The Escalating US-China Tech War

After the trade war, the tech war is going to be the eminent phase in the succeeding era of technology. The US-China competition, which has been playing out across nearly every sector, now encircles science and technology. On 7 October 2022, Washington released a new export controls policy on critical technologies to China and announced a set of protocols that restricted China’s access to artificial intelligence (AI) and semiconductor technologies primarily. This implies an open declaration of the economic war between the Great Powers, where technology has turned geopolitical, and the trade war has crystallised into a tech war. The subsequent development is a lead-up beginning with the Trump administration and continuing through the Biden Administration. The US-China approach to the tech competition and its implications for the rest of the world is a serious matter of concern.

The partial disclosure of the semiconductor export control restrictions by the Biden Administration in early September generated confusion and received colossal backlash. In the first half of the policy, America’s top two semiconductor companies, Advanced Micro Devices (AMD) and Nvidia, were banned from exporting their premium supercomputing and AI chips to China. Nvidia being one of the world’s largest chip developer companies, found itself in a real predicament as its growth opportunities were limited by the policy. The subsequent policy released in October comes on the heels of the CHIPS Act’s passage and deviates from the previous market-driven and laissez-faire policies. This way, Washington can retain firm control over chokepoint technologies in the global supply chain of semiconductor technology.

The fallout of their rivalry would be disrupted global industrial and supply chains, demolished international sci-tech exchange, and troubled trade cooperation, to name a few.

There are three broad assumptions which explain US’ intent behind its recent actions. Firstly, to maintain a competitive edge, the great power competition steps in. The export controls policy can be America’s efforts to avert China from indigenising advanced chip-making expertise, thereby encouraging the latter’s reliance on democracies to acquire leading-edge chips. The four crucial US-intervened chokepoints include high-end AI chip designs, semiconductor manufacturing equipment, equipment components and electronic design automation software. This control is not solely to retain an unprecedented degree of US dominance over these chokepoints but to vigorously strangle large segments of Chinese tech industry expansion.

The second assumption encompasses the notion of domestic growth. In 2021, the shortage of semiconductors knocked US economic growth by nearly a quarter-trillion dollars, which diverted the state’s focus towards domestic manufacturing and self-reliance. Under CHIPS Act 2022, the US aims to catalyse innovation, competitiveness and investments in domestic semiconductor manufacturing capacity. For instance, the Act directs 200 billion USD to be spent for the commercialisation of leading-edge technologies and scientific Research and Development (R&D); 52.7 billion USD for semiconductor manufacturing and workforce enlargement; 24 billion USD tax credit for the production of chips; and 3 billion USD on wireless supply chains and leading-edge technology programs, all in the period of next ten years.

Thirdly, Washington seems to be motivated by its national security and foreign policy concerns encompassing technology protection. The US Department of Commerce vividly stated that the products might be diverted to “military end uses” or “military end users” in China. China is believed to be supporting destabilising military modernisation efforts and allegedly operating supercomputers for nuclear explosive activities and hypersonic weapons. Furthermore, over security concerns, Federal Communications Commission (FCC) has also banned the import of “untrustworthy” equipment to the US by Chinese telecom vendors, namely ZTE and Huawei. The ban on telecom equipment on the grounds of national security occurred for the first time in US history. Hence, the US is not willing to hand over an advantage to China, whether it is to retain its dominance or to protect technologies from being used against values which do not align with the US.

Meanwhile, China has highly condemned America’s latest export controls policy, considering it to be crafted out of the need to maintain its sci-tech hegemony. The distortion in the import of the stranglehold technologies would severely hamper the development and growth of Chinese industries. However, Foreign Ministry spokesperson Mao Ning contemplated it as a negative-sum game. Such developments will not only impair Chinese companies’ legitimate rights and interests but will also lousily affect American companies. She further claimed that this is the weaponisation and politicisation of trade and tech issues by the US.

Chinese retaliation is evident from President Xi Jinping’s emphasis on technological advancement and self-sufficiency at the 20th National Congress. The state also issued a White Paper titled “Jointly Build a Community with a Shared Future in Cyberspace”, which is a clear indication of fostering people-centred development and vibrant and inclusive cyberspace. The aforementioned actions and reports highlight crucial components of China’s tech strategy: talent and innovation. Besides domestic growth to circumvent escalated export controls, China will seek alternatives to American advanced technologies and equipment as the US has forbidden US toolmakers from exporting technology to its competitor without aiming at non-US companies.

The US-China tech war illustrates that technology has become increasingly essential to strategic competition. The changing landscape of Great Power rivalry in the tech sector is a testament to the fact that the economies of the US and China are decoupling. There is a world outside US-China tech competition, and actions taken by the two states impact countries across the world. The fallout of their rivalry would be disrupted global industrial and supply chains, demolished international sci-tech exchange, and troubled trade cooperation, to name a few. Hence, there is a need for impacted countries to look out for ways to protect their economic interests amid an ongoing economic war between great powers. From trade war to tech war, one thing is clear the US and China are persistently drawn into a titanic struggle for supremacy.

Zainab Yasin

Zainab Yasin is a graduate of National Defence University, Islamabad. She serves as a research intern at CSCR, and is passionate about analyzing diplomatic relations, world politics and cyberspace.

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