![]() ![]() ![]() As a result of military-civil fusion, U.S. China’s strategy of “military-civil fusion” is designed to ensure that the best Chinese commercial AI technology is always available to the military and that the military’s linkages to China’s commercial industry are deeply interwoven. China is a global leader in AI research, AI commercialization, and AI-enabled military technology. The highest levels of leadership in both the United States and China-including Chinese president Xi Jinping- believe that leading in AI technology is critical to the future of global military and economic power competition. Strangle the Chinese AI and supercomputing industries by choking off access to high-end chips.policy of actively strangling large segments of the Chinese technology industry-strangling with an intent to kill. government intervention to not only preserve chokepoint control but also begin a new U.S. These actions demonstrate an unprecedented degree of U.S. In short, the Biden administration is trying to (1) strangle the Chinese AI industry by choking off access to high-end AI chips (2) block China from designing AI chips domestically by choking off China’s access to U.S.-made chip design software (3) block China from manufacturing advanced chips by choking off access to U.S.-built semiconductor manufacturing equipment and (4) block China from domestically producing semiconductor manufacturing equipment by choking off access to U.S.-built components. There are four interlocking elements of the new policy targeting different segments of the semiconductor value chain, and all elements must be understood simultaneously to grasp the scope of what the Biden administration plans on achieving. The Biden Administration’s Four Semiconductor Policy Chokeholds In doing so, these actions demonstrate an unprecedented degree of U.S. dominance across all four of these chokepoints. The Biden administration’s latest actions simultaneously exploit U.S. The most important chokepoints in the context of this discussion are AI chip designs, electronic design automation software, semiconductor manufacturing equipment, and equipment components. With the new policy, which comes on the heels of the CHIPS Act’s passage, the United States is firmly focused on retaining control over so-called “ chokepoint” (or as it is sometimes translated from Chinese “ stranglehold”) technologies in the global semiconductor technology supply chain. semiconductor policy has been primarily market driven and laissez faire. The Biden administration announced a massive policy shift on semiconductor exports to China as well as revised rules for how the lists of restricted parties are managed. Clearly something was missing, and industry experts have been waiting for the other shoe to drop ever since. A policy like this would not make sense if that is the only step the administration planned to take. Rather, it shows how the policy as disclosed in September was incomplete. While the reasoning in this criticism is sound, it does not imply that the Biden administration’s actions are self-defeating. AI chip designers from selling their world-leading chips is actually good for China in the longer term because it will strengthen China’s domestic chip design ecosystem. In the short term, this policy will significantly harm Chinese AI data center companies.chip companies will now go to Chinese chip companies, offering a viable path to economies of scale and competitive performance. Because of the new export controls, revenues that formerly flowed to U.S.Chinese firms could not catch up to Nvidia and AMD on performance because they did not have enough customers to benefit from economies of scale and network effects.China’s domestic AI chip design companies could not win customers in China because their chip designs could not compete with Nvidia and AMD on performance.AI computer chip designers, such as Nvidia and AMD, from selling their high-end chips for AI and supercomputing to China. For weeks the Biden administration has been receiving criticism in many quarters for a new round of semiconductor export control restrictions, first disclosed on September 1. These new controls-a genuine landmark in U.S.-China relations-provide the complete picture after a partial disclosure in early September generated confusion. On October 7, 2022, the Biden administration announced a new export controls policy on artificial intelligence (AI) and semiconductor technologies to China. ![]()
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