Why America's 'silicon blockade' against China is as counterproductive as it is immoral

Economic warfare between the world's two largest economies will lead somewhere neither want to go

Trainees learn how to build and operate an EUV machine, which makes advanced semiconductors, in Taiwan. Reuters
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There was huge news in the technology world last week. Huawei launched its latest smartphone, the Mate 60 Pro, just as US Commerce Secretary Gina Raimondo was wrapping up a four-day visit to China. It was remarkable that the phone contained high-tech components that American sanctions were designed to prevent Chinese companies getting their hands on. It looked as though China had managed to get around the bans. Huawei gleefully announced that whereas in 2019 only 30 per cent of its flagship phone’s components were locally sourced, the rate was now 90 per cent. The company now had, it said, “a self-reliant supply chain.”

How would an objective, independent-minded person react to this news? With surprise, and with congratulations, surely, that Chinese ingenuity had triumphed. Technological advances are usually “hailed”. How impressive, I thought, that dedicated Chinese scientists and researchers had managed to do this on their own.

But the reaction in America has been quite different. The new phone’s launch was a disaster, apparently – and not just because, according to one estimate, the new Mate could wipe out nearly 40 per cent of Apple’s iPhone sales in China. No, Huawei must have somehow cheated, was one accusation. Republican Congressman Michael McCaul made the astonishing statement that one Chinese company – Semiconductor Manufacturing International Corporation – may have violated US sanctions by supplying parts to another Chinese company – Huawei. The American government has already started an official investigation into a “purported” seven-nanometre processor in the Mate 60 Pro.

We will have to see what they find out. But it is worth mentioning that even the New York Times – generally friendly to President Joe Biden’s administration – describes one of the provisions Huawei is subject to, the foreign direct product rule, as “a sweeping assertion of extraterritorial power: even if an item is made and shipped outside the United States, never once crossing the country’s borders, and contains no US-origin components or technology in the final product, it can still be considered an American good”. Rarely has US exceptionalism been laid barer. Where would we be if every country came up with rules like that?

Rarely has US exceptionalism been laid barer

We have been told that the phone’s launch threatens to derail outreach efforts by Mr Biden’s administration to Beijing. Others, such as myself, take the view that it is the declaration of economic war on China that undermines any conciliatory gestures from US officials. For it is indisputable that the series of sanctions the US has tried to impose on China over the last few years are just that.

On October 7, 2022, the US Bureau of Industry and Security issued regulations whose intent was to block completely the ability of Chinese companies to produce or buy the very highest-end microchips. CJ Muse, a Wall Street semiconductor expert, said a few months later: “If you’d told me about these rules five years ago, I would’ve told you that’s an act of war – we’d have to be at war.”

After visiting Beijing in June, US Secretary of State Antony Blinken issued a statement saying that “while we will compete vigorously, the United States will responsibly manage that competition so that the relationship does not veer into conflict”. If the US is waging economic war on China, how is that compatible with claiming you will “responsibly manage” competition between the two countries? And what is the point of either Mr Blinken or Secretary Raimondo making visits to improve ties, while still being determined to hobble the country technologically?

Scientists, academics and researchers need to collaborate across the globe for the common good. Retreating behind the ramparts of the nation state is not the way for us to advance the sum of human knowledge, and has often had a very unhappy history indeed. These nonsensical bans should be repealed, not strengthened. And if anyone wants to accuse Chinese companies of intellectual property (IP) theft, Bloomberg’s Howard Chua-Eoan came up with a good riposte recently, arguing that IP tends to leak; and that, in any case, Europeans stole Chinese IP in the form of the secrets to making paper, silk, gunpowder and porcelain over the course of millennia. “No one has a monopoly on innovation,” he concluded.

I can’t be alone in finding it incredibly dispiriting – albeit inevitable – that every time China marks an achievement of whatever kind, a chorus of doom erupts; and it’s not just from the hawks in America and Europe, for they seem to have infected nearly all mainstream opinion with their fear-mongering as well. Yes, I know that the ban on high-end chips is supposed to limit developments in China’s military capabilities. But whatever work-arounds or locally-sourced tech Huawei has come up with are currently functioning only in a handheld device. Sometimes a phone is just a phone.

A shooting war between the US and China would be catastrophic for all of us. The economic war being waged just last week led to $200 billion being wiped off Apple’s market value after reports that Beijing is banning government employees from using iPhones, presumably in retaliation for the sanctions. This is not competition, and the belligerent is hurting its own. Given that this is about phones, both sides would do well to recall a famous British Telecom slogan from the 1990s: “It’s good to talk.”

And maybe, just maybe, US politicians could acknowledge that when China forges new ground, in any area, it could one day be of use to them. Knowledge knows no boundaries. And technological advances are not a zero sum game.

Published: September 13, 2023, 5:00 AM