Can China gain semiconductor independence while the US escalates the “Great Chip War”? “It’s going to be a big hit while China works it out,” TechNode contributor Stewart Randall said at a webinar on May 28, “but given time and money, yeah, it’s possible.”
Randall discussed the US “Export Ban 2.0” against Huawei with fellow TechNode contributor Jan-Peter Kleinhans at the second installment of the monthly “Tech After Hours” webinar series. With that ban, the US said, “you think you’re ahead of us, but I’m going to prove you wrong,” said Randall, who is head of Electronics and Embedded Software at Intralink.
“It would be really hard for Huawei to go around this ban,” said Kleinhans, director of the Geopolitics and Technology project at the Berlin-based Stiftung Neue Verantwortung. But in the long run, he said, “I don’t think any country, China included, will be held back.”
Fresh out of tricks
Huawei itself might have a tough time with the new export controls, Randall said. They’ve surprised us before—but he “can’t personally see how they could keep on designing” this time without access to Electronic Design Automation (EDA) tools or fabs.
Even a magic trick that evades this round of sanctions may not matter, Kleinhans said. The real question is about the US government’s “direction of travel.” Even if the most recent export ban against Huawei isn’t watertight, we can “probably expect a third or fourth one until they get it right.”
According to him, this isn’t just about the trade dispute anymore, or even previous allegations of theft of intellectual property. “It’s about containment,” he said.
Randall agreed. “When you have the ability to do this and China is your adversary—why not?”
Huawei’s chip design subsidiary, Hisilicon, will be particularly hurt by the export controls, he said. The company represents the cutting edge of China’s integrated circuit industry and is a point of national pride. Even if Huawei buys more chips from other companies, Hisilicon won’t “have anything to do,” and that would “be embarrassing to China—Hisilicon enters the top 10 in the world, and a few months later it doesn’t exist.”
And in the near future, “if Hisilicon collapses, China can’t make world-beating military tech, doesn’t have access to fabs—that could lead to some kind of pressure on China and a compromise with the US.”
Parallel semiconductor stacks
So in the short- and mid-term, Kleinhans said, the US can certainly block China’s way. But with extra Chinese investment, “in a decade or two we have very different semiconductor stacks.” He and Randall agreed that the most reasonable option would be a “trailing-edge” chip, something “middle-range” in case China got cut off from the rest of the world.
“Interestingly,” Kleinhans said, “you see a connection between different regions… in Germany and Europe, there’s a fraction of policymakers saying, well, in the public domain, we don’t need the latest and greatest—we need secure and trustworthy ICT systems.”
Building up to independence will be difficult, if not impossible. No semiconductor company today can do anything without US tools or equipment, Randall said. “It’s just how the industry is,” he said, “you could flip it around and say that the US is reliant on Taiwan to make its chips.”
As both speakers said, that independence will come easier in some processes and products than others, and getting there is going to take more than cash. In Kleinhans’ words, “if it was just about money, China would’ve already been successful.” China will need to get smart about how it invests, and how it attracts talent to the industry.
Crisis or opportunity
So who stands to win, and lose, from the Great Chip War?
Expect no winners in the short- and mid-term, Kleinhans says. “Every single dollar you spend there eats away from R&D.”
But long-term, he sees it as an opportunity for companies to make their supply chains more resilient—not just to buffer against geopolitical crises, but also pandemics and natural disasters.
For US semiconductor companies, life isn’t about to get any easier, according to Randall. Europe, though, has been trying to sit on the fence, and as China moves to exclude US suppliers and move to non-US equivalents, “maybe that’s a good opportunity for others out there when blood is on the streets.”
The Great Chip War isn’t likely to simmer down anytime soon. Both governments will have to decide how much they want to escalate, and if China decides it wants to hurt the US, it could target something else, making the chip war bleed into other industries and products.
Overall, it’s bad news for an industry that depends on global supply chains and distribution of labor. “So I’m really wondering,” Kleinhans said, “in 20 years, if you’re a historian looking at this time period, how much innovation got lost in the nitty-gritty details of this tech rivalry?”