China’s Chip Industry Is Gaining Momentum – It Could Alter the Global Economic and Security Landscape
Today’s military prowess even directly relies on chips. In fact, according to the Center for Strategic and International Studies, “all major US defense systems and platforms rely on semiconductors.”
The prospect of relying on Chinese-made chips — and the backdoors, Trojan horses and control over supply that would pose — are unacceptable to Washington and its allies.
Stifling China’s Chip Industry
Since the 1980s, the US has helped establish and maintain a distribution of chip manufacturing that is dominated by South Korea and Taiwan. But the US has recently sought to safeguard its technological supremacy and independence by bolstering its own manufacturing ability.
Through large-scale industrial policy, billions of dollars are being poured into US chip manufacturing facilities, including a multi-billion dollar plant in Arizona.
The second major tack is exclusion. The Committee on Foreign Investment in the United States has subjected numerous investment and acquisition deals to review, ultimately even blocking some in the name of US national security. This includes the high-profile case of Broadcom’s attempt to buy Qualcomm in 2018 due to its China links.
In 2023, the US government issued an executive order inhibiting the export of advanced semiconductor manufacturing equipment and technologies to China. By imposing stringent export controls, the US aims to impede China’s access to critical components.
The hypothesis has been that HiSilicon and SMIC would continue to stumble as they attempt self-sufficiency at the frontier. The US government has called on its friends to adopt a unified stance around excluding chip exports to China. Notably, ASML, a leading Dutch designer, has halted shipments of its hi-tech chips to China on account of US policy.
Washington has also limited talent flows to the Chinese semiconductor industry. The regulations to limit the movements of talent are motivated by the observation that even “godfathers” of semiconductor manufacturing in Japan, Korea and Taiwan went on to work for Chinese chipmakers — taking their know-how and connections with them.
This, and the recurring headlines about the need for more semiconductor talent in the US, has fueled the clampdown on the outflow of American talent.
Finally, the US government has explicitly targeted China’s national champion firms: Huawei and SMIC. It banned the sale and import of equipment from Huawei in 2019 and has imposed sanctions on SMIC since 2020.
What’s at Stake?
The “chip war” is about economic and security dominance. Beijing’s ascent to the technological frontier would mean an economic boom for China and bust for the US. And it would have profound security implications.
Economically, China’s emergence as a major semiconductor player could disrupt existing supply chains, reshape the division of labor and distribution of human capital in the global electronics industry. From a security perspective, China’s rise poses a heightened risk of vulnerabilities in Chinese-made chips being exploited to compromise critical infrastructure or conduct cyber espionage.
Chinese self-sufficiency in semiconductor design and manufacturing would also undermine Taiwan’s “silicon shield”. Taiwan’s status as the leading manufacturer of semiconductors has so far deterred China from using force to attack the island.
China is advancing its semiconductor capabilities. The economic, geopolitical and security implications will be profound and far-reaching. Given the stakes that both superpowers face, what we can be sure about is that Washington will not easily acquiesce, nor will Beijing give up.
Robyn Klingler-Vidra is Associate Dean, Global Engagement | Associate Professor in Entrepreneurship and Sustainability, King’s College London. Steven Hai is Affiliate Fellow, King’s Institute for Artificial Intelligence, King’s College London, King’s College London. This article is published courtesy of The Conversation.
