August 10, 2023:
Information Clearing
House
-- "UNZ"
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The Biden administration
has imposed a blockade on advanced
computer chips headed for China. The
action is expected to slow China’s
technological development while
inflicting serious damage on the broader
economy. The strategy has been widely
praised by the media and foreign policy
experts, but a growing number of
analysts wonder if the plan could
backfire?
Dan Wang is skeptical that Biden’s
blockade will succeed in the way the
authors had intended. Wang is a
technology analyst who presented his
views in an editorial at the New
York Times. Here’s what he said:
The White House is
intent on outcompeting China on
technology. The ground on which this
competition is taking place is chip
making. But the Biden administration
shouldn’t sit back and savor this
accomplishment for one reason:
What if its core belief — that
advanced semiconductors are one of
the critical fronts in the contest —
is wrong?…
America’s actions are
driven by the assumption,
articulated by the national security
adviser, Jake Sullivan, that
computing chips are a force
multiplier technology, staking it as
critical to continued U.S.
leadership. But what if the U.S.
government is too focused on the
most novel technologies rather than
the most important ones? I
believe America is in a great power
contest with China, one that will be
multidimensional and protracted,
making it unlikely that success
hinges solely on who can stay ahead
in a few advanced technologies….
An excessive focus by
the United States on A.I. — and on
the advanced chip-making
capabilities it requires — may
represent a failure to appreciate
China’s broad technology strengths.
While China has suffered serious
setbacks in chip production, its
companies are vaulting ahead in
other sectors. Last year China
overtook Germany in automobile
exports, and it is on track to
overtake Japan as the global leader
this year. While most of these
exports consist of foreign brands
produced in China, the numbers
reflect the deep expertise that
Chinese companies have built in the
next era of automotive technologies,
particularly in car batteries.
We have been breaking people out of the Matrix
for more than 23 Years!
It’s not just cars.
Industry estimates put Chinese
companies at owning around 80
percent of the supply chain for
solar manufacturing. Chinese
electronics makers have produced a
rising share of the components in
Apple’s iPhone. And increasingly in
less glamorous products — such as
industrial machinery and basic
household equipment…
With one hand, the
U.S. government is blocking China’s
progress on A.I. and supercomputing,
but with the other, it is ushering
Chinese companies toward
concentrating their efforts on chips
for products of daily use. And
a world in
which Chinese companies dominate the
production of mature chips — driven
directly by American policy — hardly
looks like a victorious outcome for
the United States….
We need to spend less
time making ever more marginal
refinements to restricting an
emerging technology. Rather, we
should take a more holistic view of
a long-term contest with a peer
competitor. That means broadening
the strategic focus to a wider range
of sectors and following through
on plans to build unglamorous
technologies, too.
Biden Is Beating China on Chips. It
May Not Be Enough, New York
Times
Wang’s op-ed helps to point out the
shortcomings of Biden’s blockade.
Whatever technological gains the US may
achieve in the near-term, they will pale
in comparison to China’s forward
progress in other, more mundane sectors
of the economy. What the blockade
illustrates is the administration’s
obsessive search for a “silver bullet”,
that is, a ‘magical weapon’ that will
help them to achieve their broader
strategic objectives. Unfortunately,
there is no silver bullet that will make
a waning empire with dilapidated
infrastructure, an aging workforce, a
failing educational system, and a
hollowed out industrial core, more
competitive. The United States will have
to spend less money on its wasteful and
over-bloated military and more on the
development of its productive assets and
industries if it wants to compete
head-to-head with a manufacturing
powerhouse like China.
It’s also worth noting, that the
blockade has dramatically impacted the
bottom line of the major chip producers.
Headlines like these can now be found in
all the major mainstream media:
Samsung to extend
production cuts after $7 billion
chip loss in first half, Reuters
SK Hynix, one of the
biggest memory chipmakers, reports
record quarterly loss as prices
slump, CNBC
Intel, Samsung,
Micron and others are being hit by
one of the worst chip routs ever in
a swift decent from the pandemic
sales surge, Bloomberg
Semiconductor giants
are losing money on every chip as
historic glut threatens to wipe out
earnings, South China Morning Post
An
industry that still is undergoing
post-Covid distress syndrome, has now
been whipsawed by precipitous policies
aimed at containing a rising China.
Here’s more on the topic from an article
at the Global Times:
During a recent White
House meeting with the chief
executive officers of American
semiconductor giants, Intel,
Nvidia and Qualcomm criticized the
Biden administration’s relentless
approach to curb exports of advanced
chips to Chinese customers, saying
the restrictions will surely
backfire on them, depleting them of
a big revenue source and endangering
their ability to lead the sector in
the future.
The blunt warning is
an attestation that the US
government’s so-called “small yard
and high fence” strategy to scupper
China’s technology sector progress
is ill-willed in the first place and
to no avail in the end. For an
example, Nvidia CEO Jensen Huang
told senior US officials that
limiting sales of
American chips in China had “just
made alternatives more popular.”
The undertone is
if the American chip companies lose
the market share in the world’s
largest semiconductor market, they
will lose them permanently. All
the more, the availability and
quality of the software that Chinese
companies are using more than
compensates for any hardware
restrictions by Washington, the CEOs
said.
