The Future of the China-US Chip War

Beijing sees no choice but to have the state take control of its tech industry amid US pressure. But past experience shows that the big semiconductor push will bring complications.

Last year, the United States stepped up its competition with China in the semiconductor industry. In August, the Biden administration signed the CHIPS and Science Act, an $52.7 billion industrial policy that aims to bolster research, enhance supply chain resiliency, and revitalize semiconductor production in the United States.

In October, the administration rolled out the most extensive restrictions to date on China’s chip manufacturing industry. This new set of restrictions curbs the sale of advanced chips to China, depriving China of the computing power it needs to train artificial intelligence at scale. It also extends restrictions on chip-making tools even further to industries that support the semiconductor supply chain, cutting off both US talent and the components used in the tools that make the chips.

The Biden administration has not offered Beijing a viable “exit strategy” to end the technology war; the White House neither demanded Beijing to improve its trade behaviors nor provided a roadmap for the lifting of sanctions. Thus, in the eyes of the Chinese leadership, the new semiconductor sanctions illustrate that the US government is actively weaponizing its control over core technologies in order to contain China. As a result, China’s government elevated supply chain security to its highest priority.