China and the US are trying to take Taiwan’s semiconductors. In the background a stylized electrical panel
Like China, US sees AI as key to both military and economic power in 21st centurySt century. Both Republicans and Democrats in DC are concerned about the pace of Chinese progress. In fact, the running joke on Capitol Hill is that the only thing they can agree on is the Chinese threat.
To that end, Congress recently passed the CHIPS Act, and the Executive Department is implementing trade controls to deny technology they believe is critical to China’s AI development. While this desire is reasonable, it is unlikely to work in the medium to long term and will only increase geopolitical tension.
US technology strategy is based on seven realities that, while true today, are unlikely to all be true tomorrow.
Semiconductors require one of the the most complex supply chains in the world. While the governments in these regions are aligned with the US today, this may not always be the case. Many of the key chokepoints are in regions that trade more with China than with the US.
1. Europe’s central role in the semiconductor trade
One of the main choke points on China’s path to semiconductor advancement is access to cutting-edge photolithography technology and test equipment, particularly from ASML in the Netherlands. The US negotiation of trade controls with the Netherlands required intense pressure — pressure that may not be possible in the future. In fact, Dutch politicians are already questioning the deal.
As China’s economic ties with Europe, particularly Germany, deepen. These greater trade relations could potentially lead to a reassessment of Europe’s alignment with US priorities. This could be accelerated if there are changes in US commitments to European security, such as a reduced presence in Ukraine or a limited role in NATO — wishes expressed by today’s presidential candidates.
Such developments could lead to a realignment of economic and security interests between Europe and the US, with profound implications for China’s technological containment.
2. Japan’s shifting alliances
Japan is the other major supplier of semiconductor manufacturing and test equipment. Today, Japan’s strategic alignment with the US is rooted in a deep-rooted security alliance. However, Japan becomes less dependent on the US Navy for security.
If the United States limits its commitment to other security partners, Japan may well prioritize its economic interests over security alliances. The US is a significantly smaller trading partner than China, which already accounts for more than a quarter of Japan’s total trade. This ratio will likely become more pronounced over time.
Beyond these key choke points, there are a number of questionable assumptions that must continue to hold for the US to maintain its dominance in technology:
3. Taiwan at the crossroads
Taiwan’s semiconductor prowess is a linchpin for the industry, but like Japan, it must perform a delicate dance of strategic alignment to balance its largest trading partner, China and the US
Xi ordered the Chinese military to be able to invade Taiwan by 2027. Today, an invasion of Taiwan and the subsequent destruction of its semiconductor facilities would be a disaster for all nations. As China approaches parity with the technologies that the US and its allies have denied it, Taiwan’s disaster may have a far greater impact on the United States and Europe than itself.
4. Jump Technology
The current technological superiority of semiconductor production in the US and Taiwan, especially in cutting-edge chips, is a major factor in the global balance of power. However, a slowdown in the ability of cutting-edge manufacturers to increase transistor density – the end of what has become known as Moore’s Law – creates an opportunity for China to close the gap.
While the West is said to have a decade-plus lead, some of the right crossings could change the dynamic. China continues to progress as an innovator, as evidenced by the 7nm chip in Huawei’s new phone. This ability to move product from the lab to the market could change the race for technological dominance.
5. Sustainability of next generation technology
Today, Samsung, Intel and TSMC are leading the way in next-generation 3D semiconductor technologies, but Chinese competitors such as SMIC are experienced and fast followers.
These are the most complex devices ever made and there is no guarantee that non-Chinese companies will successfully scale production. If increasing complexity and cost slows technological progress, the leap may not be so great for a government-sponsored body, offering Chinese firms a more attainable goal.
If the West maintains its lead in higher-end brands, in many applications, China will be able to make up the shortfall by using a larger volume of less energy-efficient equipment.
6. Production of Clean Energy
Creating a single image in Midjourney uses as much electricity as charging your smartphone. A typical ChatGPT session requires 16 oz. (500 ml) of water to cool the servers.
By 2030, data centers, the lifelines of artificial intelligence, are expected to be used at least as much electricity as the country of Argentinaprobably much more.
It will be difficult for America and its allies to power these data centers without Chinese support. China produces ¾ of the world’s solar cells and it is the first to be released on the market 4th generation nuclear technology.
7. The Resource Equation
The US is heavily dependent on Chinese companies for materials vital to semiconductor production, such as gallium and germanium. Disconnecting resources is difficult. It will take over a decade, if at all possible, according to Jensen Huang, founder of NVIDIA. This is a potential choke point for US semiconductor production and China has already started putting controls on exports of basic materials.
The most obvious response by Western countries is to deny access to advanced improvement capabilities that the Chinese depend on. As long as this remains a trade dispute, both the US and China may be able to advance their efforts, just at a slower pace. If tensions escalate, the broader denial of strategic resources could be disastrous for both countries.
It is wrong to push Panda
Giant panda bear teething, eating bamboo
Given this level of uncertainty about how the future will play out, and The possibility of eventual near-technological and economic parity does not seem wise for the US to seek conflict. The memories of the wronged are long.
This kind of myopic nationalist agenda echoes the decisions that brought the US into conflict with Japan and plunged it into World War II.
In the 1930s and 40s, the US engaged in systematic resource denial with Japan to slow its expansion. Japan saw this as a strategic threat and responded by bombing Pearl Harbor. As Japan did, China will take whatever steps it deems necessary to thrive.
Unlike Japan in the 1940s, China’s challenge today is that its economy is over-productive. Japan is an island country, but China’s land and mineral resources are vast. If scaling occurs, its capabilities, resources and economy will continue to grow.
Treating China as a strategic threat, rather than a strategic peer, is a short-sighted approach to statecraft. We share a small planet and limited resources. While the US will have to assert its right. It is foolish to limit strategic cooperation and increase competition. Our world depends on it.
