Part II
Mr Biden’s administration is anyway hamstrung by politics at home, whatever new course America might try to chart with China. “Many are sceptical because they’re not sure whether or not Biden will be around,” says Richard Thurston, once the top lawyer at the Taiwan Semiconductor Manufacturing Company (tsmc), the world’s largest chipmaker. He says the administration may be losing its appetite for energetic chiplomacy for fear that any agreement it makes may be swept away later this year if Congress turns Republican.
Mr Thurston reckons that controlling exports of specific machines and components is unwise anyway, because no net of controls can be drawn tightly enough to stop a determined, powerful country from somehow getting the tools. But it will nonetheless be tricky for China to acquire the knowledge for using those tools to make chips in commercially viable volumes. Mr Thurston suggests that governments, instead of constraining semiconductor supply chains, should focus on protecting trade secrets. American semiconductor companies and those in friendly countries could sell their most advanced chipmaking services to the Chinese market, yet still be able to prevent Chinese firms from developing the most sophisticated manufacturing capacity themselves.
This is not a popular view in Washington, where Mr Biden is all too easily battered by headlines bemoaning the flow of chips and tools to China. Yet an awkward fact is that America’s own semiconductor toolmakers still count China as one of their biggest markets. Applied Materials, a Californian firm that makes machines used to etch minute circuits on silicon wafers, sold tools worth $5bn to China in 2020, more than to any other market.
Meanwhile China keeps making progress. The proportion of global chips sold by China is rising (see chart 1). That is not true for any other major chipmaking country, despite Mr Trump’s campaign to snuff out China’s indigenous industries and Mr Biden’s more multilateral attempts to achieve the same end. America and its allies may yet agree on how to contain China’s semiconductor ambitions. But it may prove impossible for one state to control such a complex industry. If so, America may come to regret trying to intervene.
Non-paywall source:
The Economist is always muh free market but there are exceptions for example when it comes to defending western hegemony.
Mr Biden’s administration is anyway hamstrung by politics at home, whatever new course America might try to chart with China. “Many are sceptical because they’re not sure whether or not Biden will be around,” says Richard Thurston, once the top lawyer at the Taiwan Semiconductor Manufacturing Company (tsmc), the world’s largest chipmaker. He says the administration may be losing its appetite for energetic chiplomacy for fear that any agreement it makes may be swept away later this year if Congress turns Republican.
Mr Thurston reckons that controlling exports of specific machines and components is unwise anyway, because no net of controls can be drawn tightly enough to stop a determined, powerful country from somehow getting the tools. But it will nonetheless be tricky for China to acquire the knowledge for using those tools to make chips in commercially viable volumes. Mr Thurston suggests that governments, instead of constraining semiconductor supply chains, should focus on protecting trade secrets. American semiconductor companies and those in friendly countries could sell their most advanced chipmaking services to the Chinese market, yet still be able to prevent Chinese firms from developing the most sophisticated manufacturing capacity themselves.
This is not a popular view in Washington, where Mr Biden is all too easily battered by headlines bemoaning the flow of chips and tools to China. Yet an awkward fact is that America’s own semiconductor toolmakers still count China as one of their biggest markets. Applied Materials, a Californian firm that makes machines used to etch minute circuits on silicon wafers, sold tools worth $5bn to China in 2020, more than to any other market.
Meanwhile China keeps making progress. The proportion of global chips sold by China is rising (see chart 1). That is not true for any other major chipmaking country, despite Mr Trump’s campaign to snuff out China’s indigenous industries and Mr Biden’s more multilateral attempts to achieve the same end. America and its allies may yet agree on how to contain China’s semiconductor ambitions. But it may prove impossible for one state to control such a complex industry. If so, America may come to regret trying to intervene.
Non-paywall source:
The Economist is always muh free market but there are exceptions for example when it comes to defending western hegemony.
