By Tom Fowdy
Although deeply overshadowed by other events in the world, over the weekend the United States initiated a major escalation in its technology war against China. The White House implemented a "foreign direct production rule" against the country's semiconductor sector as a whole, that is prohibiting Chinese chipmakers from importing advanced equipment using American patents not just from the US itself, but from any country in the world using follow-up products. The goal, as quite clearly set out in numerous op-eds cheerleading the move, is to "hobble" or "cripple" China's semiconductor advances and as National Security Advisor Jake Sullivan stated a few weeks ago, to "maintain our lead for as long as possible".
Since the time of the Trump administration, the United States has waged an increasingly aggressive technological war against China of which aims to curb and undermine its rise in high-end fields to block the country's structural transition from low-end cheap manufacturing towards sophisticated technologies such as semiconductors, artificial intelligence, 5G, aviation and so on. The US has sought to both blockade their advance whilst also undermining China's global market share. In doing so, the United States has placed hundreds of Chinese companies onto the Commerce Department "Entity list" prohibiting them from obtaining US technology. The Telecommunications firm Huawei, however, was singled out for the harshest "foreign direct product rule" cutting them off from the global semiconductor supply chain altogether.
What the Huawei example shows, in particular, is that the pattern of American policy in doing this is that it will ask allies to "cooperate" with such sanctions. However, if they do not, they tend to turn to coercive measures and the application of extraterritorial jurisdiction, such as this. For the Biden administration to now, however, attempt to place an entire sector of China's economy, as opposed to specific companies, on this list, is an astronomical attack that shows its foreign policy is even more unhinged than Trump's, it also speaks the obvious fact that nothing even as much associated with the United States can be depended upon as a reliable supplier. This includes the semiconductor industries of Japan, South Korea and Taiwan, which are merely built on extensions of licensed American patents, giving the US sovereign jurisdiction over them.
It is now or never for China to envision and articulate an entirely new semiconductor supply chain and to break out against this US-described effort of "containment", which does not even use the superficial pretense of "Military-Civil fusion" anymore to justify it. China has nonetheless thrown billions at the development of its own semiconductor industry. There is a lot to do and it is a slow burner, but there have been some breakthroughs of note. It was reported earlier this year that despite already being subject to US sanctions, China's key production firm SMIC had successfully started producing 7nm chips, against expectations. Likewise, Chinese firms, already pre-empting US sanctions, have imported billions of dollars' worth of lithography machines from overseas.
Even if they only produce lower-end nodes, it is a start, with China's production of low-end chips surging so fast that it has quickly eroded South Korea's trade surplus with its giant neighbor. Concurrently, Huawei has been busy assembling its very own China-centric supply chain by engaging in takeovers of local companies and redesigning its chips so that it can configure older technologies into newer products. As the article stated: "Rather than build its own chip plants from scratch, the sources said, Huawei is sending staff members to help with the financing, procurement and operation of several local chipmakers, with strong government support. The aim, sources added, is to build production lines free from U.S. "interference."- It has been able to salvage its telecommunications equipment as a result already.
While the media will always be pessimistic, these coercive measures will be the true test of China's ability, creativity and resolve in the face of the United States. The world has irreversibly changed and America has since 2017 commenced on a pathway of breaking down globalization because it no longer believes that an integrated and open world compliments its strategic vision of unilateralist hegemony. China is perceived to be a rising power whose capabilities can potentially outshine the United States, thus this move is an unhinged gamble by the Biden administration to try and stifle China's high-tech advances. Beijing has a plan to become high-tech self-sufficient, albeit one which is tremendously difficult, timely and expensive to achieve. No predictions can be made as to where things will go, but Beijing must be willing to do everything in its possibility to render Washington's hand useless.
The author is a well-seasoned writer and analyst with a large portfolio related to China topics, especially in the field of politics, international relations and more. He graduated with an Msc. in Chinese Studies from Oxford University in 2018.
The views do not necessarily reflect those of DotDotNews.
Read more articles by Tom Fowdy:
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