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Biden’s computer chip ban on China is a big deal

Over at Vox, Michael Bluhm interviews Jordan Schneider about President Biden's recent decision to ban exports of advanced computer chips to China. This is a very big deal that's gotten less attention than it deserves, something that Schneider calls "a point of no return for the relationship." And like everyone, he wonders how China will respond:

They could double down on manufacturing lagging-edge tech, which means well-established technologies that are still widely used in countless products. They could try to punish the US by retaliating against leading electronics firms. They could retaliate directly against the semiconductor supply chain by making moves on the rare earth minerals necessary to make chips, or on packaging — areas where China has a considerable place in the global market. They could do something as escalatory as a cyber-attack on some leading-edge American chipmaker.

But I'm also curious about this:

The new export controls ban the export to China of cutting-edge chips, as well as chip design software, chip manufacturing equipment, and US-built components of manufacturing equipment. Not only do the prohibitions cover exports from American firms, but also apply to any company worldwide that uses US semiconductor technology — which would cover all the world’s leading chipmakers. The new rules also forbid US citizens, residents, and green-card holders from working in Chinese chip firms.

I assume the Biden folks conferred with our allies about this, and I can't say that I've heard about any serious pushback from them. Still, as with so many other US sanctions, I wonder how long it's going to be before our allies get weary of this. Is there going to come a point where foreign companies tire of using American tech for fear that their sales to a major market could be cut off anytime at the whim of a US president? Why should the US be able to dictate the conduct of foreign commerce to all of its supposed friends?

This is hardly a new concern, but in the past it's usually been about small countries like Iran or Cuba. China is a whole different order of magnitude. Europe is already paying the lion's share of the price for US sanctions against Russia, and if China becomes a routine target it could cause problems on a much larger multilateral scale than ever before.

28 thoughts on “Biden’s computer chip ban on China is a big deal

  1. Jasper_in_Boston

    I assume the Biden folks conferred with our allies about this, and I can't say that I've heard about any serious pushback from them.

    The reporting I've read on this mostly indicates that Washington is pressuring allies, but it's not yet clear as to how much buy-in and support they're going to get. So, it may not be a matter of lack of pushback but rather foot-dragging and lack of cooperation (or maybe they'll get full cooperation; it's early days yet).

    One reason the story hasn't gotten more coverage is that the Chinese themselves have responded to the policy in (somewhat surprisingly) relatively subdued fashion. I also wonder what's gone on behind the scenes we don't know about. Perhaps the administration sought Xi's help on Russia/Ukraine, and no help has been forthcoming, so that was what pushed the administration over the edge into taking this action?

    Biden has certainly been vastly tougher on China than the big talker who preceded him.

    1. civiltwilight

      "Biden has certainly been vastly tougher on China than the big talker who preceded him." You are correct about that, and I have been pleasantly surprised. I expected Biden to remove the sanctions the big talker had instituted, and instead, he is making them more burdensome.

      1. name99

        To be fair:

        (a) It took Nixon to go to China; and likewise it takes a Democrat to break up with China.

        (b) The US policy (both parties) was predicated on China continuing down the path of Deng Xiaoping, Jiang Zemin, and Hu Jintao, who all seemed, for all their faults, to have in mind a China running by rule of law, becoming more transparent and with a growing degree of some version of voting and public policy discussion. No-one knew that Xi was so determined to go back to one-man rule and throughout Trump's term this was unclear, and could be argued (and was) argued either way by people on all sides of the US political divide. It's only been during Biden's time, and with Xi willing to break tradition and force a third "term" that a US-wide consensus has arisen that Xi's China is not Hu's China.

  2. D_Ohrk_E1

    This is a very big deal that's gotten less attention than it deserves.

    How often do you read the comments on your posts? 🙃

    Is there going to come a point where foreign companies tire of using American tech for fear that their sales to a major market could be cut off anytime at the whim of a US president?

    Your speculation misses the big picture. Between chip designs, manufacturing, and FAB tooling, most of the market -- but especially the high end -- is tied up between US and Taiwan. So long as Taiwan and the US are on the same page, there is little choice on the matter.

    1. pottery wonk

      100%.

