The United States is intensifying its efforts to obstruct China’s advancement in the semiconductor sector, which is crucial for a wide range of applications including smartphones and military weapons
In October, the US government implemented some of the most comprehensive export controls to date, requiring licenses for companies that export chips to China using US tools or software, regardless of where they are ma
nufactured. These measures also prohibit US citizens and green card holders from working for specific Chinese chip companies, effectively blocking a major source of American talent for the Chinese semiconductor industry and hindering the development of advanced chips.
Why is the US doing this?
Advanced chips, which are used in various applications including supercomputers, artificial intelligence, and military hardware, have become the focus of a dispute between the US and China.
The US has imposed export controls on chips destined for China, requiring licenses for companies that use US tools or software in the manufacturing process, regardless of where the chips are made. These measures also prohibit US citizens and permanent residents from working for certain Chinese chip companies.
The US government cites national security concerns as the motivation behind these actions, stating that the threat posed by China’s acquisition of sensitive technologies with military applications requires updated policies.
In response, China has labeled these measures as “technology terrorism.” The chip conflict has also raised concerns among other countries in Asia that produce chips, such as Taiwan, Singapore, and South Korea, about the impact on the global supply chain.
In the past week, there have been three significant developments in this ongoing dispute.
Additional Chinese Companies Added to the US Entity List
The Biden administration recently placed 36 additional Chinese companies, including major chip manufacturer YMTC, on the US entity list.
This means that American companies must obtain government approval to sell certain technologies to these companies, which can be difficult to obtain.
The US restrictions have far-reaching consequences; for example, last week, UK-based computer chip designer Arm announced that it will not be selling its most advanced designs to Chinese firms such as Alibaba due to US and UK controls.
Arm stated that it is “committed to adhering to all applicable export laws and regulations in the jurisdictions in which it operates.
China Lodges Complaint with the World Trade Organization
China has filed a complaint with the World Trade Organization (WTO) against the US over its export controls on semiconductors and other related technology.
This is the first WTO case brought by China against the US since President Joe Biden took office in 2021. In its complaint, China alleges that the US is using export controls to maintain its dominance in the science, technology, engineering, and manufacturing sectors, and that these actions pose a threat to the stability of global industrial supply chains.
The US has countered that the WTO is not the appropriate forum to address national security concerns and that US national security interests require decisive action to prevent access to advanced technologies. The WTO has given the US 60 days to try to resolve the issue, after which China may request a panel review.
This dispute follows a recent WTO ruling that US tariffs on steel and aluminum imposed by former President Donald Trump violated international trade rules, a decision that the US strongly rejects and has no intention of reversing.
Future Outlook
Chip manufacturers are facing increasing demand to produce more advanced chips for new products.
For example, Apple’s new laptop will contain 3 nanometer chips from Taiwan Semiconductor Manufacturing Company, a leading industry player. This size is significantly smaller than a human hair, which measures roughly 50,000 to 100,000 nanometers.
Experts predict that US controls on chip exports to China could widen the gap between China and other chip-producing countries, despite China’s stated goal of prioritizing semiconductor manufacturing and becoming a global leader in the sector.
The US has already significantly isolated China’s chip industry, and the latest measures only further this isolation, even though they are not as comprehensive as those implemented in October.
