China Chip Controls Have Strong Initial Impact but Could Weaken, Expert Says
New U.S. restrictions on semiconductor exports to China likely will have a “truly devastating impact” on China’s access to advanced semiconductors within the next three years, the Carnegie Endowment for International Peace said in an Oct. 27 report. Even though China has been expecting the controls and has stockpiled some chips and semiconductor manufacturing equipment, those stockpiles will eventually “dwindle” and the country “will likely be forced to step backward in technological time and use less advanced chips that the industry has long since moved past,” the report said.
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But the report, written by Carnegie fellow Matt Sheehan, also said China could eventually access “alternative supplies of key parts” as foreign companies move away from U.S. parts that are subject to foreign direct product rule restrictions.
“Many leading SME and component companies are headquartered in Germany, Japan, the Netherlands, South Korea, and other U.S. allies that often share a general concern about Chinese technology prowess,” Sheehan wrote. “But the exact cost-benefit calculations around equipment sales look different when viewed from a smaller country that has far fewer technology juggernauts, more overall reliance on economic ties to China, and either less acute threat perceptions or greater fear of escalation risks.”
Sheehan sees a future where “companies would aim to reduce U.S. components so that they are only subject to the veto power of their home government and not a foreign power.” He also said Chinese fabs and firms could “emerge both strong and fully untethered from U.S. controls” if they work together and manage to “survive the initial onslaught of restrictions.”
“Those concerns are legitimate, but they come with a huge amount of uncertainty -- technological, economic, and geopolitical -- baked in,” Sheehan wrote. “In issuing the latest round of export controls, President Joe Biden’s administration chose to play the cards it had for the impact it can create today.”