The Biden administration has struck another blow at Chinese manufacturing, announcing yesterday that severe restrictions would be imposed to prevent the export of computer chips to China, and to limit the capacity of companies outside America that use US technology to sell to China.
It represents a significant ramping up of longer-term controls designed to limit Chinese access to advanced semiconductors. The new rules will also restrict massive subsidies recently announced by the Biden administration to companies that do not manufacture chips in China.
China has long struggled to escape its reliance on foreign manufacturing of advanced computer chips, but its expensive efforts to catch up with the West and Taiwan have so far failed. This year one of the key companies in China’s chip-production plans, Tsinghua Unigroup, had to be bailed out by the government after facing bankruptcy.
The Chinese regime has also cracked down on the sector in an effort to establish why it has so far failed to recover ground with the West. Biden’s new restrictions will put further pressure on China’s efforts and its ability to manufacture complex armaments.
At the same time as the new restrictions were being announced, Biden was welcoming a US$20 billion investment by IBM in chip manufacturing in Poughkeepsie, New York. Other chip manufacturers have also announced investment plans, all using tens of billions in subsidies announced by Biden as part of the CHIPS Act which, along with the Inflation Reduction Act (IRA), represents Biden’s signature economic policies centred on high-tech manufacturing and renewables.
Money available under the IRA is also tied to US strategic goals: renewables technology manufacturing qualifies for subsidies as it uses minerals, like lithium, sourced from either the US or from countries with a free trade agreement with the US (which includes Australia). Chinese-manufactured technology won’t qualify for IRA subsidies.
These are policies that come with price tags in the tens of billions of dollars, but are justified by the US on the basis of strategic rivalry with China, curbing any technological relationship or supply chain reliance on China, and onshoring high-end manufacturing. The Trump administration tried to pursue similar policy goals, but did so using even clumsier tools like tariffs on Chinese goods that made American consumers pay more.
America has long used defence spending as a form of industry policy, pumping trillions into domestic manufacturing of weaponry. Advanced semiconductors occupy a border area of defence policy, given they are required for combat and transport systems and most weapons above the level of a rifle. But China’s inability to match Western advances in chip production has created a strategic opportunity for the US that perfectly suits American politicians’ domestic interests.
And it’s happened at a time when the core philosophies of manufacturing in developed countries — long, complex global supply chains, and just-in-time delivery — have been replaced by the pursuit of resilient supplies and “strategic” or “sovereign” production capability. Out with globalisation, in with onshoring.
The result is Biden gets to preside over the growth of high-end manufacturing in the US while crimping Chinese technological ambitions — all thanks to American taxpayers.
Globalisation is ok as long as totalitarian fruitcakes dont rock the boat. Unfortunately they cant resist rocking the boat. Time for us to all become a bit more self sufficient.
Yeah but what can you do about the worst totalitarian fruitcake ie the US?
Darn, see what happens when the US finds a couple of components in the F35 that are manufactured in China and cannot be manufactured in the US. Ooops. We have to change that.
Free markets my auntie.
Oh and the US has ordered the sole company in Europe that produces the machines that make the latest chips not to supply China.
Yep that’s market forces at work US style.
About time we followed and brought in tariffs to protect our new electric car manufacturer. We can all it the Holden Electric!
PS I am on the dreaded cancel culture delete mechanism. Crikey are absolute hypocrites as no indication as to what I have done – Just deleted.
Looks like Biden is encouraging China to invade Taiwan. Take away with free chips.
How long do they really think it will take for China to develop their own computer chips?
China’s advancement, technologically AND militarily, is inevitable. All America is doing is widening the gulf between America and China in the short term and making war between the two nations virtually inevitable. America’s current strategy of enforced domination of the world, including China, will not be tolerated by China for much longer. China will soon be strong enough militarily to challenge American dominance. The horrible truth is that when a war with China begins, Australia will be one of the first casualties. With something like 70% of Australia’s population and infrastructure confined to a few cities on the coastal fringe, a couple of submarines off our coast could destroy almost the entire population in the first hours of a war. And given that Australia is such an important part of the “Five Eyes” intelligence alliance, we WILL be a primary target.
American tactics of subvert, divide and economic control used worldwide now can’t confine or delay China’s growth for much longer, successful as those strategies have been in controlling the rest of the world.
Current policies to use this country as the septics’ largest unsinkable aircraft carrier could result in our becoming the world’s largest ash tray.
Not knowing anything about it, I can’t help wondering how long it will take China to be able to manufacture its own chips.
They are already. Give them 5 years and they will be pumping the higher end they can’t produce in quantity for cents whilst the US sells them for dollars.
They have just started producing 7nm Chips actually.
Tit for tat then China should stop exporting rare metals and minerals – so no one manufactures anything!!
Also if you start strangling the other…. You know where that ends up
They also process the rare earths and minerals on behalf of other countries. All they have to do is to cease exports to the West and cease processing other nations ores. The West doesn’t have the expertise or equipment to process these currently.