Trump Effort to Keep U.S. Tech Out of China Alarms American Firms
The administration wants to protect national security by restricting the flow of technology to China. But technology companies worry it could undermine them instead.
Companies, along with the lawyers and consultants who advise them, say firms increasingly have no choice but to locate more research and development outside the United States, to ensure that they have uninterrupted access to China, a fast-growing consumer market and the center of the global electronics supply chain. New investment dollars are being funneled to research hubs near University of Waterloo in Canada, as well as Israel, Britain and other places beyond the reach of the American government, they say.
“Anyone who thinks our concerns are exaggerated should talk to the U.S. semiconductor industry workers who are already losing their jobs due to walling off our largest market,” said John Neuffer, the president and chief executive of the Semiconductor Industry Association, which represents chip makers. “Revenue from that big market fuels our big research investments, which allows us to innovate and drive America’s economic growth and national security.”
The RISC-V Foundation, a nonprofit that has created an open-source software standard for the chips that power smartphones and other electronics, acknowledged in recent months that it had chosen to move its incorporation from Delaware to Switzerland because of concerns from its members about more stringent regulations in the United States.
“If this administration proceeds with the current trajectory, we’ll see more defections of companies, of scientists,” said Scott Jones, a nonresident fellow with the Stimson Center. “They’ll take their toys and they’ll go elsewhere, and other economies will be the beneficiary of that.”
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While tech companies found a way around the initial Huawei ban, the administration is
. A new proposal would extend the reach of the U.S. government to regulate products made around the world, prohibiting companies from using American components and technologies in foreign-made products that are then supplied to Huawei.
The proposals have set off panic within the technology industry, which fears the new restrictions will hamper its ability to tap into the Chinese market. Industry lawyers and trade groups have begun warning that, unless the administration can persuade its allies to adopt similar restrictions, companies will decide the safest course is to try to limit their use of American technology.
Critics point to past incidents where tight regulation pushed American industries offshore — including machine tool makers in the 1990s, and commercial satellites in the 2000s. While it is illegal for companies to move existing operations abroad to try to circumvent export control rules, there are no such constraints on new investments
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In recent months, some Chinese companies have begun asking their suppliers to certify that their products are made with a minimal amount of American content, so they are not at risk from American export controls, people familiar with the conversations say.