China Seethes as US Chip Controls Threaten Tech Ambitions
China and the US are embroiled in a tech war, with access to advanced computer chips at the center of the conflict. While the Chinese government is trying to build its own capabilities, it is struggling to find ways to retaliate against US efforts that cut off access to chip-making tools. The conflict could trigger a bifurcation in technological and economic systems, leading to incompatible technology standards and raising costs. Here are some key points to consider:
The importance of chips in the US-China rivalry
China sees chips as a crucial asset in its strategic rivalry with Washington and efforts to gain global influence. Xi Jinping’s government believes that without chips, China will hit a wall, and its industries will fall behind significantly. Making processors requires technologies owned by US, European, Japanese, and other suppliers, which Beijing wants to reduce the need for. The conflict has prompted warnings the world might decouple with the incompatible technology standards and raise costs.
Why China is slow to retaliate against U.S. companies
Despite Beijing’s rhetoric of “daring to fight,” it has been slow to retaliate against U.S. companies, possibly to avoid disrupting Chinese industries that assemble most of the world’s consumer electronics. China imports more than $300 billion worth of foreign chips every year, making it difficult to cut off access completely. Moreover, if any damage occurs, Beijing must take action to protect itself. However, retaliation may bring about unforeseen consequences that could hurt Chinese industries.
The importance of ASML
ASML, a Dutch company, makes the machine using ultraviolet light to etch circuits into silicon chips at a scale measured in nanometers, preventing China’s efforts to make transistors faster and more efficient by packing them more closely together. Without this machine, China’s chip-making capabilities are paralyzed, revealing the country’s dependence on foreign technology.
What China might do next
China is not revealing its plans of retaliation, but it is known to be one of the biggest suppliers of batteries for electric vehicles, which could give China some leverage. Chinese battery giant CATL already supplies U.S. and European automakers, and Ford Motor Company plans to use CATL technology in a $3.5 billion battery factory in Michigan. China is unlikely to give the US batteries for electric vehicles if pushed too far.
What Japan’s joining in the fight means
Japan recently joined Washington in imposing controls on exports of chip-making equipment, which could heighten tensions further. While the announcement did not mention China, Tokyo said it does not want its technology used for military purposes. In response, a Chinese foreign ministry spokeswoman warned Japan against weaponizing sci-tech and trade issues, saying it would hurt everyone.
Key Takeaway
The US-China tech war has significant implications for both countries and the rest of the world. China is heavily reliant on foreign technology for its chip-making industry, which is vital for its domestic and global ambitions. Retaliating against the US could lead to unforeseen consequences that may hurt the Chinese industries. Meanwhile, the US sees the Chinese tech industry growth as a threat to its own strategic interests. The conflict could trigger a decoupling of technological and economic systems, making it difficult for computers, smartphones etc. from one region to work in others, raising costs and slowing innovation.
Related Facts
– Chip giants Qualcomm and Intel have lobbied the US government for permission to sell to Huawei Technologies, China’s largest smartphone maker. However, the US government maintains a hold on companies’ sales to Huawei due to security concerns.
– US semiconductor companies, such as Intel and AMD, dominate the global chip-making industry. The Trump administration’s restrictions have weakened the global position of China’s largest tech company, Huawei, as it was unable to access the US chip-making technology.
Conclusion
The tech war between the US and China is likely to continue well into the future, with access to advanced computer chips remaining a central focus. China is pursuing a self-reliance policy, which will take time to achieve, and retaliation against the US would likely harm Chinese industries more than the US. Meanwhile, the US government is likely to keep restricting access to chip-making tools to maintain its global position. Ultimately, both countries will have to find a way to work together for the good of the global economy.
