Top officials in the Biden administration talked to American business leaders this spring. They told them about an aggressive plan to counter the rapid technological progress of the Chinese military.
Intelligence reports say that China used supercomputing and artificial intelligence to make stealth and hypersonic weapons and to break into the U.S. government’s most encrypted messages. Officials in the administration talked about what they could do to slow the country’s progress for months.
They saw a way out: the Biden administration would use U.S. power over global technology and supply chains to try to cut off China’s access to advanced chips and the tools needed to make them. The goal was to keep Chinese organizations that could be a threat far behind their rivals in the U.S. and the countries where we work.
The effort, similar to what the U.S. did to Soviet industries during the Cold War, picked up speed this year as the U.S. tried out powerful economic tools against Russia as a punishment for its invasion of Ukraine and China broke technological barriers. The Russian offensive and Beijing’s military moves also made it seem more likely to U.S. officials that China would invade Taiwan.
The administration’s worries about China’s tech goals came to a head last week when the U.S. government announced the strictest controls on technology exports to the country in decades. This was the first shot in a fight that could affect global trade and make other governments and companies angry.
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Jake Sullivan, the national security adviser, talked about a “small yard, high fence” for critical technologies in a speech about the administration’s national security strategy on Wednesday.
“Choke points for foundational technologies have to be inside that yard, and the fence has to be high because these competitors shouldn’t be able to use American and allied technologies to hurt American and allied security,” he said.
This account of how President Biden and his staff decided to start a new global campaign against China is based on interviews with more than two dozen current and former government officials and business leaders. It includes details that have not been made public before. Most people talked about deliberations on the condition that they wouldn’t be named.
The steps were essential because the Biden administration liked to announce policies with allies to counter rival powers, like the sanctions against Russia.
With China, the administration spent months talking to allies like the Dutch, Japanese, South Korean, Israeli, and British governments and trying to get some of them to put restrictions on China along with the U.S.
But some of these governments have been hesitant to stop important trade with China, which has one of the biggest technology markets in the world. So the Biden administration decided to act independently, without allies’ help.
Gregory C. Allen, who used to work for the Defense Department and now works at the Center for Strategic and International Studies, said that the move was “fundamentally unilateral” even though it was made after consulting with allies.
In an analysis, he wrote, “By turning its dominant choke-point positions in the global semiconductor value chain into weapons, the United States is using its technological and geopolitical power on a huge scale.”
With this set of restrictions, the administration can stop China from getting specific high-tech chips made by U.S. companies and companies outside of the U.S. that use U.S. technology.
Officials from the United States said that the decision to go ahead with export controls was a sign of leadership. They said that some allies wanted to take similar steps but were afraid of what China would do in response, so the rules from Washington that apply to foreign companies did the hard work for them.
Other rules say that American companies can’t sell Chinese companies the equipment or parts they need to make advanced chips. They also say that Americans and U.S. companies can’t give China’s advanced chip factories software updates or other services.
The measures do not directly stop foreign companies from selling products to China that are made with semiconductor equipment. But experts said that the lack of American equipment would likely slow down China’s new industry for making advanced chips. In the long run, though, this could lose its power as China learns how to make its vital production technologies.
Some companies didn’t like losing sales in a market that made a lot of money. In August, a Tokyo Electron executive told investors on a call that the company was “apprehensive” that restrictions could make it hard for its Chinese customers to make chips. ASML, a Dutch equipment company, has said some negative things.
Chinese officials said the U.S. restrictions were a big step to stopping their country from growing. The move could have many effects, like slowing down progress in artificial intelligence, which is used in self-driving cars, video recommendation algorithms, and gene sequencing, and ending China’s chip-making industry.
China could punish foreign companies that do business there as a response. Some experts say that the way Washington puts the rules in place could hurt U.S. alliances.
China Makes A Step Forwards
Commerce, Defense, Energy, and State Department experts spent months reviewing spreadsheets identifying dozens of U.S. semiconductor instruments to decide which could be utilized for advanced chip manufacture and whether Japan and the Netherlands made comparable equipment.
July brought terrible news. SMIC reportedly produced a semiconductor that rivals complicated Taiwanese devices.
The breakthrough caused the White House and Capitol Hill displeasure with U.S. efforts to curb China’s technological growth.
The Biden administration sent letters to equipment manufacturers and chip producers in August to tighten down on China’s semiconductor industry. Global guidelines were issued last week.
Companies stopped shipping to China. U.S. officials indicated they would award licenses case-by-case so non-Chinese enterprises could continue servicing Chinese facilities. Intel, TSMC, Samsung, and S.K. Hynix have temporary exemptions.
Pottinger said the regulations might be the start of a U.S. attack. “The Biden administration recognizes that it’s not enough for America to go faster — we also need to hinder China’s tech ambitions,” he said. “The administration’s thinking has evolved”
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