Briefly - China and the Changing World Order no.17
The US and China trade more tech export control blows
Hello and welcome back to What China Wants.
Here is the latest Briefly: China in the changing world order, by Adarga.
There’s just one story this week but it’s a big one. We seem to have entered what we all feared would happen – a never-ending cycle of tit-for-tat export controls as the US and China set about trying to cripple each other’s tech industries.
For the full Briefly edition click here.
I’ll be back later this week with more research and analysis.
Thanks for reading.
Sam
Technology | US Implements More Chips Controls; China Immediately Retaliates with
On 2 December, the United States Department of Commerce implemented additional export controls to restrict the export of advanced semiconductor technologies and memory components – specifically high-bandwidth memory (HBM) chips, to China. The latest restrictions include adding 136 Chinese companies associated with military technologies to a trade blacklist, prohibiting the export of specific semiconductor equipment, and enforcing compliance with U.S. production and software standards even for non-U.S. manufactured goods. Washington’s announcement was immediately followed by Beijing slapping export restrictions on critical minerals gallium, germanium and antimony, which have widespread military applications,
Analysis:
The recent implementation of additional restrictions by the U.S. Department of Commerce on HBM chips and semiconductor technologies signals a significant intensification of the technological rivalry between the US and China. We highlighted the potential for this measure in the very first issue of Briefly, published on 9 August, following Bloomberg’s report that the U.S. was considering expanding its export controls to include HBM chips.
It is almost certain that these measures aim to curtail China's progress in artificial intelligence (AI) and advanced technologies, where HBM chips play a critical role. HBM chips are essential components for AI accelerators, which are pivotal for training and running advanced machine learning models. By restricting access, the U.S. is likely seeking not only to impair China's ability to develop high-performance AI systems but also to strengthen its position in managing critical technology flows globally.
This move increases the pressure on U.S.-China relations and heightens the risk of escalating retaliatory measures. China’s rhetoric around protecting its own national security and its immediate announcement of additional controls on critical materials like gallium and germanium, along with enhanced reviews for graphite exports, underscores this point. These materials are integral to semiconductor production and other high-tech applications, making their restriction a direct challenge to the U.S. and its allies or partners supporting these export controls.
As predicted in our earlier analysis, South Korean firms like SK Hynix and Samsung Electronics, which dominate the HBM market, are now caught in the crossfire. The Foreign Direct Product Rule (FDPR) potentially forces these companies to choose between their two largest markets: the U.S. and China. While existing agreements may shield SK Hynix in the short term, both companies could face significant challenges if the U.S. broadens restrictions to include bundled AI accelerators or enforces tighter compliance mechanisms. In contrast, the American firm, Micron, less exposed to China due to earlier bans on its memory chips in critical infrastructure, remains a less impacted player in the immediate term. However, even then, the realistic possibility of broader market disruptions and retaliatory risks could indirectly affect its long-term prospects.
Chinese firms directly affected by the controls, such as Empyrean Technology and NAURA Technology Group, are already working to mitigate the impact by focusing on self-reliance. Their investments in domestic research and development (R&D) and alternative supply chains highlight a medium-term strategy to reduce dependency on U.S. technologies. The implementation of these latest measures will likely accelerate this trend.
Among the strongest actions taken by the U.S. to limit China’s ability to develop high-tech military applications since the CHIPS Act in 2022, these export controls are consistent with a trend of increasing securitisation of AI-enabling technologies, not only by the U.S. and China but also by other developed economies seeking to safeguard their strategic interests. While official statements from both sides frame these measures as necessary for national security, they likely extend to broader strategies to assert dominance over critical global supply chains in the context of techno-economic competition.
The timing of these actions, against the backdrop of heightened geopolitical tensions and the renewed focus on U.S.-China competition following President Trump's re-election in the November election, further underscores their symbolic and strategic importance. U.S. restrictions on China's access to advanced semiconductor technologies and HBM chips align with its overarching strategy to consolidate its technological and geopolitical edge. The latest restrictions are highly likely to exacerbate tensions between the two countries, with both sides engaging in escalating economic and trade countermeasures. However, the consequences reach far beyond bilateral relations. These measures ripple across global supply chains, imposing significant challenges on allied industries and innovation ecosystems through increased costs, disruption to production networks, and fragmentation of international collaboration in critical technologies.
While China faces immediate hurdles due to its reliance on imported semiconductor technologies, the longer-term effects may deviate from the U.S.’ intended outcomes. By accelerating its focus on self-sufficiency and fostering domestic innovation, China could gradually reduce its dependency on U.S. technologies, ultimately reshaping the global semiconductor landscape and potentially undermining U.S. objectives. Such a scenario underscores the risks of overusing economic coercion as a tool of strategic competition, as it may incentivise adversaries to build independent capabilities, consequently eroding the very leverage the policies aim to secure.