Chip Export Controls Against China Have Been ‘Incredibly Successful,’ Panelist Says
U.S. semiconductor-related export controls against China have been "incredibly successful," mostly because they have forced Beijing to expend more resources trying to advance its domestic chip industry, argued Stephen Brooks, a professor at Dartmouth College who focuses on economics and security.
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Speaking at a Cato Institute event last week, Brooks said the controls are making it more challenging for China to catch up to the U.S. lead in chip technology. Beijing "is having to spend an incredible amount of money to essentially try to make semiconductors without inputs from the United States and the rest of the world," he said. "It can do that fairly well, but it requires an extraordinary amount of resources that are directed to that effort. Those resources have to come from somewhere," which has created a "huge opportunity cost" for the country.
He said he believes China remains "very far behind [the U.S.] in semiconductors," pointing to the fact that the best semiconductor that Chinese companies can make -- the chip used in the latest Huawei phone -- is the same one that Taiwan Semiconductor Manufacturing Co. "would have made five or six years ago."
"I'm not sure, outside of the developing world, if there [are] going to be too many people that want to buy phones that have 5- or 6-year-old chips if you want to be doing the most advanced AI work," he said.
Brooks also noted that China doesn't have legal access to the world's leading chip manufacturing equipment, which is further hindering its chip production abilities. "Those older machines are not as efficient, they're not as good. And so 80% of those 5-year-old chips that China makes have to be thrown out."
"It's incredibly successful, this [export control] policy," Brooks added. "But oftentimes you'll hear in D.C. and other places that it hasn't worked. When you look underneath the surface, you can see that it has."
Gerard DiPippo, associate director of the Rand China Research Center, stressed that the largest choke point that the U.S. and its allies have over China is in chip equipment, including the advanced lithography machines made by Netherlands-based ASML.
But he also said U.S. export controls over advanced chips may have pushed China more quickly toward trying to "indigenize" its chip industry.
“Do I think that China has thrown more resources into indigenization of semiconductors than it would have in a counterfactual where we did not use the export controls? I think the answer is definitely yes,” he said. “Are they further ahead in their indigenization because of that? Probably.”
In addition, Brooks and DiPippo were asked if they believe the U.S. and its allies would be willing to sanction China -- to the same extent those nations have sanctioned Russia after Moscow’s invasion of Ukraine -- if Beijing were to take a similarly hostile act, including a possible invasion of Taiwan. They both said it would be more challenging to impose a similar set of sweeping sanctions against China.
“In the absence of an actual military conflict, I do not see it as being in any way likely that the United States or Europe or Japan would bear the costs of a cutoff with China,” Brooks said. “Would they be willing to do it in wartime? I think it's reasonable to place a question mark over that also.”
Brooks said he could envision a “fair number” of U.S. allies being willing to impose massive sanctions against China, while others wouldn’t. “There would be the need for the U.S. to be bargaining with them, perhaps using coercive leverage with them.”
DiPippo pointed to the fact that Europe and other nations have been hesitant to shut off all trade ties with Russia because of its major role as an energy supplier, and the Chinese economy is an "order of magnitude, literally, larger than Russia.”
“In this case, what you would lose from Russia, if you were going all in, would have been commodities. In China's case, it would be supply chains and manufacturing,” DiPippo said. “The U.S. would have a major problem if they didn't have access to the Chinese market. So I think there's ultimately the political question of: Are you prepared to go that far?”
He added that he believes it would be “unlikely that either the U.S. or the EU would go all in on economic sanctions, unless they were engaged militarily.”