Economics/Class Relations

Why is the U.S. banning semiconductor-chip exports to China?

The Signal

Why is the U.S. banning semiconductor-chip exports to China? Chris Miller on Washington’s new strategy to protect its military advantage and hobble Beijing’s.
Chris Yang
Chris Yang
Last month in Indonesia, the presidents of the United States and China met to discuss the question of Taiwan, the war in Ukraine, and the issue of human rights in the People’s Republic. The biggest recent development between their two countries, however, might have been something much lower profile: In October, the U.S. Commerce Department introduced a comprehensive ban on technology exports to China, including cutting-edge semiconductor chips—the foundational components for advanced computers and other electronic devices—as well as software for designing them and equipment for manufacturing them. The new ban covers not only American companies but any company in the world that uses American semiconductor technology. And it forbids all U.S. citizens, residents, and green-card holders from working for Chinese chip makers. The threat to China’s high-tech industries—whether in military applications, artificial intelligence, or the surveillance technology Beijing relies on to monitor its citizens—appears so grave that Gregory Allen, of the Washington-based Center for Strategic and International Studies, called the new U.S. approach to China’s tech sector “strangling with an intent to kill.” How deadly is this?
Chris Miller is an assistant professor of international history at Tufts University’s Fletcher School of Law and Diplomacy, and the author of the new book Chip War: The Fight for the World’s Most Critical Technology. In the defining great-power competition of the early 21st century, Miller says, U.S. President Joe Biden has made an unusually aggressive move to halt technological progress in China’s military by exploiting the West’s critical advantages in the chip sector. The strategy could end up doing real damage to China’s economy over the long term; but in the meantime, it could also spur Chinese President Xi Jinping to create an independent Chinese production chain—and all the uncertainties for the U.S. that would come with it.
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Michael Bluhm: What’s behind these new export controls?
Chris Miller: Over the past two decades, the military balance between the U.S. and China has shifted dramatically in Beijing’s favor. Over the next decade, China is likely to continue developing its military capabilities and shifting the balance even further—for instance, by building more ships and airplanes than the U.S. will. And China is likely to continue producing more military systems than the U.S. will—and to deploy more of these systems in contested regions across Asia, above all in the Taiwan Strait.
All of this has been happening with the U.S. becoming increasingly concerned about China’s intentions—in Taiwan and elsewhere in the region. Beijing’s moves in the South China Sea, in particular, in recent years suggest that, where it can, it’ll use its military power to bolster its political influence and territorial control.
Now, given that the Chinese government has a standing policy to establish territorial control over Taiwan, there’s been a growing concern in the U.S. that the shift in the military balance between it and China could destabilize the region—by opening the door for Beijing to try to take Taiwan or otherwise transform Asia’s security landscape.
The question for the U.S. is what to do about this. One option would be to give up on trying to maintain the status quo in Asia—but there’s a bipartisan consensus in the U.S. that this isn’t a good idea. So the Americans have to find some way to halt the deterioration of their military position relative to China’s.
Bluhm: How does the U.S. administration expect the export ban will address the problem?
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Miller: Because no one expects any major increase in the U.S. defense budget—to build a lot more ships, planes, and missiles, for example—the administration has to address the problem qualitatively, by creating better systems than China’s.
Because China is the manufacturing workshop of the world, the solution can’t be in physically manufacturing better systems. But the Americans and their allies have a qualitative lead in computing and with the semiconductors that make computing possible. That’s what the U.S. administration targeting with these controls: They’re trying to keep, and ideally grow, the U.S. advantage over China with advanced computing and sensor capabilities in military systems, which already rely on a lot of semiconductors. And they’re trying to reduce China’s access to the advanced data centers and supercomputers used to design or train the AI systems deployed in military devices.
At its simplest, the U.S. objective is to reduce China’s access to cutting-edge computing, to retain America’s advantage in it, and then to deploy this advantage to military and intelligence systems.
Bluhm: You mention implications for military competition, AI, and big data. How big of a deal are these?
Miller: It is a very big deal. The controls are written so that they won’t only affect the Chinese government or military; they’ll affect all of China. Restricting the transfer of certain advanced chips and chip-making equipment into the country altogether, these controls are going to have a real impact on civilian firms in China that have no direct relationship with their government.
The U.S. wrote the controls this way because they concluded that their previous effort—which targeted only the transfer of equipment to the Chinese military—hadn’t worked. The U.S. had no control of chips once they entered China. So even if the chips weren’t supposed to go to a Chinese military facility, many companies in China openly advertised that they could use U.S. chips and technology for the Chinese military.
There will be collateral damage to Chinese tech firms. There’s no doubt about that. The U.S. administration was aware of this in writing the new controls, but they decided it was a price worth paying for putting more effective limitations on the Chinese military and intelligence apparatus.
Anne Nygård
Anne Nygård
More from Chris Miller at The Signal:
This is a zero-sum move. There’s no doubt about that. The U.S. recognizes that there are zero-sum aspects to U.S.-China competition. For a long time, it’s been popular to say, We compete in certain spheres and cooperate in others. The Biden administration probably still embraces that framing. But if you look at their first two years in office, they haven’t found many ways to cooperate. They focused largely on competition. Some competition can be positive—it makes everyone better off. But this competition over chips is designed to hold China back as the U.S. moves forward. That’s not unique; it’s standard practice among great powers in the midst of competitions like this to try to prevent their adversaries from getting access to technology. But it does add to the recognition that the competition has moved to a more zero-sum stage than a couple of years ago.”
Since 2014, President Xi and the Chinese government have been focused on finding ways to reduce China’s reliance on imported chips and chip-making technology. Government programs have supported this at the national, provincial, and local levels. They’ve made some strides, though not as many as they would have liked. But where things stood in 2014 is largely where they stand today. China is heavily reliant on imported technology from countries such as the U.S., Japan, and Taiwan, which are geopolitical competitors and adversaries. This is not a comfortable position if you want to be a technological leader.”
Chinese tech firms are responding in two different ways. One way is trying to use different chips to get around the controls. Some companies that used to provide the now-banned chips, have begun to offer slightly less capable chips that are exempt from the controls. This is within the letter of the law of the controls and also the spirit: Non-cutting-edge chips should be allowed to be sold to China. The second way is trying to build up Chinese chip-making capacities. In recent years, China has had the most success in the chip-design part of the process. But in chip manufacturing, China remains very heavily reliant on imported tools, especially from the United States. This is going to be a long-term process; it’ll take China at least half a decade to make real progress. But Chinese corporations are increasingly going to focus on this.”

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