The Chip War With China Is Just Getting Started

[Daniel Nenni]

Last week the Biden administration announced new restrictions on American companies selling advanced semiconductors to China, including restrictions on U.S. citizens and residents working for chip plants in China. The impact on our America’s most dangerous opponent since the end of the Cold War, was almost instantaneous. According to Bloomberg, Americans working in Chinese plants are already leaving. If ever there was a strategy to stop a high-tech rival in its tracks, this was it.

This strategy, however, is not original with the Biden team. When I was at the National Security Council, the Trump administration was using the Direct Product Rule, that can prevent companies anywhere in the world from selling products using U.S. products or technology subject to export controls, to slow Chinese telecom giant Huawei’s attempt to take over the global 5G market. Now Biden is using it to prevent even allied countries like South Korea from selling advanced chips to Chinese firms or organizations engaged in AI and supercomputing activities.

Together with the CHIPS Act Congress passed to devote $52 billion in subsidies to “revitalize the domestic semiconductor industry and spur innovation,” and Taiwan’s leading chip manufacturer TSMC agreeing to build a major new plant in Arizona, America’s semiconductor industry should be back on track, right?

The Chip War With China Is Just Getting Started

Our overreliance on foreign sources for microchips, even from trusted allies such as Taiwan, Japan, and South Korea, is only part of a broader issue: America’s overreliance on global supply chains that are all too vulnerable to disruption, including in time of war.

www.forbes.com

 

[blueone]

Together with the CHIPS Act Congress passed to devote $52 billion in subsidies to “revitalize the domestic semiconductor industry and spur innovation,” and Taiwan’s leading chip manufacturer TSMC agreeing to build a major new plant in Arizona, America’s semiconductor industry should be back on track, right?

But now comes the hard part - actually succeeding.

 

[nickw]

This strategy, however, is not original with the Biden team.

Yes, but the application of it, which is the hard part, is the Biden administration's responsibility for success or failure. My guess is that it will fail.

 

[Barnsley]

Yes, but the application of it, which is the hard part, is the Biden administration's responsibility for success or failure. My guess is that it will fail.

What would be considered a win?

 

[nickw]

A win would be a fair and prosperous economy for all parties.

 

[tonyget]

Yes, but the application of it, which is the hard part, is the Biden administration's responsibility for success or failure. My guess is that it will fail.

Matters not to Biden. Biden can claim credit for implementing policies， as for the result，well it won't show up within his term of office so who cares

 

[antonm]

A couple of points from the Chinese perspective (I'm based in China):

1. When China released Made in China 2025, a plan drafted by the Academy of Sciences, everyone thought it was alarmist and over the top. The idea was to make sure that they can supply enough of their own high tech components by 2025 in case the US cuts them off. They were aiming for 40% self-sufficiency in semi. This looks like a very modest goal in late 2022.

2. Right up until 2021, the idea of replicating Nvidia, ASML, and Lam Research in China wasn't something any major firm (including HiSilicon) was thinking of doing. Broadband mobile chip design and DRAM were areas that the private sector was interested in, but self-sufficiency was only something the government cared about. Not true anymore.

So, let's image what success looks like. China's chip industry falls permanently behind, creating a knock-on effect in other parts of the value chain and China's entire industrial and consumer electronics sector suffers. Non-US chip firms learn their lesson: if you want to compete with Americans, don't buy their equipment, software, and design.

So I wonder what it would take to regain this trust again.

 

[TICin852]

So, let's image what success looks like. China's chip industry falls permanently behind, creating a knock-on effect in other parts of the value chain and China's entire industrial and consumer electronics sector suffers. Non-US chip firms learn their lesson: if you want to compete with Americans, don't buy their equipment, software, and design.

So I wonder what it would take to regain this trust again.

The only reason they would trust the Americans is if they are so far ahead in tech that they have no other choice. The US is currently abusing its natural monopoly, whether that natural monopoly will remain is the real question now.

 

[Jert]

Semiconductor was and always assumed a borderless industry (whether it's design, mfg, applications, or whatever). People in the industry never had the need or urge to specifically mention or highlight "this technology is from so and so country". This changed when Made in China 2025 came out which seemed to be interpreted as "if you want to sell in China, you need to cooperate and transfer the technology so that China can be self-sufficient". People and governments equate the China self-sufficiency as China taking over the industry and everyone else going to be jobless. And thus the conflict we are seeing now.

I don't see big trust issues amongst US allies who are majors in this industry, Taiwan, Korea, Japan, EU. Democracy allows different opinions on certain things but overall they understand this industry is global and nobody is focused on replacing anybody.

 

[blueone]

So I wonder what it would take to regain this trust again.

While I think the US is being short-sighted in some of these recent actions, I don't think it's possible for the US government to trust the current Chinese government and its policies. I can't imagine a realistic scenario where this stand-off ends well. I doubt China will soften its approach, and the assessment of China as an adversary of all democracies has not only bipartisan support in the US, but broad international support. Other than climate change, I can't think of another issue with such clear lines and numerous participants.

 

[tonyget]

I don't see big trust issues amongst US allies who are majors in this industry, Taiwan, Korea, Japan, EU. Democracy allows different opinions on certain things but overall they understand this industry is global and nobody is focused on replacing anybody.

Really？From what I see，the US obviously doesn't feel comfortable of not having advanced chip fabrication capability within the country.

 

[hist78]

A couple of points from the Chinese perspective (I'm based in China):

1. When China released Made in China 2025, a plan drafted by the Academy of Sciences, everyone thought it was alarmist and over the top. The idea was to make sure that they can supply enough of their own high tech components by 2025 in case the US cuts them off. They were aiming for 40% self-sufficiency in semi. This looks like a very modest goal in late 2022.

2. Right up until 2021, the idea of replicating Nvidia, ASML, and Lam Research in China wasn't something any major firm (including HiSilicon) was thinking of doing. Broadband mobile chip design and DRAM were areas that the private sector was interested in, but self-sufficiency was only something the government cared about. Not true anymore.

So, let's image what success looks like. China's chip industry falls permanently behind, creating a knock-on effect in other parts of the value chain and China's entire industrial and consumer electronics sector suffers. Non-US chip firms learn their lesson: if you want to compete with Americans, don't buy their equipment, software, and design.

So I wonder what it would take to regain this trust again.

"So I wonder what it would take to regain this trust again."

At this stage, there is no need and no chance to regain so called "Trust" anymore. After CCP threatened to shoot down the airplane that carried Nancy Pelosi, after CCP threw out the no-change-for-50-year agreement with the UK for Hong Kong, and after PLA (People's liberation Army) sent missiles into ocean around Taiwan, the US has made up her mind.

We can call it a "containment policy" or we can call it "decoupling". The word "trust" means very little to CCP.

 

[nickw]

US semi and corporations must out smart and out engineer its competition in order to remain leaders. US politicians should not give the impression that they can change that simple fact by fiat. The time is for the US to look at itself rather than demonize someone else.

 

[Xebec]

"So I wonder what it would take to regain this trust again."

At this stage, there is no need and no chance to regain so called "Trust" anymore. After CCP threatened to shoot down the airplane that carried Nancy Pelosi, after CCP threw out the no-change-for-50-year agreement with the UK for Hong Kong, and after PLA (People's liberation Army) sent missiles into ocean around Taiwan, the US has made up her mind.

We can call it a "containment policy" or we can call it "decoupling". The word "trust" means very little to CCP.

Agreed. Another cold war is not good for humanity but then the CCP has been asking for this for quite a while. (Govt sponsored IP theft, cyber warfare. Human rights violations continuously, etc).