Napoleon once remarked, “Let China sleep, for when she wakes, she will shake the world.” It seems that during her sleep, China was mulling over the pathways she would take to change the world order. The moment she opened her eyes, she did nothing but keep her eyes on the prize. She wanted to rule the world and become “great again. This, she couldn’t do without challenging the existence of the incumbent superpower—the USA.
The US-China rivalry captured eyeballs when China became the largest exporter in the world, pushing the US to enjoy the second position. In 2022, China accounted for 14% of world trade, whereas the US accounted for 8.5% of world trade. The trade war has become a thing of the past. For the past few years, the two economic giants have been waging a new technological war—a war to rule the global chip industry.
The 20th century marked the beginning of the seminal transformation of the global world order. Nation-states scrambled and fought for oil. Oil was considered the symbol of superiority. Contrary to the previous century, the 21st century unfolded new dimensions in the world order. Today, countries are fighting for chips. Chips have become an invaluable, priceless asset for emerging and existing superpowers. Superiority in the chip industry goes hand in hand with an edge in military modernization. This complex and omnipresent nature of chips has dragged the US and China into a silent economic war.
More Sanctions on the Chinese Chip Industry
A few weeks before the swearing-in of Donald Trump, the 78th President of the USA, Joe Biden, drew first blood, initiating the US-China chip war. He announced sweeping sanctions on the Chinese chip-manufacturing companies to thwart the access of China to sophisticated chips. According to the US government, China uses chips to advance the power of military and artificial intelligence. Advancement in the Chinese military poses an inevitable threat to the national security of the USA, so it is bound to impede the strengthening of the Chinese chip industry.
The latest sanctions put a ban on approximately 24 chipmaking tools and 3 software tools; cutting-edge high-bandwidth memory (HBM) chips; and equipment needed to produce and assemble chips made in Malaysia and Singapore. Besides, restrictions are also imposed on the infamous Naura Technology Group, ACM Research, Piotech, and SiCarrier Technology.
Restrictions are also going to affect companies like Si’En Qingdao, Swaysure Technology Co., and Shenzhen Pensun Technology Co. All these companies work in association with China’s Huawei Technologies. The restrictions aim at hobbling the mushroom growth of the Chinese chip industry, which helps in the modernization of the military.
China responded to the sanctions by imposing restrictions on the export of rare metals like gallium, germanium, and antimony to the United States. Gallium is one of the prime ingredients in making chips. 94% of the world’s gallium is produced by China. A ban on gallium is going to pose a serious threat to the US chip industry. Also, China is the largest producer of antimony, one of the rarest elements found on the face of the Earth.
Reason For US-China Chip War
The US-China chip war is one of the latest versions of the war that the unstoppable China and the immovable USA have been fighting for the past few years. It is not a normal war. It is a war between two giants who aim at making their respective countries “great again.”
The US-China Thucydides Trap
The Thucydides Trap is a kind of structural stress that develops when a rising power challenges a ruling power. In his book, Destined For War: Can America and China Escape Thucydides Trap?, Graham T. Allison remarked that the economic and technological rise of China is instilling fear in the US. This fear forces both countries to wage war against each other.
Fortunately, the two giants have not fought a war on the battlefield. They keep on waging wars on other fronts. The primary goal of the US and Chinese governments is to make their countries “great again.” In this scenario, China is unstoppable and America is immovable. Either of the two countries have to take a step back; otherwise, they would remain in Thucydides Trap for longer than expected.
Silicon Chips Represent Military Power
A trust deficit occurs between states, especially when one is an emerging power and the other is a hegemon. This trust deficit gives birth to the security dilemma. The USA and NASA are the first ones to use silicon chips in the manufacturing of missiles and other weapons. The US government often remarks that chips are currency for national power and national security.
For decades, the US was the only country to use chips for military purposes. The US government found itself in a security dilemma when China tested two hypersonic missile systems that were capable of flowing around the entire globe at five times the speed of sound. These missiles were maneuverable, super-nimble, difficult to detect by radar, and could carry nukes.
These missiles were manufactured using the chips imported from the US. So far, the US has not been able to either manufacture similar missiles or a system to track such missiles. This inferiority nudged the US to experience a security dilemma. The US administration repeatedly stressed that restrictions on the Chinese chip industry are crucial to the US’s national security.
Implications of the US-China Chip War
For more than a decade, the US was the sole power to rule the chip industry. After a while, Japan entered into the game and started developing and exporting silicon chips at a much lower rate. This led to the ban on the imports of Japanese chips in 1987 by Ronald Reagan. At this point, a scientist named Morris Chang from Taiwan came up with a plan that worked in favour of the US and Taiwan. He developed Taiwan’s Semiconductor Manufacturing Company (TSMC). The purpose of TSMC was to make chips for the US at inexpensive prices. In return, Taiwan got protection from its aggressive neighbour China.
Currently, the USA does not produce chips. It only manufactures design and software for the chip. The Netherlands produces UV laser machines to carve the chips, and Japan provides all the essential metals and chemicals for making chips. In the end, Taiwan makes chips using the available resources.
This dependence on Taiwan roused concerns in the USA. To lessen dependence on Taiwan, Biden’s administration passed the Chips Act. This act encourages the government to spend billions of dollars on national chip-making companies. As per the reports, the US would need time to re-establish chip-making warehouses. Simultaneously, the US is making efforts to hobble the production of sophisticated chips in its rival China.
According to the report of the World Trade Organisation (WTO), the USA is toiling hard to maintain its hegemony, but involvement in international wars like the Ukraine crisis and the Israel-Palestine conflict acts as a barrier to its position in the world. At the same time, the US struggles with internal politics and issues like high inflation, etc. All these factors slow down the investment in the chip industry.
China is a major consumer market for the US. Restrictions on exports would result in revenue losses for leading US companies like Intel, Nvidia, and Qualcomm. Revenue losses would hamper the availability of resources needed for further research. Less research in technology means less innovation. This can directly affect the position of the US at the global level.
Restrictions also provide China with a reason to strengthen domestic production capabilities. If this happens, restrictions will only work in China’s favour. On the other hand, China has not encountered these issues. The political system of China favors the rule of a single party. Knowing the significance of chips, the Chinese government is investing a huge amount of money in a bunch of smaller technological giants. More than 7,000 private businesses are involved in the production of advanced chips in China.
It would be fascinating to see the steps taken by the Trump administration in the coming days.
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Gul Naz received a degree in MPhil Zoology in 2023 from the University of Okara. Besides deriving strength from bibliotherapy, she finds solace in producing articles based on contemporary issues from different parts of the globe.