      TSMC in Taiwan has every incentive to follow our lead, as do Samsung and SK Hynix in South Korea. The US and its allies is so tied into the technology supply chain that its hard to imagine any major player breaking sanctions.

      Chip War by Chris Miller is a good intro book on this.

      1. Jasper_in_Boston

        >>TSMC in Taiwan has every incentive to follow our lead, as do Samsung and SK Hynix in South Korea.<<

        TSMC, yes, but why the Koreans? (Not saying you're wrong, just wondering what their incentive is).

    2. memyselfandi

      It's actually the netherlands that presently owns the most critical technology. And no, the US has thus far gotten zero cooperation from allies on this initiative.

      1. name99

        "the most critical technology" is one of those phrases that sounds good but means nothing because there's no metric for "criticalness of a technology".

        The light source (which some would call the most difficult part) is absolutely US technology. No-one denies this, and this is how the US is able to control ASML in this particular respect.

        The optics (EUV mirrors) are German.

        The (extremely precise) alignment machinery is probably some combination of German, Swiss, and Japanese.

        The resists and wafers (without which the rest is meaningless) are mostly Japanese.

        ASML puts everything together (and lord knows, that's not an easy job!) but they are the project managers for an effort that spans San Diego through Europe to Japan...

      2. D_Ohrk_E1

        Criticality is dependent on ASML's ability to build w/o anyone else's support, including subcomponents and intellectual property licensing for EUV and its subcomponents of fab. In this regard, US and Taiwan (and SK) still hold the most important cards.

        But if it's ASML's choice to leverage its chips (pun intended) and therefore emphasize its monopoly power, well then you know what will follow shortly.

  3. golack

    With chip shortages affecting...well...everything, the ban on China would have some effect--but chip companies were ok.
    Now that tech is not doing so well and there is a chip excess....we'll see.

  4. jte21

    I don't know about the chip matter in the EU, but the Europeans are starting to squawk about the subsidies/tax incentives for US battery manufacturers and other green energy firms contained in the Inflation Reduction Act.

    1. Jasper_in_Boston

      And rightly so. The days when the United States even pretended to care about free and open trade are long past.

      1. memyselfandi

        Trump was adamantly opposed to free trade. Since he now controls the republican party that means there is little to no pressure on democrats to push free trade ideas.

        1. Jasper_in_Boston

          Actually, there's intense pressure on Democrats to do just the opposite (that is, it's politically difficult for Democrats to espouse trade liberalization). Same thing with China hawkery, for that matter. Even if there are some elements in the administration that have misgivings about the harshly confrontational nature of the country's China policy (and I'd imagine there are) there's simply no politically tenable path right now in DC toward any degree of detente with Beijing. And that's because Democrats fear (righly, I'd say) they'll face blistering "soft on China" attacks from the GOP were they to even hint at any form of reconciliation.

    1. Jasper_in_Boston

      Because it wouldn't be retaliation is why. The PRC leadership (and frankly, almost all ordinary Chinese: in my observation even the ones who hate the party buy into this narrative) views that province as Chinese soil that must be forced back under Beijing's rule. This policy long predates the rise of the Taiwanese chip sector.

        1. Jasper_in_Boston

          I don't see how war is avoided in that scenario. I really doubt domestic US politics wouldn't allow a US president to sit back and allow 22 million Taiwanese to starve. Which would mean US supply ships and/or military escorts. Which would mean war, unless China backs down.

          Fun times.

        2. D_Ohrk_E1

          The blockade only works if China is willing to encircle all of Taiwan and fires at unarmed shipping vessels. Otherwise, it's just a show of force.

          If they do fire at unarmed ships, they lose their top export market -- US -- equal to nearly 1/5th of all of China's exports, followed by import bans by two of the next 3 largest markets for Chinese exports.

          These are the very least effects of an attempt to create a blockade.

  5. skeptonomist

    "Europe is already paying the lion's share of the price for US sanctions against Russia"

    Don't European nations have an interest in stopping the reconstitution of the Soviet Union (or Russian Empire)? Or is the US coercing them in some way or other?

    1. memyselfandi

      The fact that they support the US sanctions is irrelevant to the question of who is paying the cost of the sanctions.

