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The U.S. has long dominated the advanced semiconductor industry and has gone to great lengths and expense to prevent China from catching up.
Key Point:
- US wants to stop China from making cutting-edge chips
- China announces mass production of 14-nanometer chips
- Smaller chips are more advanced and essential for things like AI and defense systems
Tiny computing components are essential to almost everything that runs on electricity, from consumer electronics to consumer technologies like smartphones, computers, and cars, to defense systems, satellites, AI systems, and weapons of war. is.
In addition to pouring billions of dollars in subsidies and other incentives into the industry, the United States is seeking to build alliances with South Korea, Japan, the Netherlands, and Taiwan to expand production.
It also takes steps to severely limit China’s ability to access critical technology, also known as microchips.
But experts warn that the latest series of US moves in the so-called “chip wars” could backfire and force Chinese industry to develop its own advanced semiconductors.
“They are desperate to get better chips.”
Andrew Kennedy, an associate professor at the ANU Crawford School of Public Policy, told ABC that “there is a huge gap between what China’s major chip makers can do” compared to the world’s leading producers.
To show just how much pressure is coming from China, the company announced a $1.4 trillion plan to boost its chip technology and manufacturing sector.
It aims to build 31 semiconductor factories within the next two years.
That could save about $150 billion spent on semiconductor imports in 2021 alone.
China announced in early September that it was mass-producing 14-nanometer chips in its semiconductor hub, Shanghai.
These chips are used in many devices, but not enough for AI and advanced defense systems.
Reports from outside China emerged in July suggesting that the country’s Semiconductor Manufacturing International Corporation was technically capable of producing 7-nanometer chips.
This has led some to say that US regulations are not working, but little is still known about China’s apparent breakthrough, and some remain skeptical of the claim.
Major chips come from South Korea and Taiwan, which produce about 60% of the world’s microchips and 90% of advanced chips.
Those are 3-nanometer chips, and China is desperate to improve what it can do.
“They want better chips than 14. [nanometre]said Dr. Kennedy.
“They want to be on the cutting edge.”
What steps did the United States take?
The US’ main focus at the moment is to limit China’s ability to develop or access higher-tech microchips.
Washington justified this by arguing that restricting chips to China would protect national security and foreign policy interests.
It also allows the United States to maintain its dominance in this technology area.
“The immediate concern is [the US] We don’t want advanced chips to be handed over to the Chinese military,” said Dr. Kennedy.
“It may be deep down in their hearts that they want to limit China’s chip manufacturing capacity…for general strategic competitive reasons.”
In December, the United States agreed with 42 other countries to implement controls to limit the use of software called EDA, which is used to make advanced chips.
In addition to this, it announced further measures in September.
China has restricted the export of equipment needed to make advanced chips, making it increasingly difficult for U.S. firms to supply Chinese companies with the tools they need to develop sub-14-nanometer chips. .
U.S. officials have also directed major chip makers to stop exporting advanced chips to China, which is expected to limit the ability of Chinese firms to tackle cutting-edge projects such as image recognition. will be
“What the United States is trying to do is restrict exports to China of technology that allows chips to be smaller than 14 nanometers,” Kennedy said.
“The smaller the chip, the more advanced it is.”
Senior US politicians are also urging the Biden administration to blacklist Yangtze Memory Technologies, a Chinese state-owned semiconductor company that reportedly supplies Huawei with chips for mobile phones. .
US wants supply chain without China
Meanwhile, the US is also investing heavily to increase local production of advanced chips.
The White House said in August, “The United States invented the semiconductor, but today it produces about 10% of the world’s supply, and not a single cutting-edge chip is produced.
“Instead, we rely on East Asia for 75% of global production.”
Last month, it announced $52 billion ($77.77 billion) in subsidies for the semiconductor industry and tax incentives for building chip factories in the United States.
So far, the United States has plans to build 12 manufacturing plants, including a $12 billion investment with Taiwan Semiconductor Manufacturing Company (TSMC), one of the world’s leading chip makers, in Arizona. Factory included.
Part of the move has to do with an increase in American manufacturing, as demand rises to make up for chip shortages exacerbated by COVID and the ongoing war in Ukraine.
The White House said it would “strengthen America’s manufacturing, supply chains, and national security, and invest in research, development, and science and technology.”
But it also allows the United States and its allies to maintain a technological edge over China, which has relied on advanced chip imports, Dr. Kennedy said.
“[It] It will also ensure that the United States maintains and advances its scientific and technological superiority,” the White House said.
Washington has worked to build an advanced microchip supply chain that excludes China.
The United States has agreements with Japan, Taiwan, and South Korea.
Japan has partnered with TSMC to build a $7 billion facility in the South.
South Korea is a major microchip supplier and last May announced a massive $450 billion plan to boost its semiconductor manufacturing capacity over the next decade.
As part of its response to US restrictions, China last week sent Li Zhanshu, the third-highest-ranking member of the Chinese Communist Party, to South Korea.
Li said China supports “realizing cooperation in cutting-edge technological fields and managing supply and industrial chains smoothly and stably.”
Limits should be carefully enforced
The aim of limiting China’s technological development could backfire if even tighter restrictions are deployed.
“If we allow foreign companies doing business in China to continue importing stuff like this, they will have no incentive to de-Americanize their supply chains,” Kennedy said.
“But if we make it tougher, meaning that no one in China has access to this stuff, there will be more incentive to de-Americanize the supply chain, which would be bad for the United States.”
Dr. Kennedy warned that the United States must implement restrictions carefully.
“Without US technology, it would be difficult to build a supply chain in China alone,” he said.
“If the restrictions are too broad, both Chinese chip makers and non-Chinese suppliers may coalesce to create a chip-manufacturing supply chain that does not include American technology.”
It is not feasible in the near future.
“But there are concerns that it could be done long-term,” Dr. Kennedy said.
China sees its dependence on the United States as a weakness and has set an ambitious goal of manufacturing 70% of its semiconductors domestically by 2025, says Samantha Hoffman, senior analyst at the Australian Institute for Strategic Policy. told ABC.
“In the long run, I don’t think US regulations will be seen as the cause, or seen as a backfire if China succeeds.
Hoffman said China has a long way to go in advanced chip manufacturing, but is likely to fill a technological gap.
“China has invested billions of dollars in the semiconductor industry and invested a lot of energy to acquire foreign intellectual property rights from semiconductor companies,” she said.
“Ultimately, we’re going to reduce that dependency anyway, with or without U.S. restrictions.”
According to Dr. Hoffman, concerns about advanced chips making their way into China’s military were justified.
“Military platforms rely on semiconductor technology,” she said.
“Also, it is a technology that contributes to a wide range of non-military fields, but it is difficult to regulate its end use.
“In the context of China’s ‘military-civilian fusion’, the line between ‘normal’ technology and its application to national defense is deliberately becoming more and more blurred.”
Kennedy said recent reports suggested that the US alliance was “struggling” and that “South Koreans in particular were concerned about it.”
He said it was important for the US to remain allies.
Kennedy said, “In the past, it was feared that the United States had struck a good balance between these considerations, but now it seems likely that it will adopt a more comprehensive approach.
“And if they kind of took a more holistic approach, [to restrictions], they risk alienating their allies. ”
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