Supply chains cut off: 'Democratic' U.S. loses from decoupling approach

Editor's note: The U.S. lauds itself as a lighthouse of democracy. But the reality is quite the opposite. American Lighthouse Dying Down is a three-part series delving into the contrast between the democratic ideals and the stark realities present in the United States. The third essay focuses on Washington's technological suppression over others. Gong Xiaofei, a special commentator on current affairs for CGTN, is an associate researcher at the Institute of American Studies, Chinese Academy of Social Sciences. The article reflects the author's opinions and not necessarily the views of CGTN.

The U.S. has been holding high the banner of "openness," "freedom" and "equality." But in reality, "openness" was the first to be sacrificed by Washington for its status as the only superpower in the world. In interactions with countries it deems as rivals, the "democratic" U.S. has shown its unrivalled bullying skills.

Over the past few years, the United States – under its "small yard, high fence" containment strategy – has escalated its efforts to hinder China's technological progress. Through measures such as export controls and investment restrictions, Washington has constructed a "high fence" obstructing exchanges between China and the U.S. in the field of high-tech.

In terms of export controls, the U.S. has been striving to limit China's access to advanced technologies, equipment and services. For instance, the U.S. Department of Commerce updated its Export Administration Regulations on October 7, 2022, placing restrictions on the export of advanced chips, equipment, and services to Chinese state-owned enterprises. In 2023, the U.S. issued extensive updates to these controls, making it difficult for U.S. firms to sell semiconductor manufacturing equipment and other advanced technologies to their Chinese counterparts.

Regarding investment, Washington restricts domestic firms or those receiving U.S. subsidies from expanding advanced chip production capacity in China. The United States has also courted allies to form exclusive alliances in an attempt to isolate China from the global semiconductor supply chain. In January 2023, the United States, Japan and the Netherlands reached an agreement, cutting China's access to advanced semiconductor equipment.

Washington's "small yard, high fence" strategy is making a rod for its own back, which will ultimately harm American companies. Decoupling has resulted in a significant reduction in sales for U.S. semiconductor companies in the Chinese market. Boston Consulting Group estimates that American companies could lose 18 percentage points of global share and 37 percent of their revenues if the U.S. government continues to pursue decoupling and bans domestic semiconductor companies from selling to Chinese firms.

Therefore, American high-tech companies have, on several occasions, expressed concerns about the Biden administration's decoupling policies, and have been actively lobbying for more relaxed measures on doing business with China. NVIDIA CEO Colette Kress, for instance, warned that "restrictions prohibiting the sale of our (AI) chips to China will result in a permanent loss of opportunities for the U.S. industry to compete and lead in one of the world's largest markets, and the impact on our future business and financial results is there."

By decoupling from China, the U.S. attempted to impede its rival's technological growth. But ironically, it only ended up with accelerating China's technological strides. Washington's sanctions have instead made Chinese semiconductor companies, in an attempt to reduce their dependencies on other countries, more determined to increase their investments in research and development.

For example, Chinese telecom giant Huawei significantly increased its spending on research and development to 161.5 billion yuan ($23 billion) in 2022, accounting for a quarter of its sales revenue. Furthermore, Huawei launched its Mate 60 Pro smartphone in 2023, featuring the domestically produced Kirin 9000S chip manufactured by Semiconductor Manufacturing International Corp (SMIC). The launch is a slap in the face for U.S. sanctions.

Trying to thwart China's growth, Washington's "small yard, high fence" strategy is instead harming its own economic interests. On the other hand, China has consistently followed the right path of economic globalization by promoting open, fair and non-discriminatory international scientific and technological cooperation.

Science without borders benefits everyone. As a "democratic" country, the U.S. is clear about this. But interestingly, it is acting the opposite way – all for its hegemonic status in the world.

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