      1. name99

        Well there's also the own goal aspect to Europe, which I think enough in Europe understand that they don't want to push the "US are making us do this" angle and risk getting too much recent history publicized to their voters...

        - It was not the US that made Germany rush to shut down their nuclear plants without serious consideration of how that might play out.
        - And the US government's response to European dependence on Russian gas has mostly been (across multiple administrations) to warn that Russia would likely use energy as a weapon, eg
        https://www.everycrsreport.com/reports/RL34261.html

  6. Goosedat

    From Asia Times: US chip equipment makers like LAM Research and Applied Materials, and design tool providers like Synopsis and Cadence, stand to lose the 20% to 30% of revenue they derive from China, with devastating consequences for their CapEx and R&D budgets.

    Scott Foster of Asia Times reported October 17 that US semiconductor firms would suffer more damage than China from the new regulations.

  7. Special Newb

    Taiwan already said they'd comply. The highest cutting edge chips are made in Taiwan and the Netherlands. China CAN'T replicate them, they've tried. But there are a finite number of people in the world that are actually intellectually capable of making the machines, using them, and fixing them. The US can't even do it.

  8. name99

    As usual the mainstream discussion is a waste of time because (as usual) it's all about horse races and morality signaling, devoid of technology.

    MUCH more interesting is the technical issue, which is that EUV is not the only game in town...
    But first a reminder. We have been down this road before. The US tried hard to limit Soviet access to nuclear weapons and that merely slowed down their timetable four years for fission weapons. Now you can argue that that was the result of spying, but that's simply ignorance. No spying was involved for fusion weapons and (I remind you because this always gets forgotten) the Soviets got to a fusion weapon *first*. (Yes, the US had a science demonstration first with Mike, but nothing about Mike was a practical weapon, there was no way it could have been hooked up to any delivery system.)
    So, sure, cut the other guys off from your tech if you feel that's valuable. But remember that history shows us the other guys (at least for the adversaries we take seriously) are not idiots.

    So back to tech. The thing is we landed on EUV as the result of a series of choices that each made sense at the time; but that is NOT the same thing as saying that EUV would be the optimal choice if you were building an entire industry from scratch with full knowledge of what we know today, and no concerns for getting on-going value out of already existing machines.
    There are at least four known alternatives to EUV.

    The obvious one is EUV/soft X-rays generated via an alternative mechanism (like free electron laser or synchrotron). This still requires the rest of the EUV nightmare (mirrors, masks, pellicles, resists) so probably the choice of last resort. But it DOES avoid the one part of EUV that the US definitely has control of, namely the light source. The other stuff (mirrors, resists, etc) is European or Japanese so if they no longer care about the US' opinion...

    Then we have nano-imprint lithography or direct self-assembly which are still in research but are both not crazy ideas.

    Finally we have electron-beam lithography which we know works and which we know can be scaled a lot further, more easily, than EUV. Problem is electron-beam lithography is (as currently practiced) extremely slow, so it's never made economic sense apart from specialty use cases. BUT does it have to be intrinsically slow? That's not clear. If an effort as large as the EUV effort were directed at electron-beam lithography the results could be astonishing; vast numbers of simultaneous beams (to get throughput) with an easy path to improving resolution every few years.
    And China has a good reason to go down that path, to make that Manhattan effort, unlike the way the West (for justifiable reasons) poured their effort into EUV.

    The US' decision today could result in a world in 2032 where the Chinese have the world's best lithography, and it's the West that is scrambling to duplicate their massively parallel multi-beam e-scribers...

  9. ruralhobo

    Is there going to be a point where Europeans tire of having to apply US sanctions? Yes, and that point was in 1996 when under Clinton the US imposed harsh sanctions on Iran and Europe angrily enacted the socalled blocking statute to protect its companies. That statute was brought to life again in 2018 because of Trump's withdrawal from the Iran nuclear deal. But as it turned out, European companies mostly still preferred to be on good terms with the US rather than trade with Iran. In short, yes, Europeans were mad at having to obey sanctions they had not passed and did not agree with, but were helpless.

    1. ruralhobo

      PS the term is "extraterritorial sanctions" and their legality has often been questioned. If, say, Denmark imposed sanctions on China, would the US be bound by them? The question answers itself: it's just a question of power.

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