Is America’s Ban on China Chip Exports the End of Globalisation?

Jian Feng

President Biden announced tougher restrictions on semiconductor exports to China on October 7th. According to him, it’s a human rights issue, because advanced chips can be used to produce cutting-edge military weapons.

Chips are an advanced technology product that can be found in a wide range of household items, from electric vehicles to computers and dishwashers.

After the announcement, chip and related companies stocks in China fell sharply. Semiconductor Manufacturing International Corp. fell 9.3% during the next three days. Naura Technology Group Co., a leading chip equipment maker, fell by its daily limit for two days in a row.

Before these new restrictions, the American government implemented policies such as limiting the number of Chinese students studying technology degrees at American universities. In addition, the U.S. in the past has put restrictions on Huawei, a Chinese mobile firm.

However, the latest moves bring more damage to both countries. Advances in electric vehicles and other technologies that benefit the environment will be in danger. It’s a sign that globalisation, which has bolstered economic growth throughout decades, is in retreat.

Although America has world-leading chip technology, it is relying on the chip-making companies in China to produce it. The battle will be whether China can overcome the new export rules by creating their own advanced chips. This requires a large amount of time and funding.

On the other hand, the American government needs to develop their own chip supply chain instead of relying on cheaper labour from other countries. They also need to design policies that will attract companies to move their overseas offices in China, back to America.

China has made it a national priority to build a domestic semiconductor industry, but at the moment they still need to import chips from America because of the technology gap.

This policy would also delay China’s ambition on developing auto driving, cloud computing, and digitising their currency. The new restrictions also requests that staff who are of American nationality leave the job, cutting any link with Chinese chip companies. This include Applied Materials Inc., KLA Corp. and Lam Research Corp. They started to bring back their employees from Yangtze Memory Technologies Co., China’s most advanced maker of memory chips.

The China Semiconductor Industry Association has suggested America reverse the restrictions, and follow the international trade negotiation process. Although China can find other countries to import chips from, America could force their allies to join the restrictions. This poses another