DW Weekly #189 – 6 December 2024
The US-China tech export war is intensifying as both nations continue pushing their antagonistic agendas to curb the other’s technological advancements. As expected, trade tensions between the USA and China are escalating again in the semiconductor sector as four top Chinese industry associations have recently warned against purchasing US chips, claiming they are ‘no longer safe’ and threaten national security principles. The Chinese associations, representing major industries from telecommunications to the digital economy, have opted for a considerable change in the mindset of Chinese businesses. They are now advised to consider non-US suppliers to safeguard their operations and reduce reliance on US technology.
The industry associations’ response follows the latest US crackdown, targeting China’s semiconductor industry. The new restrictions, introduced by the US Department of Commerce, extend to 140 Chinese companies and cover a broad range of products, including critical semiconductor equipment and high-bandwidth memory used in AI chip development. These measures aim to limit China’s access to advanced technologies essential for its military modernisation and AI capabilities, with the Biden administration labelling the restrictions necessary for US national security.
However, Beijing is far from passive in this ‘tech conflict’. Chinese authorities have been ramping up retaliatory measures in response to the curbs. One of the most notable moves came last year when China blocked US chipmaker Micron from some government purchases following a failed security review. Similar scrutiny has been directed at other US tech giants like Intel, with significant revenue from China. Furthermore, China has increasingly turned to its ‘unreliable entity list’ to target US firms, such as PVH Corp, probed for complying with US sanctions on Xinjiang cotton, showing China’s determination to impose economic and market barriers on American companies.
China has also used its control over rare earth materials as leverage, imposing export restrictions on critical elements like gallium, germanium, and antimony. These materials are vital for semiconductor manufacturing and military applications, and their abundance means China’s strategic advantage in global supply chains. In addition to the listed, the recent imposition of new export controls on dual-use technologies to US military users or for military purposes further underscores China’s strategy to regulate products that have both civilian and military applications. The change in course aims to secure China’s rise and dominance in these sectors and limit US access to critical technologies needed for advanced military and AI applications.
Amid these tensions, the semiconductor sector has become a focal point of a global power struggle. The USA has restricted the sale of advanced chipmaking equipment to China, focusing mainly on equipment from US-based companies such as Lam Research and Applied Materials and European suppliers like ASML. While China has made strides toward becoming more self-sufficient in semiconductor manufacturing, the US curbs continue to impact China’s access to cutting-edge equipment and expertise essential for advancing its chip technology. Despite the setbacks, Chinese companies, such as Empyrean and Nata Opto-Electronic, have been building equipment stockpiles and pushing for greater localisation to mitigate the effects of the sanctions.
The expanding reach of US export controls also affects global partners, including Japan and the Netherlands, which supply critical chipmaking equipment to China. While Japan and the Netherlands have been exempt from some of the curbs, their involvement in the US rules still limits the scope of their exports to China. However, the USA seems quick to monitor and enforce these regulations, further entangling allies in the conflict.
The conclusion is that the escalating tech conflict between the USA and China provokes deepening concerns in the two governments about data security, military supremacy, and leadership in critical areas like AI and semiconductors. With both countries fiercely safeguarding their strategic priorities, this tech rivalry is poised to reshape global supply chains, innovation landscapes, and the overall power dynamics in the tech sector, undoubtedly influencing the world economy for years to come.
New export restrictions will ignite global trade tensions.
Bitcoin breaks $100,000 for the first time
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Marko and the Digital Watch team
Highlights from the week of 29-06 December 2024
This surge follows Donald Trump’s election as US president, which has prompted optimism for a pro-crypto regulatory environment.
Four major Chinese industry associations have advised local companies to avoid purchasing US chips, citing them as ‘no longer safe,’ and to opt for domestic or non-US alternatives instead.
German semiconductor subsidies align with EU goals to strengthen Europe’s technological autonomy.
OpenAI accused of misusing copyrighted content by Canadian media firms.
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ASML expects no financial impact from the latest US-China chip restrictions.
Ukraine focuses on autonomous systems for improved warfare efficiency.
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www.diplomacy.edu
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The 19th annual Internet Governance Forum will be hosted by the Kingdom of Saudi Arabia in Riyadh on 15-19 December 2024. Stakeholders are encouraged to submit thematic inputs by January…
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