By Tom Fowdy
In a report by Bloomberg, anonymous sources claimed yesterday that the Netherlands and Japan have finally agreed to join the United States's proposed embargo on the export of chip-making equipment to China, a bid by Washington to try and hobble and slow down Beijing's advances in high-end technology. Previously this year, the US had unleashed a sweeping embargo on the export of all advanced chip-making equipment to China itself, and prohibited its own citizens or residents from working in China's chip-making industry, the move had gone further and deeper than anything the Trump administration had utilized.
However, allied states, at least on the rhetorical level, had baulked about joining the US on these sanctions. South Korea has meted strong resistance, while according to a report in the Japan Times, the Netherlands perceived such behaviour as "bullying". Similarly, Japanese companies also strongly lobbied against the measures. In both instances, China is a critical and lucrative export market which constitutes one of the world's fastest-growing chip consumers. But if it wasn't clear already, the United States doesn't care about that.
America sees the export of semiconductors to China as a strategic Achilles hill which can curtail its economic, military, and strategic ambitions. As a developing country seeking to move into high-end technologies, China needs over growing semiconductors, and has sought to place maximum emphasis on developing its own domestic industry to be self-sufficient. But this is no easy task, as it involves a comprehensive amount of investment in not only talent, but also in a wide range of technologies and niches in order to be able to successfully produce them. It is long, expensive, and cumbersome.
Beginning with the Trump administration in 2019, the United States has sought to place a growing embargo on the export of high-end node semiconductors and chips to China. At first, individual companies were targeted, but that scope has considerably grown to the point of encompassing the whole country. In conjunction with this, the US has aggressively lobbied allies to veto the Chinese acquisition of semiconductor firms overseas, the latest example being Britain's U-turn on the low-end semiconductor producer the Newport Wafer Fab. In addition, the US has also aggressively strongarmed companies to build semiconductor manufacturing capacity in its own territory.
When viewed as a whole, the United States is utilizing a comprehensive strategy to realign global semiconductor supply chains in its favour, and in turn, isolate China from it. In doing so, America strives to sustain its economic, technological and military hegemony against the would-be competitor. This is a process of "deglobalization"- The US is actively tearing up a global industry to rewrite it around itself, and could not make it clearer that it does not care about the subsequent costs or disadvantages of which it deals to allies in the process. If ASML's most lucrative business is destroyed at the hands of US extra-territorial meddling, then that's an acceptable price to pay for hegemony.
This of course means all allies of the United States ultimately stand to be the biggest losers of such a strategy, especially those who's economies are dependent upon producing semiconductors themselves. If the US is endeavouring to "on-shore" its own semiconductor supply chain, where does that leave chip producers such as Taiwan, South Korea, and Japan? Taipei in particular, which is obsessed with obtaining US support, might want to consider the long-term ramifications of these readjustments. They may see America as their most critical partner in pushing for formalized independence, but their most successful and strategically essential industry risks being hollowed out by the sheer fact the US is absorbing it as their own.
In South Korea, observers have noted that the country's trade balance is falling rapidly. There is a reason for this. China's advances in the lower-end node of chips, a product of US coercion against its own semiconductor industry, have reduced the need for imports from this country. Global supply chains are being forcefully rewritten, in a way which ultimately places everyone not the US at a disadvantage accordingly. We can see from Europe, in the fields of energy (as opposed to technology) how US-led policies regarding Ukraine are destroying the continent's industrial competitiveness and ushering in blistering inflation.
The bottom line is, in the era of "America First", allies are last. The United States only supports globalization to the extent it can have full and unparalleled dominance over the world itself and remake it in its own image. In turn, Washington does not support forms of globalization which herald economic and power shifts which are unfavourable to the US, such as for example a Russia profiting from energy exports, or the rise of China. In such circumstances, the US has sought to aggressively destroy globalization as it sees fit. This makes the countries that depend upon the US, and prefer open economic and trade ties, the biggest losers.
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:
Opinion | Being America's friend is fatal
Opinion | Two protests, two standards, one hypocrisy
Opinion | Rishi Sunak's China Policy is an incoherent Mess
Opinion | UK U-turn on Wafer Feb puts America first, Britain last
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