Amid the global enthusiasm surrounding the potential of artificial intelligence (AI), the United States, supported by its allies, is intensifying efforts to restrict China’s access to cutting-edge technologies. Recent developments, including the Dutch government’s announcement of new restrictions on semiconductor equipment exports and the anticipated tightening of US export controls on advanced chips, highlight the growing significance of technology restrictions in the US-China tech rivalry.
Increasing export controls on semiconductor equipment
The Dutch government’s collaboration with the US and Japan to implement new export restrictions on semiconductor equipment signifies a major step towards limiting China’s access to critical technologies. This agreement requires companies involved in manufacturing advanced chip-making machinery to obtain export licenses, affecting industry leader ASML. While ASML has refrained from selling its most advanced machines to China under US pressure, the new restrictions also prevent the export of older models without a license. As the sole producer of extreme ultraviolet lithography devices essential for manufacturing chips smaller than 7 nanometers or smaller, ASML’s export restrictions deal a blow to China’s semiconductor capabilities.
Targeting AI technology and geopolitical implications
Reports suggest that the Biden administration plans to tighten restrictions on the sale of AI chips by targeting companies like Nvidia and foreign entities involved in the global supply chain. Recognizing the broad applications of AI, not only in technology but also in military and national security domains, the US aims to curb China’s advancements in this critical field. In response, China has criticized the expanding web of restrictions, accusing the US of coercing its allies and intensifying the siege on its semiconductor industry.
China’s countermeasures and challenges
Despite investing heavily in chip-making capabilities, China still lags behind the US, Europe, Japan, and South Korea in advanced chip design and production. While China produces legacy chips at scale and explores ways to leverage less-advanced chips to protect its leadership position in AI, it faces challenges in bridging the technology gap. Retaliation against technology restrictions is limited, and China’s ability to threaten the US or its allies remains constrained. In the past, China has resorted to citing cybersecurity risks to ban specific technology imports, but such actions highlight its limited leverage in the semiconductor landscape.
The battle for technological dominance
Advanced semiconductors play a central role in 21st-century technologies, including AI, quantum computing, big data analytics, and dual-use applications. The competition for intellectual property associated with their production has intensified between China and the US-led coalition of like-minded countries. While the US and its allies aim to de-risk their technological dependencies on China, China perceives these actions as a decoupling strategy. This disagreement reflects the complexity of the US-China tech rivalry and the diverse motivations of the stakeholders involved.
Impact on Companies and the ‘High Fence’ Analogy
The tightening of technology export restrictions has implications for companies like Nvidia and ASML, leading to lost future sales and revenue opportunities. But, these companies’ concerns are outweighed by national security interests and other geopolitical considerations, which drive governments to impose restrictions. The Biden administration’s characterization of America’s approach as building a high fence around a small yard aptly describes the increasing measures to limit China’s access to critical technologies. With the further tightening of restrictions in Europe and the US, the ‘yard’ is expanding, and the ‘fence’ is growing higher.
As the US and its allies double down on technology restrictions, the battle for dominance in critical technologies intensifies. The recent measures targeting semiconductor equipment exports and AI technologies indicate the growing significance of these restrictions in shaping the global technological landscape and fueling the ongoing US-China tech rivalry.
