U.S. tightens semiconductor export control: More disturbance to the global industry

Editor's note: Liu Chunsheng, a special commentator on current affairs for CGTN, is an associate professor at the Central University of Finance and Economics in Beijing. The article reflects the author's opinions and not necessarily the views of CGTN.

The U.S. Department of Commerce announced a revision on March 29 to the semiconductor export control rules first introduced in October 2023, signaling a further constriction of high-tech exports to China. The detailed document is scheduled to take effect on April 4. The amendments, specifically targeting advanced AI chips and semiconductor manufacturing equipment underscore a strategic maneuver to maintain its technological supremacy in the global arena.

The heightened controls reflect America's resolve to thwart any potential challenges to its technological hegemony. By undercutting the flow of sophisticated semiconductors to China, the U.S. aims to curb the Asian giant's advancements in crucial sectors. However, this policy also strikes at the purveyors of this technology – traditionally powerful semiconductor companies like Intel, Nvidia, and Qualcomm, which have a significant share of the Chinese market.

For companies like ASML, a Dutch firm considered the vanguard of semiconductor lithography, the U.S. restriction complicates the export of their ultra-sophisticated extreme ultraviolet lithography machines essential for advanced chip manufacturing. Similarly, restrictions on semiconductor equipment from American companies like Applied Materials and Lam Research could hinder them from tapping into China's burgeoning semiconductor industry, previously a lucrative revenue stream.

The policy adjustments not only have influence in China and the U.S. but are also creating ripple effects in the global semiconductor supply chain. Existing supply networks could face disruption, leading to potential bottlenecks and escalated costs. Multinational giants such as Taiwan Semiconductor Manufacturing Company Limited and Samsung, while not directly targeted by the U.S. restrictions, could experience the spillover effects through changes in global demand patterns and potential realignments of supply arrangements.

Consumers worldwide might also feel the reverberations of these controls. The potential segmentation of the global semiconductor market could lead to elevated costs for electronics and impede the fast-paced technological advancements to which global consumers have become accustomed.

U.S. measures are double-edged swords. While designed to create stumbling blocks for Chinese technological ascent, they inevitably impinge on the sales and growth prospects of American semiconductor firms by shrinking their addressable market. The immediate effect could manifest in slashed sales forecasts and a deceleration of intricate research and development programs that are vital for continued innovation within the semiconductor space.

If the forced separation between American suppliers and Chinese technology firms continues to escalate, it could result in the establishment of a self-reliant Chinese semiconductor industry. The Chinese government has significantly increased its support for the domestic semiconductor industry, providing financial subsidies, tax benefits, and creating a policy environment that promotes research and development as well as innovation.

China has been actively developing domestic alternatives to international suppliers, reducing dependence on foreign technologies. Investments in domestic technological research have given rise to numerous homegrown core technologies with proprietary rights, achieving a certain degree of autonomy and control. Balancing strategies of "bringing in" and "going global," China's semiconductor industry is gradually lessening its dependence on external high-end technologies.

In response to U.S. controls, China's local startups and innovative enterprises are rapidly rising with the support of the capital market. Many startups are investing heavily in research and development targeting industry bottlenecks, resulting in a batch of advanced semiconductor products with proprietary intellectual property rights and international competitiveness. The innovative capacities and market-responsive agility of these companies are expected to reshape the global supply chain and become new engines of global industry restructuring in the future.

In terms of education and talent development, the Chinese government has strengthened collaborations with universities, and made substantial investments in semiconductor manufacturing and design fields. These efforts have successfully attracted a number of highly skilled individuals to return to China and contribute to the country's growth. Simultaneously, China is committed to fostering an open and inclusive environment for innovation, offering a broad platform for domestic and international tech talents to flourish.

The U.S. decision to intensify semiconductor export control to China has caused impacts on the semiconductor markets of China, the U.S., and also globally. As a significant market player, China is responding to these challenges by building a more self-reliant technological system. This process may have profound effects on the Chinese and global tech ecosystems.

There is no doubt that the U.S. strategy has only backfired and caused harm to themselves. It will serve as a catalyst, propelling China toward greater heights of technological self-innovation and empowering it to seize the initiative in the global economy. In the future, we may witness China playing an increasingly pivotal role in the global semiconductor industry, acting as a key driver in global technological advancement.

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