CHINA WATCHWashington’s Semiconductor Sanctions Won’t Slow China’s Military Build-Up

By Gary Clyde Hufbauer and Megan Hogan

Published 15 December 2022

Advanced semiconductors underpin everything from autonomous vehicles to hypersonic weapon systems. Chips are imperative to the defense industry and technologies of the future. By targeting this critical input, the Biden administration aims to freeze China’s semiconductor suite at 2022 levels and impede its military development. Despite the bleak short-term outlook, it is wrong to assume that US controls will hobble China for years.

In October, the US introduced a ban on exports to China of cutting-edge semiconductor chips, the advanced equipment needed to manufacture them and semiconductor expertise. The export controls are Washington’s most serious attempt to undermine China’s military modernization and the most damaging measures US President Joe Biden has taken against China.

Advanced semiconductors underpin everything from autonomous vehicles to hypersonic weapon systems. Chips are imperative to the defense industry and technologies of the future. By targeting this critical input, the Biden administration aims to freeze China’s semiconductor suite at 2022 levels and impede its military development.

China will probably struggle to maintain its rapid advances in artificial intelligence, quantum and cloud computing without access to US technology and expertise. Chipmakers like the Semiconductor Manufacturing International Corporation—China’s largest logic chip producer—will lose access to machine maintenance and equipment replacement under the new controls.

US chip equipment suppliers like Lam Research, Applied Materials and KLA Corporation have suspended sales and services to Chinese chipmakers, while ASML Holding, a Netherlands-based supplier, told its US staff to stop servicing Chinese customers until further notice.

The new controls exploit China’s weaknesses in developing talent and research. They require all US citizens, residents and green-card holders—including hundreds of ethnic Chinese educated and trained in the US—to seek permission from the US Department of Commerce to work in Chinese fabrication plants. Since such permission is unlikely to be granted, US citizens working at Chinese semiconductor companies will be forced to sacrifice their citizenship or their jobs. Most will have to give up their current jobs. Indeed, Yangtze Memory Technologies Corp has already asked core US staff to leave the company.

Despite the bleak short-term outlook, it is wrong to assume that US controls will hobble China for years. In the case of nuclear weapons, significant resources were poured into acquiring bomb technology once political leaders decided that they were essential for national defense. That effort inevitably starved other sectors, but more often than not successfully delivered nuclear weapons programs.

Now that advanced semiconductors are seen as essential to national defense, Beijing is adopting a ‘whole of the nation’ approach and investing national resources into the industry. Many engineers and computer scientists are likely to be assigned to semiconductor design and manufacture, assisted by espionage against US, South Korean, Taiwanese, Japanese and European chip firms.