Joe Biden Just Crushed China's Semiconductor Industry
Dark Brandon strikes again.
There was some big, important news on Friday and no one really noticed: The Biden administration hit China, hard, with a series of export controls that are going to hurt.
Here’s how the policy works: Making computer chips requires a lot of advanced equipment. Much of that advanced equipment is made by American companies. The new rules from the Biden administration make it so that any company, anywhere in the world, using certain advanced American equipment to make chips can’t sell those chips to Chinese-controlled companies.
Which means that, at the stroke of a pen, China is getting cut off from the kind of advanced chips it can’t manufacture on its own. Which will cripple both military progress and tech-sector progress, too.
Technology experts said the rules appeared to impose the broadest export controls issued in a decade. While similar to the Trump administration’s crackdown on the telecom giant Huawei, the new rules are far wider in scope, affecting dozens of Chinese firms. And unlike the Trump administration’s approach — which was viewed as aggressive but scattershot — the rules appear to establish a more comprehensive policy that will stop cutting-edge exports to a range of Chinese technology companies and cut off China’s nascent ability to produce advanced chips itself.
Here’s Ben Thompson with his takeaways:
First, in case there was any question, it is clear that China is being viewed as an adversary, and that that view is a bipartisan one. Any tech company with business in China would do well to note that any further investments are fraught with risk, and previous investments need to be diversified sooner rather than later.
Second is the point I started with: while Trump deserves credit for upsetting the apple cart in terms of conventional wisdom with regards to China relations, the Biden administration is correct to pursue those previous actions to their logical conclusion. . . .
[W]hat is significant about this move is not simply that it bans chips but it also bans equipment as well (and, given the restrictions it places on U.S.-persons, also bans the service of existing equipment). That certainly increases the motivation for China to build alternatives, but it is tough to get strong legs when you have to first figure out how to make weights (but the weights involve the most complex tools ever invented by humans).
What Thompson is talking about with the “weights” here is the fact that this policy doesn’t just hurt China’s ability to get chips now—thus hurting its economy and military. It also hobbles China’s ability to build its own advanced semiconductor industry because now the Chinese have to reinvent every wheel in the process just to get to par as it exists in the West circa 2022.
Maybe you should mention this the next time someone suggests that Biden hasn’t been “tough on China.”
Anyway, the Biden administration isn’t perfect. Sometimes it does things you don’t like. Sometimes it does things you do like, but imperfectly.
But add these new, very aggressive, export controls to the list of things Biden has done either pretty well or very well.
2. It’s the Racism?
On the Secret Show with Sarah last week we talked about an accusation we sometimes hear:
It’s nice that you right-wingers have come around since 2016, but the Republican party was always like this.
On the show, I argued that I don’t think this criticism is really right. Let’s pretend that you were a Republican in 2000 and you cared about:
Robust foreign policy
The spread of democracy abroad
The rule of law
Well, guess what: The Democratic party is now your natural home for those priorities. Sure, the Democrats also have some stuff you’re against, like political correctness and student loan forgiveness and expansion of the welfare state.
The point is that the Republican party has changed along some very important, policy and ideological vectors. It really wasn’t always like this.
But at the same time, I understand—I think—what these critics mean. What they mean is: