On November 17, another measure from the Biden administration to further limit exports of advanced semiconductors and the machines to manufacture them to China, came into force.
According to the US government, the new rules aim to eliminate ways to circumvent previous restrictions and will prevent, for example, the export of advanced artificial intelligence chips to China.
In response to the announcement, made in October, the US Semiconductor Industry Association questioned the move, stating that “overly broad, unilateral controls risk harming the US semiconductor ecosystem without advancing national security.”
Recently, US Secretary of Commerce, Gina Raimondo, participated in the Reagan National Defense Forum for the first time, where she stated that short-term revenues are not her department’s priority but, in her words, national security.
At the forum, Raimondo said: “We can’t let China get these chips. Period.” She also took the opportunity to ask for more budget for her department.
Semiconductor companies are looking for ways to get around the “very hard lines” being taken by the US government, said Charles Liu, senior fellow at the Taihe Institute on the Global Times’ Global Arena program.
“Ultimately, you can’t stop China from advancing technology. If you don’t sell the chips, the Chinese will do it themselves, they have already demonstrated their ability to do so. We have very smart scientists, engineers, and workers. And they will, as they have already done in many sectors, overtake the US. You can try to block here and there, but you can’t block all sectors and all fields forever,” says Liu.
China is an important market for most large companies in the semiconductor sector. Even with export restriction measures, in 2022, China represented 27% of the total revenue of the American Intel, 23.9% of Tokyo Electron’s sales, and 15% of ASML’s sales.
Semiconductors and Artificial Intelligence
In October, the Commerce Department’s Bureau of Industry and Security said in a statement that the controls were designed to address China’s “efforts to obtain semiconductor manufacturing equipment essential to producing advanced integrated circuits needed for the next generation of advanced weapon systems, as well as high-end advanced computing semiconductors necessary to enable the development and production of technologies such as artificial intelligence (AI) used in military applications.”
The agency also stated that advanced AI capabilities “can also create concerns when they are used to support facial recognition surveillance systems for human rights violations and abuses.”
Ironically, US civil rights organizations, such as the American Civil Liberties Union, have denounced how facial recognition technology used by domestic police agencies violates human rights and perpetuates racial inequality. A survey published in the research journal Government Information Quarterly confirms that unjust arrests that disproportionately affect Black people in the US are not an exception but rather the rule, embedded in the facial recognition technology used by state forces.
The Chinese government has shown great dissatisfaction with the measures. The Chinese Ministry of Commerce expressed in October that the US “extends the concept of national security too much.”
Like Liu, other experts from China, in turn, believe that the restrictive measures will have a limited impact on the development of Artificial Intelligence in China in the long term.
According to Zhou Linwen, chief science editor at The China Academy, although artificial intelligence software such as Baidu’s recently launched Ernie (similar to ChatGPT) has not met expectations, the distance between Chinese technology and the most advanced AI is not so large. He says that the largest open source platform for Artificial Intelligence models, Hugging Face, puts the Chinese model Qwen at the top.
Another league ranking is the one made by Stanford University, which analyzes closed source models. In this ranking, the Chinese model Yi 34B came in third place, just behind the GPT4, a version launched in March this year by its American owner OpenAI.
Linwen states that, in fact, among the Chinese Artificial Intelligence community, there is a firm belief that by mid-2024 the Chinese model will reach the level of GPT4. “The difference is one year between the Chinese models and the American models. We’re not that far behind, really,” adds Linwen.
The Chinese chip industry
Regarding chip development, after surprising the world with the launch of a phone with a 7 nanometer chip, coinciding with the visit of the US Secretary of Commerce, Gina Raimondo, to China in August, Huawei just launched a computer with a 5 nanometer chip, manufactured by the partially state-owned Chinese company SMIC.
Founded in 2000, SMIC is a new company compared to leaders in the chip market, such as the Taiwanese TSMC from 1987, ASML from 1984 and Intel from 1968.
In 2008, SMIC managed to manufacture its first 45 nanometer (nm) chip, with a technological license from IBM. Intel had begun mass producing 45nm chips the previous year.
Linwen says that at the beginning of the semiconductor industry, China was actually on par with the West. The Chinese Academy of Sciences had built the first national lithography machine as early as 1965. “But during the ’80s and ’90s, political decision makers in China considered that as the global supply chain was becoming increasingly integrated, we didn’t need to build everything ourselves. So, they decided that we could simply buy all the machines, chips, all those parts from international markets. It was at that point that all investment in research and development of semiconductors was cut,” explains the science editor at The China Academy.
In the context of increased sanctions and coercive measures against China, Xi Jinping’s government has highlighted the need for self-sufficiency in the semiconductor sector.
The second phase of the so-called National Integrated Circuit Industry Investment Fund of China, started in 2019, invested more than 60 billion yuan in more than 40 semiconductor companies. According to Reuters, a third phase is being prepared worth 300 billion yuan.
From 2019 to 2021, the number of engineers working in the Chinese microchip industry rose from 500,000 to 600,000.
In 2022, companies in the sector invested around 100 billion yuan in Research and Development. Zhou Linwen states that the figure is not very high considering the level of investment that the industry requires, but growth in the sector in China is accelerated.
In 2022, the Chinese government invested 3 billion yuan in Investment and Development, and also investment grew at a rate of more than 7%. That’s a lot of money, says Linwen. He also highlights that the country now has the largest number of cited scientific articles in the world. “A large publisher, Elsevier, claims that ‘these Chinese newspapers have a higher than average impact’. So, they are quality articles.”
A ban on buying advanced chips
Since last year, US officials had been pressuring Japan and the Netherlands to align with US policy against China.
The pressure included the threat of a ban on sales of chip manufacturing equipment that uses US technology. Along with companies from the United States, the Japanese Tokyo Electron and the Dutch ASML are the main manufacturers of equipment for chip production.
ASML is the leading company for the most advanced chip production machines. In 2019, under pressure from Trump, the Dutch government canceled sales of systems that use Extreme Ultraviolet Lithography technology. This is currently the system needed to produce chips of 5 nanometers (nm) or smaller.
Using “nanometer” size to classify chips has become commercial only. To a certain extent, reducing the size of a specific part of the chip was what allowed more transistors to be included on it. But the scales became so small that it was no longer possible to use this criterion to advance chip development. Thus, 7nm chips from different companies may have different technologies. Even so, experts claim that there is comparability in the performance of chips that are in the same categories of, for example, 7, 5, 3 nm.
In August of this year, the Chinese company Shanghai Micro Electronics Equipment announced that it would deliver its first 28 nm lithography machine in the coming months, made entirely with Chinese technology and components.
“That’s why we heard the CEO of ASML say that the Chinese people will find a way to invent the machine. I would say that China will have its own Extreme Ultraviolet Lithography machine. Maybe not like the Netherlands, but we can have one slightly different technology. There’s more than one way to do it,” says Linwen.
The Taiwan issue
Amid the debate, it has become commonplace in the West to assert that China could accelerate the process of reunification with the island of Taiwan, arguing that the country would be interested in “appropriating” TSMC, the company that produces about 60% of all semiconductors in the world.
“Western media wants to downplay the issue because it’s easier for people in the West to understand it, but for China and the Chinese people, the Taiwan issue has never been about semiconductors, it’s about sovereignty,” says Linwen.
Currently, 182 countries (including the US and most European and Latin American countries) recognize the one-China principle, under which Taiwan is considered part of China. Thirteen countries recognize Taiwan as an independent state. Even within Taiwan, the Kuomintang (the party defeated in the 1949 revolution) recognizes the principle, despite wanting the return of the “Republic of China.”
The semiconductor industry in mainland China has a very close relationship with Taiwanese companies and talents, says Linwen. “So we are together, many Taiwanese have contributed greatly to developing our semiconductor industry. I don’t think the top leadership regards Taiwan as a semiconductor issue.”
On the other hand, she states that the hypothesis also makes no sense because China’s priority is now the construction of Extreme Ultraviolet Lithography (EUV) technology. “And the Taiwanese can’t build EUV. They also import EUV machines from the Netherlands.”
It is possible that the US is the most interested in mixing things up. The Reagan National Defense Forum, where Gina Raimondo participated, is one of the most important annual conferences on military policy in the country and brings together senior military officials, legislators and executives from the giants of the US arms industry (which are also the largest in the world), such as Lockheed Martin, Boeing and Northrop Grumman and RTX, formerly Raytheon.
The military revenues of the five largest arms corporations in the world (all of them from the US) in 2022 were in the billions, according to the news website Eyes on the Ties: Boeing (USD 30.8 billion), General Dynamics (USD 30.4 billion), Lockheed Martin (USD 63.3 billion), Northrop Grumman (USD 32.4 billion) and RTX (USD 39.6 billion).
Days later, on December 14, the US Congress approved the largest military budget in the country’s history, USD 886.3 billion, USD 28 billion more than the previous year.
The approved package includes USD 14.7 billion for the Pacific Deterrence Initiative, a strategy launched in 2021 by the US government. A report published by the US Department of Defense from March this year, on this initiative for the 2024 budget, states that “The Department is prioritizing China as its main challenge,” and that “a large part of the Department’s investments and efforts focuses on this threat.”
The report further states that the objective of the initiative is to “develop capabilities, operational concepts, and planning to strengthen deterrence against the People’s Republic of China in the IndoPacific.”
This article first appeared in Portuguese at Brasil de Fato.
