WASHINGTON, August 24, 2023 – China’s ability to remain competitive in the global artificial intelligence race will depend on its ability to produce its own chips, as U.S. restrictions on the export of that product to the adversarial nation will hobble its ability to move forward, experts said Thursday.

“U.S. chip export sanctions are a huge roadblock” for AI development in China, said Qiheng Chen, a senior analyst at consulting firm Compass Lexecon.

The ability to manufacture advanced chips domestically will be essential for the country to continue researching and implementing AI, Chen added at the AI event hosted by the Asia Society Policy Institute.

The Commerce Department imposed in October 2022 restrictions on exports of advanced semiconductors and chip manufacturing equipment to China and required U.S. citizens to get a permit before working with Chinese chip manufacturers.

The move was designed to limit China’s ability to compete with the U.S. by curbing its access to hardware required for cutting-edge military technology. It also makes AI research and development, a highly chip-dependent process, more difficult.

Other panelists Tuesday emphasized chip making as a top priority of the Chinese government.

The country has already moved toward independence from the U.S. in other areas, like satellites and fiber optics, as a response to Trump administration policies.

This has continued under President Joe Biden, with a 2021 executive order restricting investment in Chinese firms drawing criticism from Huawei, the Chinese telecom company.

Experts have previously said the threat of restricting access to global trade even further could make China hesitant to retaliate for the sanctions. This is because advanced chip manufacturing requires materials, components, and processes that would be difficult for a single nation to source entirely within its borders.

“It’s too complex, too global, too interdependent for one country to be able to produce all these technologies on their own,” said Jimmy Goodrich, vice president of Global Policy at the Semiconductor Industry Association, at a conference earlier this year.

A Huawei spokesperson estimated at a conference following the investment ban that it would take three to five years for Chinese chip manufacturing to become self-sufficient and rely less on American components and investments.

Biden signed the CHIPS and Science Act into law last year, two months before the export restrictions went into effect. It allocates $52 billion for American semiconductor manufacturing and gives tax credits for investments in the industry.

WASHINGTON, August 2, 2023 – The United States needs to collaborate with its allies to ensure semiconductor supply chain resilience, said a former National Security Advisor.

Robert O’Brien, chairman of strategic advisory firm American Global Strategies, said at a Hudson Institute event Tuesday that the semiconductor industry — the chips that run all electronic devices — is a primary industry of concern for competition with China.

O’Brien urged the government to cooperate with allies to onshore, moving plants onto domestic land, and “friend-shore,” moving plants into allying countries, manufacturing plants. Failing to do so will subject the U.S. and its allies to additional risks in the future, he said. 

The United States’ advantage is that it has “real allies” that share its beliefs and values, particularly for liberty and a free market, said O’Brien. In contrast, China has very few allies that share its values and are not paid for their loyalty, he said. He urged the U.S. to capitalize on its strengths. 

There are many countries, including Philippines, Thailand, India, and Mexico that have manufacturing capability that can support American demand in place of China, he said. 

Beijing is not interested in being an economic partner, O’Brien warned. In 2020, the country had over 22,000 companies in the semiconductor industry. The sector only continues to grow as China’s policies provide incentives for companies to produce at scale.  

Appeasement and negotiation are not options when dealing with China, said O’Brien. China does not play by the same rules as western states, it generates wealth by stealing the intellectual property of American companies. There is no way to compete with China if we continue to allow theft to happen, he said. 

Ultimately, the competition between the countries is not a squabble over ideals, but instead a fight between liberty and the “worst form” of totalitarianism, claimed O’Brien. For this reason, he suggested that the Biden Administration take measures to limit American private investment in the Chinese government. 

President Joe Biden’s Investing in America initiative is investing billions of dollars into the United States’ domestic manufacturing. Congress passed the Inflation Reduction Act and CHIPS and Science Act in 2021 which invest in America’s electric vehicle and green energy plans and semiconductor manufacturing. 

Biden ran his presidential election campaign on his initiative to move companies onshore, defend American supply chains, and create more jobs. According to the White House, the agenda has “already attracted hundreds of billions of dollars in private investment and created nearly 800,000 new manufacturing jobs in everything from semiconductors and electric car batteries to clean energy technology and more.” 

WASHINGTON, June 28, 2023 – American chip manufacturer Micron Technology announced Thursday plans to invest up to $825 million in building its first chip assembly and test facility in Gujarat, India, which is intended to reduce America’s reliance on China for semiconductors. 

The total investment for the facility, with support from the Indian central government and the state of Gujarat, is expected to reach $2.75 billion. 

The United States holds just 12 percent of the semiconductor market share globally, and the announcement is intended to partly remedy that. Semiconductors are required for several advanced industries, including electronics, telecommunications, and automotive. 

The ongoing worldwide shortage of semiconductors has also caused disruptions in supply chains impacting industries on a global scale. The fab in India is designed to ensure the stability of critical industries and enhance U.S. national security.

The partnership between India and the U.S. in the semiconductor sector is viewed as a means to counter China’s dominance in cutting-edge technologies. The U.S.-India memorandum of understanding on establishing a semiconductor supply chain, signed in March, seeks to enhance collaboration and diversify the supply chain. This partnership aligns with the U.S. strategy of strengthening connections with Asian allies.

Experts see the signing of the memorandum as an opportunity for both nations to reduce global dependency on China.

“The MoU seeks to establish a collaborative mechanism for the semiconductor supply chain resiliency and diversification in view of the US CHIPS and Science Act and India Semiconductor Mission (ISM),” said Charlie Dai, vice president, and research director at research firm Forrester.

The Quad Alliance, comprising India, the U.S., Japan, and Australia, has collaborated to secure supply chains in semiconductors and 5G telecom technologies. By becoming a part of the global semiconductor supply chain, India aims to achieve a balanced regional distribution of chip manufacturing share and eat into China’s share of the market – becoming America’s primary supplier of semiconductors for the time being.

The new facility in Gujarat will focus on the production of ball grid array (BGA) integrated circuit packages, memory modules, and solid-state drives. Micron aims to commence construction in 2023, with the first phase becoming operational in late 2024. The project’s second phase is planned for the latter half of the decade, creating up to 5,000 new jobs for the company both in America and India.

Alongside the investment from Micron, semiconductor toolmaker Applied Materials will invest $400 million over four years in a new engineering center in India, the company said on Thursday. Lam Research also pledged to train 60,000 Indian engineers through its Semiverse Solution virtual fabrication platform, thus increasing the labor pool as well. 

“Lam’s Semiverse Solutions portfolio is a game-changer that provides a foundation to create a virtual semiconductor innovation universe,” said corporate vice president David Fried in a press release. “As the semiconductor ecosystem races to scale to address the criticality of chips, the virtual-physical fabrication world made possible with Semiverse Solutions opens the door for exciting new opportunities for collaboration, workforce development and advanced technology breakthroughs.”