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The Semiconductor Wars

President Biden recently enacted new controls on semiconductor sales to China. The new rule says that no “US persons”, which includes both US citizens and permanent residents, from supporting the development or production of chips at Chinese factories (without a license). Notably, it is the first time that controls have been directed at people and not organisations, companies, or firms. This sweeping decision is forcing many people to make very personal choices; they have to choose between working in China and their US citizenship.

Why semiconductors?

The advanced technology has become increasingly important, especially amidst the global shortage of the advanced chips. Cutting off China’s chip development is essentially cutting off their technological development. These chips are used to power just about every advanced machine, including military technology. Since China’s military technology continues to advance rapidly, Biden has taken perhaps one of the biggest steps possible to curtail that advancement. According to reports, China has been using supercomputers and AI systems, which rely on semiconductors, to develop stealth and hypersonic weapons systems. These systems attempted to break into the US government’s most sensitive encrypted messages, so the Biden administration has been debating how to respond. Some did not expect the response to be so dramatic, as this new rule substantially hinders all progress China can make in the near future.

China is now looking at a harsh reality: their technology will be years behind their competitors. This is the same tactic used by the United States against the Soviet Union during the Cold War. The idea is that Americans do not want their own technological superiority to leak out of the country and be used against their interests. Given China’s recent indications that military force is increasingly likely, the United States seems to have felt even more justified in its actions. Typically, such a move is done simultaneously with allies, like when the US and many other powers announced economic sanctions against Russia. But this time, the US had trouble drumming up enough international support to do so, so they decided to go it alone. Other countries, such as Japan and South Korea, have been hesitant to anger China, a key trading partner of both nations, especially when it comes to technology.

The Long Game

Other announced rules ban American companies from selling any equipment or components needed to manufacture semiconductors to Chinese firms. They are also banned from giving software updates and related services to advanced chip manufacturers. Experts in the industry believe that the White House’s actions have effectively gutted the young semiconductor industry in China. It is too early to say what the economic or geopolitical fallout will be, but the world knows it is coming.