Named the global consequences of US restrictions on the sale of microchips to China

The US has taken unprecedented steps to limit the sale of advanced computer chips to China, stepping up efforts to curb Beijing’s technological and military ambitions.

According to The Guardian, these steps are aimed at cutting off the supply to China of critical technologies that can be used in various sectors, including advanced computing and weapons production.

The restrictions mark the most significant move by Washington against Beijing on technology exports in decades, escalating the trade battle between the world’s two most powerful economies.

Following export controls, Apple has reportedly suspended plans to use Chinese company Yangtze Memory Technologies’ memory chips in its products. The Nikkei reported that Apple planned to use the chips in iPhones sold in China.

So what action has the US taken? On October 7, the Biden administration introduced a wide range of export controls, including measures to cut off China from the sources of certain semiconductor chips and equipment for their production.

Under the rules, US companies must stop supplying Chinese chip makers with equipment that can produce relatively advanced chips unless they first obtain a license.

The new rules also add control over certain elements of semiconductor manufacturing and transactions for specific end-uses of certain integrated circuits or microcircuits. The US also wants to tighten export controls to include semiconductor products and software, technology and other things used to design and manufacture integrated circuits. Under the additional restriction, US citizens and green card holders will also be prohibited from working on certain technologies for Chinese companies and organizations.

According to The Guardian, export restrictions will include high-performance computing chips such as the NVIDIA A100/H100 and Intel GPU (Ponte Vecchio), according to Brady Wang, Deputy Director of Research at Counterpoint in Hong Kong.

The US Department of Commerce said that export controls “restrict China’s ability to obtain advanced computing chips, develop and maintain supercomputers, and produce advanced semiconductors.”

Analyst Bill Bishop described the chip ban as a “massive escalation” in trade and geopolitical tensions between the US and China. “We are still trying to understand the impact of new controls,” he says in his Sinocism newsletter, “and frankly, I think many underestimate their importance both for technology supply chains and for future developments, but in a broader meaning for US-China relations.

International research firm GlobalData said the US announcement “goes beyond the semiconductor industry” and is about nothing less than leadership in the global economy. “It’s about dominance [искусственного интеллекта]says expert Josep Bory, “which is at the heart of what many call the Fifth Industrial Revolution and, ultimately, global economic leadership in the next few decades.”

Can China use locally made chips instead of American microchips? China consumes more than three-quarters of the semiconductors sold in the world, but produces only about 15% of the world’s production.

Experts say China’s own equipment makers are four to five years behind their foreign counterparts, making them unsuitable for instant replacements for equipment lost from US suppliers such as KLA Corp, Applied Materials and Lam Research.

The Boston Consulting Group estimates in 2021 that China will need at least $1 trillion in additional initial investment to build fully “self-sufficient” local chip supply chains.

The new restrictions could encourage Chinese chip makers to try to produce improved chips using creative engineering with older technologies that are not subject to sanctions.

Counterpoint’s Brady Wang notes, “The latest US restrictions will significantly slow down the development of China’s advanced semiconductor industry and derivative technologies, including AI, supercomputing, self-driving education, etc.” Instead, Beijing may be forced to focus its manufacturing capacity on “mature technologies and use services outside of China.”

How did China react to American actions? The China Semiconductor Industry Association said in a statement that it hopes the US government will reverse its decision and return to international trade negotiation processes.

The importance of technological self-sufficiency, which has already been a priority for Xi over the past decade, became the theme of this year’s congress when Xi Jinping highlighted the hostility of foreign rivals. However, experts say there may be few ways for Beijing to force Washington back to the negotiating table. Bill Bishop believes that China’s options are limited, in addition to limiting US access to important rare earths that China controls. “Their options are limited as many seemingly obvious actions, such as targeting Apple, will also do a lot of damage. [китайской] economy. Boeing would make sense, but they are already being punished. I wouldn’t be surprised to see rare earths as weapons.

What will happen next? Singapore’s Prime Minister Lee Hsien Loong warned that increased strife between the US and China would lead to a “less stable world.” “The Biden administration’s latest move is very serious, I’m sure they thought it through carefully. This could have very wide implications,” he said at a press conference in Australia.