Tuesday, May 30, 2023

The battle between the United States and China is escalating over semiconductors

A person stands in front of a building with the premises of US semiconductor manufacturer Micron in Shanghai, China, on May 22, 2023.

By imposing restrictions on US semiconductor giant Micron, China is raising its tone against the United States in a tech battle that has stoked diplomatic tensions.

However, several analysts from the AFP consultancy say Beijing’s room to maneuver is limited, with its priority relegated to the world’s second-largest economy, undermined by three years of anti-covid policies.

Microchips are a very strategic sector that gives life to the economy of this world, as in LED light bulbs, washing machines, cars or smart cell phones.

But Micron “presents potential issues for network security” posed “at risk to China’s national security,” China’s cybersecurity agency said on Sunday, urging “infrastructure operators who work with sensitive data from China” to stop buying them.

In response, Washington gave his account of “grave concerns.”

The day before, the leaders of the G7 world in Hiroshima (Japan) warned against any attempt at “economic coercion”, in a veiled allusion to China’s practices.

“The strong proposal from the G7 has perhaps added fuel to the fire,” said Gary Ng, an economist at Natixis.

According to him, the Micron case “will establish jurisprudence.”

– ‘Retaliation’ –

The case against the group, which began at the end of March, is the first against a foreign company since Beijing tightens rules on cybersecurity in 2021.

“It would not be surprising if regulators in the future use these processes as a geopolitical retaliatory tool,” said Gary Ng.

For that part, Emily Weinstein, a researcher at Georgetown University, the concept of “infrastructure workers who work with sensitive data” can be very far-reaching and can go from defense to health through water conservation.

In addition, he mentioned that “China has always found ways of national security or others to create protective barriers.”

Thus, Chinese authorities sometimes transfer technology agreements, forcing companies to store data within the country and, in some provinces, some foreign companies to create a local partnership with a local partner.

The move against the company is “clearly in retaliation for what Beijing perceives as Washington’s support for Micron and the US semiconductor industry,” said Paul Triolo, a China technology expert at the Albright Stonebridge consultancy.

And it happened in October 2022 that the United States, also discussing issues of “national security”, announced new export powers to prevent Beijing’s access to high-end chips “with military applications”.

The measure was banned by a Chinese company that rivals Micron’s Yangtze Memory technology.

– On the South Korean trumpet card –

For China, Micron – the world’s fourth largest semiconductor – was an easy target, as its chips could be replaced by those of South Korea’s Hynix and Samsung.

On the other hand, unlike other US giants, such as Intel or Qualcomm, it will be more difficult when the chips are used in consumer goods, such as mobile phones – which are manufactured in China and then exported.

In addition, Beijing cannot risk undermining its economy, still affected by the consequences of the “no covid” policy.

“China has been very prudent and has not taken too many retaliatory measures. […] This is because Beijing cannot rapidly increase its national capabilities to deal with the eventuality of “hollow” incidents, Gary Ng observed.

From now on, as you can see, “South Korean suppliers,” said Paul Triolo.

But the White House last month advised South Korean manufacturers not to export to China and also pressured Belgium and Japan, which announced restrictions in this area.

Nation World News Desk
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