US-led semiconductor technology
blockade to backfire on itself,
allies, Global Times
Still, the Biden administration is
charging ahead blindly despite the
protests of industry honchos or
skeptical allies. They’re not concerned
about the loss of revenues for chip
manufacturers or the impact their
blockade could have on the industry as a
whole. They are convinced that their
onerous export controls will succeed and
that, eventually, Beijing will submit to
Washington’s diktat.
Most analysts, however, believe it is
only a matter of time before China
catches up and is able to produce its
own advanced semiconductors. After all,
China spends “$400 billion in annual
chip imports” which will now be diverted
to domestic production. Given China’s
strides in other areas of technological
development, we expect that they will
bridge the gap within the decade.
Consider, for example, what happened to
Huawei. This is from an article at the
New York Times:
Huawei may prove
instructive once again. Battered by
American sanctions and China’s
strict pandemic controls, the
company’s 2022 profits fell by a
staggering 70 percent compared with
the previous year. But there are
signs of life: Despite the plunge in
profits, revenues rose slightly, and
the company’s operating system,
HarmonyOS — which it developed after
being cut off from using Android —
has been installed on more than 330
million devices, mostly in China. …
Bereft of American
chips and technology, Huawei has
been forced to redesign and
remanufacture all of its legacy
products to ensure they contain no
American components. The company is
dragging along an entire domestic
supply chain in its wake, sending
its own engineers to help train and
upscale Chinese suppliers it once
shunned in favor of foreign
alternatives. Recently, Huawei
claimed that it had made significant
breakthroughs in the electronic
design software used to produce
advanced semiconductors at a size
that, though still a few generations
behind the U.S., would put it
further along than any other Chinese
company. If Huawei manages to
succeed, it could emerge from
American sanctions stronger and more
resilient than ever.”
‘An Act of War’: Inside America’s
Silicon Blockade Against China,
New York Times
So, yes, Trump’s sanctions put Huawei
into a steep tailspin, but now the
tech-giant is back on its feet and
gaining momentum. Can we expect the same
from China’s budding chips industry?
Yes, we can. China’s development may be
delayed but it won’t be stopped. And
when China finally catches up, they will
remember the countries that violated WTO
rules and abandoned their “free market”
principles in order to inflict as much
pain on China as possible. This is from
a post at Econofact:
The rules of the WTO
prohibit countries from acting
unilaterally in response to what
they perceive as violations by other
countries.
WTO members are instead required to
use the WTO dispute settlement
system for their complaints. This is
intended to eliminate the
possibility of a retaliatory spiral
of protectionist measures.
Recent moves by
the United States to impose tariffs,
justified as important to national
security, are widely regarded by
other countries as unilateral action
that is illegal under WTO law…..
Unilateral action
violating WTO rules risks destroying
a system that the United States has
led for decades, and that has
benefited this country.
U.S. Trade Policy: Going it Alone
vs. Abiding by the World Trade
Organization, Econofact
Simply put, Biden’s advanced
semiconductor blockade is cheating. It
is a clear violation of the rules the US
agreed to uphold.
As
we noted earlier, the vast majority of
western journalists not only support the
blockade but, also, take great delight
in the fact that China is being unfairly
targeted. Michael Schuman at The
Atlantic, for example, is thrilled
that Biden has taken such aggressive
action which he thinks is entirely
justified. Here’s what he said:
President Joe Biden
showed Xi who’s boss.
Two days earlier, on October 21,
Biden had dropped the hammer on
China’s semiconductor industry by
fully implementing a slew of tough
controls on the export of American
chip technology to China. This is a
painful blow to Xi’s ambitions to
rival the U.S…
Biden’s new policy
reveals that the standard narrative
of China’s unstoppable ascent and
America’s inexorable decline is
based on flawed assumptions. The
U.S. continues to hold tremendous
economic and technological
advantages over China, which, as
Biden just signaled, Washington is
becoming more willing to use against
its Communist competitor. Above all,
Biden’s export-control measures
are a ruthless expression of
American clout—and an intentional
reminder that, in many respects,
America has it and China does not. ...
These controls mark a
distinct shift in Washington’s
approach to China. On top of trying
to outcompete China, which is the
intent of the CHIPS Act recently
passed to support the U.S.
semiconductor sector, Washington
is now purposely and openly working
to hold back Chinese economic
progress. Allen called the
controls a “genuine landmark in
U.S.-China relations” that heralds “a
new U.S. policy of actively
strangling large segments of the
Chinese technology
industry—strangling with an intent
to kill.”
Why Biden’s Block on Chips to China
Is a Big Deal, The Atlantic
Not surprisingly, Schuman’s views are
shared by a vast number of his
colleagues in the media. They all
seem to believe that China must be
punished for succeeding in a system the
US helped to create. What’s striking
about Schuman’s piece, however, is the
diabolical glee with which he promotes
the “new U.S. policy of actively
strangling large segments of the Chinese
technology industry… with an intent to
kill.” That might sound a bit extreme
for an opinion piece, but it does
accurately reflect the aims of the Biden
team who seem fully-committed to
“thwarting Chinese capabilities on a
broad and fundamental level.” In short,
sabotaging China’s technological rise
looks to be Washington’s top priority.