wwhether the topic of the day is Chinese spy balloons or American AI breakthroughs, Washington and Beijing increasingly see world events through the lens of a “tech war.” This intensifying rivalry is often framed as “America vs. China,” but that misses the point: America is not alone.
America’s biggest competitive advantage against China is not wealth or weapons, but the fact that America has many close friends, and China does not. In fact, The only country that has signed an agreement to support China in the event of a war is North Korea, a poor pariah state that deliberately schedules nuclear tests and missile launches to humiliate China during high-profile diplomatic summits. Treaty or not, few would describe China and North Korea as friends.
It’s good to have friends, especially since many in America are world leaders in technologies of great strategic and geopolitical importance, including semiconductors. Most Americans are vaguely aware that Saudi Arabia is a key player in the global economy as it produces more than 10% of the world’s oil, but even fewer know that Taiwan produces more than 90% of the world’s most advanced semiconductor computer chips or. that a company based in the Netherlands, ASML, makes 100% of the most advanced lithography machines that are irreplaceable equipment for computer chip factories. Today, computer chips are essential inputs not only in datacenters and smartphones, but also in cars, critical infrastructure and even household appliances such as washing machines. As the global economy becomes increasingly digitized, it also increasingly relies on chips. It is for good reason that national security experts often declare semiconductors the “new oil” when it comes to geopolitics and international security.
Which brings us to the remarkable string of tech diplomacy successes of the Biden Administration over the past few months. On October 7, 2022, the Biden Administration unilaterally imposed a set of export controls restricting Chinese sales of advanced computer chips designed for running Artificial Intelligence applications and supercomputers. in the military as well as manufacturing equipment for making chips. Since US companies design more than 95% of the AI chips used in China, and also manufacture the manufacturing equipment used in every chip factory in China, these export controls provide a a unique obstacle to China’s ambitions to lead the world in AI technology. and to achieve self-sufficiency in semiconductors.
Read More: The Only Way the US Can Win the Tech War with China
However, export controls are also a major diplomatic gamble. If the U.S. forces U.S. industry to stop selling advanced chips and chip-making equipment to China, only for other countries to come in and replace the United States, the policy could provide a major blow to US industry. The US will suffer a huge loss of market share and profits in China and gain only a temporary national security advantage, perhaps setting China back in just a few months. The success of the policy depends entirely on persuading US allies—especially Taiwan, the Netherlands, and Japan—to follow the US lead and adopt similar export control regulations.
Taiwan was the first to signal that it was on board with the new restrictions, announcing on October 8 that it would no longer allow Chinese chip design companies to contract with Taiwanese chip factories to produce chips that can replace those that are no longer allowed in America. sold in China. China has world-class chip designers, but its chip factories are far behind the state of the art in Taiwan. Taiwan has good reason to support Washington, because Joe Biden has been more open than any American president in decades about protecting Taiwan from a possible Chinese invasion and also because Taiwan’s semiconductor industry is also a you are a serious victim of China’s government-sponsored industrial espionage and illegal talent poaching campaigns. The Taiwanese government knows that China’s goal is to end its strategic semiconductor dependence on Taiwan—which Taiwan calls its “silicon shield”—as quickly as possible. Naturally, Taiwan is on board with US policies aimed at preventing that, although they want to keep as quiet as possible about it to minimize blowback from China.
Like Taiwan, Japan and the Netherlands are also world giants in the semiconductor industry. They, along with the United States, dominate the market for the amazingly complex equipment that is an essential component of every chip factory on Earth. While there are Chinese companies that make semiconductor manufacturing equipment, they make only a fraction of the wide variety of equipment needed to make chips, and the equipment made by Chinese companies is far from over. on the state of the art in the US, the Netherlands, and Japan. The most advanced Dutch lithography machines, for example, have over 100,000 parts, cost over $340 million each, and rival the James Webb Space telescope or Large Hadron Collider in terms of technological complexity.
With the Oct. 7 export controls, the U.S. cut off China from the U.S.’s most advanced semiconductor manufacturing equipment, but it will be a fleeting, hollow victory if Japan and the Netherlands don’t quickly follow suit. There are some types of equipment that only US companies can make today, but Dutch and Japanese companies produce equally advanced machines in highly related technical disciplines. In other words, they can develop new products to replace US technology relatively quickly—at least a decade faster than China itself—if the reward is guaranteed monopoly access to a large which is a customer base in China.
Unfortunately for China, Japan, and the Netherlands it will not do that. In late January, the Biden Administration secured a rare diplomatic victory: an agreement with the Netherlands and Japan to establish controls on the export of China’s multilateral semiconductor technology. Although the specific details of the deal will take months of ongoing negotiations to finalize and likely won’t be known until the Netherlands and Japan publish their updated export control regulations, two key details are known: Japan and the Netherlands will not allow their equipment companies. to replace US industry for sales to China, and countries will expand the set of export control restricted equipment to include items that US industry cannot produce, including advanced lithography equipment. If sufficiently implemented, the agreement will likely add a decade or two to the timeline for China’s plans for semiconductor self-sufficiency—and China may never reach it.
Like Taiwan, Japanese and Dutch companies have fallen victim to Chinese government-backed industrial espionage for semiconductor technology. And while they historically fear Chinese retaliation for any steps taken to stop such provocations, they will also need to reassess their foreign policy positions in the wake of the Russian invasion. in Ukraine. China’s support of the Russian government has disastrous consequences for China’s global image.
Just as important, however, Taiwan, Japan, and the Netherlands share America’s democratic values and interest in a peaceful, rules-based international order. For the most part, the US did not achieve this export control agreement through diplomatic carrots and sticks, but through genuine persuasion on the merits of the policy as well as a genuine willingness to be persuaded if allies made the good points. In the months before and after October 7, US diplomats engaged with their foreign counterparts, listened carefully to concerns, and worked diligently and collaboratively to address those concerns.
This is a sign of the Biden Administration’s approach to negotiations not only in foreign policy, but also domestically. After the 2021 passage of the bipartisan infrastructure bill in Congress, Senator Mitt Romney praised the enthusiastic collaborative approach of the Biden Administration: “You can tell the difference between an adversarial negotiation and a collaboration,” he said. he. “In this case, when one side has a problem, the other side tries to solve the problem, instead of walking away from the table.”
Obviously that’s not the right negotiation style for every situation. But nothing is better if the goal requires merit and preserving the trust of friends, and it is good to have friends.
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