Unwitting U.S. allies |
Russia’s war on Ukraine has made plenty clear that when it comes to global chip supply, America still pulls all the strings.
The U.S. now expects Chinese tech companies to comply with its newly announced trade sanctions against Russia, which aim to cut off its military’s access to sensitive technologies including semiconductors.
But why should China, which has been an isolated voice of opposition to increasingly harsh sanctions, comply? The answer, for the country’s high-tech businesses at least, is fear of losing access to U.S. tech themselves.
The go-to software for chip design comes from the U.S. Machinery, equipment, many of the backbone essentials that feed into a comprehensive silicon supply chain are provided by American suppliers. The global chipmaking apparatus would crumble overnight without U.S. participation.
Witness the example of Huawei Technologies Co., once China’s equivalent of Apple Inc., which designed its own mobile chips and beat the iPhone maker to significant firsts in mobile photography. The company’s smartphone business was effectively starved out of existence when the U.S. deemed it a national security risk and imposed sanctions that were the mirror image of what Russia is subject to now.
Tech advancements without chips are impossible and so is getting the chips you need without U.S. assent.
Few semiconductor companies in the world can create chip blueprints without using software from U.S.-based Synopsys Inc. and Cadence Design Systems Inc. Many companies that make physical chips, including China’s Semiconductor Manufacturing International Corp., use equipment from U.S.-based Applied Materials Inc. and Lam Research Corp.
SMIC continues to depend on U.S. gear for production even after it got blacklisted by the Trump administration in 2020. Violating the new U.S. export controls may lead SMIC to even more difficulties in securing licenses to get repair parts or new equipment. That in turn risks SMIC’s survival and undermines China’s ambitions to eventually become self-sufficient in chipmaking.
SMIC and other Chinese chipmakers all had front-row seats to the consequences of Huawei’s forced estrangement from American technology: the company went from the world’s most prolific smartphone vendor to having to sell off its Honor brand. It now holds a slice of the market so small it’s relegated to the list of “Other” manufacturers.
It puts Chinese tech companies in a very awkward position: having to appease U.S. demands to preserve access to essential tech at the same time as their government publicly snarls at the very idea of imposing trade restrictions.
“China doesn’t approve of resorting to sanctions to try to resolve problems,“ Foreign Ministry spokesman Wang Wenbin said at a regular press briefing in Beijing on Monday. He added that nations “should not harm the legitimate rights and interests of the Chinese side.”
So long as everyone plays ball, both U.S. demands and the legitimate interests of Chinese companies can be satisfied. China’s exports to Russia are insignificant to its economy whereas they’re the bulk of Russian electronics imports. So we can expect the sanctions to prove effective.
The question over the long term will be how far the U.S. will be able to maintain its tech lead and dictate terms even to unwilling partners like those in China. — Debby Wu