US-China tech export rivalry sparks new ‘cold war’

US tech firms are promising to obey a new policy by Washington limiting export of certain advanced computing chips as well as semiconductor production material to China, signalling stiffer rivalry over technology.

But the impact of the decision could, nonetheless, hit other countries, especially as it could rivet the prices of chips basic for any electronic gadgets across the world.

Semiconductors are the integrated circuits (IC) meticulously assembled and act as building blocks for electronic gadgets from pocket radios to smartphones, Wi-Fi routers to warplanes and other artificial intelligence (AI) equipment such as self-drive cars, unmanned aircraft and AI cameras.

Also Read: US tightens chip export controls to China

Their scarcity may directly affect the price of your future smartphone. But their availability also puts producers on a tech race to dominate the world, which is political capital.

Surveillance

For example, restricting the Graphics Processing Units, produced in the US but useful for Chinese companies to assemble video game consorts, will derail Chinese companies’ ability to win over the market.

But it could give Washington a foot forward by preventing Chinese investments in super computers. The GPUs are also basic in assembling supercomputers, which can be used for military research.

These supercomputers are used for the purposes of research and development of weapons as well as intelligence gathering. Some of the large-scale systems in China have been linked to surveillance.

The Semiconductor Industry Association (SIA), a lobby for chip producers said it was assessing the impact of the new export controls and working with our member companies and the US government to ensure compliance, but it did call for cooperation to ensure other markets are not hurt.

“We understand the goal of ensuring national security and urge the US government to implement the rules in a targeted way—and in collaboration with international partners—to help level the playing field and mitigate unintended harm to U.S. innovation.”

On Friday, the US Commerce Department’s Bureau of Industry and Security (BIS) announced targeted export controls “to protect US national security and foreign policy interests.”

The controls mean American chip producers are restricted from dealing with Chinese companies when it comes to selling chips used in military applications which Washington believes Beijing is used them “to produce advanced military systems including weapons of mass destruction; improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems; and commit human rights abuses.

The new policy also means foreign governments that impede Washington’s verifications on compliance may also be restricted.

“The PRC (People’s Republic of China) has poured resources into developing supercomputing capabilities and seeks to become a world leader in artificial intelligence by 2030.

“It is using these capabilities to monitor, track, and surveil their own citizens, and fuel its military modernisation,” said Assistant Secretary of Commerce for Export Administration Thea D Rozman Kendler.

Technological monopoly

US officials argue the decision is to guard sensitive tech from falling in wrong hands and say they will not stifle positive innovation.

However, the move has been seen in Beijing as merely protecting a technological monopoly, reviving the old cold war between then the US and the Soviet Union that had also involved tech arms race and spying on each other’s advancements.

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Mao Ning, Spokesperson for China’s Foreign Ministry told a briefing on Saturday Washington was violating a free market economy.

“Out of the need to maintain its sci-tech hegemony, the US abuses export control measures to maliciously block and suppress Chinese companies,” Ms Mao said, according to comments shared with the media on Saturday.

“It will not only damage the legitimate rights and interests of Chinese companies, but also affect American companies’ interests,” she said accusing Washington of weaponising science and technology.

Starting October 21, Washington says 31 Chinese companies, research institutions and related groups will be prevented from accessing US chip market to impede them from obtaining sensitive technologies.

The restrictions, however, only add to a growing geopolitical status of semi-conductors. For example, the chips have also been at the centre of US-China tiff over Taiwan.

For example, Huawei’s chips are produced in Taiwan using American tech. After a recent quarrel between US and China over Taiwan, there is a possibility Washington will withdraw the technology’s availability to Chinese firms.

Since Covid-19, there has been a general shortage as firms struggled to access material to produce enough chips for demand. If the rivalry persists, there is a danger of disrupting supply chains given China relies heavily on US technology to produce most of the electronic equipment used around the world today.

The semiconductor business is lucrative with the US controlling nearly 50 percent of the market share, worth about $193 billion and being home to half of the 15 largest semiconductor companies.

World’s factory

China imported about $100 billion worth of semiconductors a year since 2019, according to the Chinese Ministry of Commerce.

The importation controls, however, will hurt China’s ambition to rise to tech stardom.

Since 2015, China has been working on being the world’s factory and dominate the supply chain. Beijing has since elevated chip production as a key cog of the five-year development plan.

This challenge informed Washington’s earlier restriction of tech companies from working with Chinese firms including equipment sales and sanctioned some of their biggest semiconductor manufacturers.

Only time will tell how far these tech wars will affect other markets.