The Chip War Between the US and China Continues to Intensify

The chip war: Competition between countries is normal, but in the case of semiconductors, things have been heating up between the US and China for quite some time. The US wants to impede China’s progress, and they have started to take more intense measures to do so, including export controls and restrictions that have had a major impact on the industry.

Why semiconductors? Simply put, semiconductors are used in many places, from modern smartphones to military hardware. They are vital to these efforts, and the US is claiming that China is using them in a way that threatens national security. Ultimately, that outlook has led to the US doing everything it can to prevent China from acquiring technologies that can be of further threat.

• The chip war between the two countries has been going on for some time, originating from economic conflict between the two countries.
• The conflict is partially responsible for the global chip shortage that is still ongoing and might worsen as things continue to heat up.

Export controls: In October, the Biden administration published export controls that included a measure to reduce China’s access to semiconductors. The controls targeted chips made by US equipment anywhere in the world, greatly expanding the reach of previous actions to hold back China’s technological and military advances.

• The actions will make things more difficult for leading factors and chip designers in China.
• There is still a lot of reliance on other countries since their participation impacts whether the measures will succeed down the line.

The US is placing Chinese firms on a list, which is referred to as the “entity list.” Currently, the Biden administration has placed numerous companies on the list, including the massive Yangtze Memory Technologies Corp (YMTC), and more are added periodically.

When a company is placed on the list, it makes it more difficult for US companies to do business with them, restricting the sale of certain technologies. It requires government permission, which is notoriously difficult to get.

China has filed a complaint with the WTO. The filing to the World Trade Organization (WTO) stated that the US’s actions are abusing export controls to maintain industry advantage. Additionally, China remarked that the act threatened global supply chains. However, the US has held firm to its argument that the issue involves national security, stating that the WTO was not the place to address the situation.

Response from the world: The US has made its stance clear, and China has called the additional controls put in place “technology terrorism.” However, they are not the only ones affected. Many countries in Asia that produce chips, such as Taiwan, Singapore, and South Korea, have been vocal about their concerns. Particularly, they are concerned when it comes to the global supply chain.

Additionally, Japan and the Netherlands have shown a positive response to the measures, at least in some regard. Still, it is only a partial adoption, with Dutch Trade Minister Liesje Schreinemacher making it clear it would not do everything in the same manner as the US.

Hesitance from companies: Not everyone is ready to embrace the changes, and that is particularly true for some of the chip companies. The curb has the potential to cost some companies millions, if not billions. Moreover, with slowing demand on the horizon, a dip in the global supply chain and restrictions on a major buyer is something some companies might find hard to stomach.