How US semiconductor restrictions may backfire?

In 2022, the Biden administration implemented export controls to restrict China’s access to advanced semiconductors and production equipment, aiming to curb Beijing’s military advancements and maintain U.S. technological superiority. However, as detailed by Foreign Affairs, these restrictions might not achieve their intended outcomes and could inadvertently benefit China in the long run.

The primary goal of the U.S. chip ban was to slow China’s military modernization by blocking access to cutting-edge AI chips crucial for developing sophisticated weaponry and military applications. While Secretary of Commerce Gina Raimondo emphasized that the controls were aimed at preventing advancements in Chinese military capabilities, there is significant debate about their effectiveness. Although the ban might temporarily hinder China’s access to high-performance AI chips, it is unlikely to significantly impede Beijing’s military progress. This is because China can rely on legacy chips for many of its military systems and has avenues to obtain advanced chips through smuggling or domestic production.

Furthermore, the export controls could accelerate China’s efforts to develop its own semiconductor industry. The restrictions on U.S. and allied equipment are creating a market gap that incentivizes Chinese investment in domestic chip manufacturing and design. As the Chinese semiconductor industry grows, it might eventually close the technological gap, undermining the long-term effectiveness of the controls. This shift could also impact U.S. and allied chip equipment manufacturers, who are already experiencing revenue declines due to reduced access to the Chinese market. The resulting financial strain could slow their innovation and research efforts, potentially diminishing their competitive edge.

The U.S. strategy’s short-term benefits include slowing down China’s AI development and maintaining an advantage in semiconductor technology. However, the longer-term implications suggest that the chip ban may inadvertently spur China’s semiconductor sector growth. The Chinese government is likely to invest heavily in overcoming the challenges posed by these restrictions, leading to advancements in domestic chip technology. This development could eventually enable China to catch up with or even surpass U.S. capabilities in certain areas.

To maximize its advantage, Washington should shift focus from solely restricting China’s technological progress to enhancing its own innovative capacities. The 2022 CHIPS and Science Act, which invests in advanced semiconductor production and research, is a step in the right direction. However, this effort must be complemented by a broader strategy that includes breakthroughs in emerging technologies such as quantum computing, neuromorphic computing, and light-based computing. These innovations could provide the U.S. with a significant edge and help it maintain leadership in critical technologies.

Ultimately, while the chip controls may provide temporary benefits, the U.S. must prioritize advancing its own technological capabilities to stay ahead of China and ensure long-term strategic advantages.