By squeezing the industry’s natural bottlenecks, the Biden administration aims to lock China out of the future of chip technology. The effects will go far beyond cutting off Chinese military advances, also threatening the country’s economic growth and scientific leadership. “We said there are key technological areas that China should not be moving forward in,” says Emily Kilcrease, a senior fellow at the Center for a New American Security and a former US trade official. “And those are the areas that will drive economic growth and growth. development in the future”. Today, scientific breakthroughs are often achieved by running simulations and analyzing large amounts of data, rather than through trial and error experiments. The simulations are used to discover new life-saving drugs, model the future of climate change, and explore the behavior of colliding galaxies, as well as the physics of hypersonic missiles and nuclear explosions.
“The person with the best supercomputer can do the best science,” Jack Dongarra, founding director of the University of Tennessee’s Laboratory for Innovative Computing, told me. Dongarra runs a program called the TOP500, which offers a biannual ranking of the world’s fastest supercomputers. As of June, China claims 134 spots, compared to the US’s 150. But the picture is incomplete: Around 2020, China’s submissions plummeted in a way that suggested to Dongarra a desire to avoid drawing attention. Unwanted. Rumors of new supercomputers seep into scientific papers and research announcements, leaving observers guessing at the true state of the competition and the size of China’s supposed advantage. “It’s surprising because in 2001 China had no computers on the list,” says Dongarra. “Now they have grown to the point where they dominate it.”
Beneath China’s strength, however, is a crucial vulnerability: Nearly every chip powering the country’s most advanced projects and institutions is inextricably linked to American technology. “The entire industry can only run on American inputs,” says Miller. “In every facility that is remotely near the cutting edge, there are American tools, American-designed software, and American intellectual property throughout the process.” Despite decades of effort by the Chinese government and tens of billions of dollars spent on “local innovation,” the problem remains acute. In 2020, China’s domestic chip producers supplied just 15.9 percent of the country’s total demand. As recently as April, China spent more money importing semiconductors than oil.
The United States fully understood its hold on the global semiconductor market in 2019, when the Trump administration added Huawei, a major Chinese telecommunications maker, to the entity list. Although the listing was ostensibly a punishment for a criminal offense (Huawei had been caught selling sanctioned materials to Iran), the strategic benefits were immediately apparent. Without access to semiconductors, software and other essential supplies from the US, Huawei, the world’s largest producer of telecommunications equipment, had to struggle to survive. “The sanctions on Huawei immediately drew the curtain,” says Matt Sheehan, a fellow at the Carnegie Endowment for International Peace who studies China’s tech ecosystem. “Chinese tech giants are powered by chips that are either made in the United States or have deeply American components.”
Export control law had long been seen as a dusty and arcane backwater, far removed from the actual exercise of American power. But after Huawei, the United States discovered that its primacy in the semiconductor supply chain was a rich source of untapped leverage. Three companies, all located in the US, dominate the market for chip design software, which is used to arrange the billions of transistors that fit on a new chip. The market for advanced chipmaking tools is similarly concentrated, with a handful of companies able to claim effective monopolies on essential machines or processes, and almost all of these companies are American or rely on American components. At every step, the supply chain runs through the US, US treaty allies or Taiwan, all operating in a US-dominated ecosystem. “We ran into that,” says Sheehan . “We started using these weapons before we really knew as to use them.”