Xi Jinping Will Lose To U.S. In Chips War

Chinese leader Xi Jinping’s push to “win the battle” in core technologies and bolster China’s position as a tech superpower is bound to fail after Washington choked his supply of advanced chips and chip-making equipment, Laura He reported for CNN Business.

Photo Insert: The US was wrong in shipping out semiconductor manufacturing decades ago to exploit cheap labor in China.

On October 7, the Biden administration unveiled a sweeping set of export controls that ban Chinese companies from buying advanced chips and chip-making equipment without a license.

The rule also restricts the ability of “US persons” — including American citizens or green card holders — to provide support for the “development or production” of chips at certain manufacturing facilities in China.

Chips are vital to China’s industries and it was Xi’s failure to develop Beijing’s own chip technology that would shatter Xi’s dream of becoming the world’s microprocessing hub, decades after China succeeded in becoming the world’s sweatshop.

China has failed to create a technology-based cadre that could beat the US in the semiconductor industry.

"The US moves are a major threat to China’s technological ambitions,” said Mark Williams and Zichun Huang, analysts at Capital Economics, in a research report. They said the global semiconductor industry is “almost entirely” dependent on the US and countries aligned with it for chip design, the tools that make them, and fabrication.

“Without these,” the analysts said, “Chinese firms will lose access not only to advanced chips, but to technology and inputs that might over time have allowed domestic chipmakers to climb the ladder and compete at the cutting edge.”

They added: “The US has chopped the rungs away.” Arthur Dong, a professor at Georgetown University’s McDonough School of Business, described the recent US sanctions as “unprecedented in modern times.”

Dong said the latest US sanctions will make it harder for China to advance in AI as well as 5G, given the role advanced chips play in both industries. “In any circumstances,” Williams from Capital Economics said, “China would find achieving global tech leadership hard to achieve.”

Chips are vital for everything from smartphones and self-driving cars to advanced computing and weapons manufacturing. US officials have talked about the move as a measure to protect national security interests.

It also comes as the US aims to bolster its domestic chip manufacturing industry with heavy investments after chip shortages during the pandemic highlighted the country’s dependence on imports.

The US was wrong in shipping out semiconductor manufacturing decades ago to exploit cheap labor in China. Beijing actually spends more money importing chips than purchasing oil. China also failed miserably to snatch advanced US technology despite spending millions of dollars on industrial espionage.

Arthur Dong, a professor at Georgetown University’s McDonough School of Business, described the recent US sanctions as “unprecedented in modern times.” And this is the reason why Xi is now backtracking and saying China will cooperate with the US.

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