On September 16th, National Security Advisor Jake Sullivan announced a new policy on how the US should think about leadership and key technologies. He said:
Fundamentally, we believe that a select few technologies are set to play an outsized importance over the coming decade.
Computing-related technologies, biotech, and clean tech are truly “force multipliers” throughout the tech ecosystem. And leadership in each of these is a national security imperative.
On export controls, we have to revisit the longstanding premise of maintaining “relative” advantages over competitors in certain key technologies. We previously maintained a “sliding scale” approach that said we need to stay only a couple of generations ahead.
That is not the strategic environment we are in today.
Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.
As part of this Sullivan Tech Doctrine, the USG issued new export controls last week that appear to be far reaching. This is a thread by Jordan Schneider, an analyst at the Rhodium Group specializing in China and technology discussing the implications of those export controls.
Many people don’t understand why this is annihilation. ASML has stopped providing services and support to mainland China.
Summary from Lam Research, which is involved with these new sanctions:
1. All Chinese advanced computing chip design companies are covered by these sanctions, and TSMC will no longer do any tape-out for them from now on;
2. All autonomous-driving chips will be sanctioned as well;
3. The starting point for this round of sanctions is to go all the way up the food chain and ensure the elimination of all American products and technologies from the entire ecosystem;
4. Any company or individual who violates these sanctions face arrest by the US Department of Justice..
The following is the translation of a thread posted earlier this week by @lidangzzz
“Lots of people don’t know what happened yesterday. To put it simply, Biden has forced all Americans working in China to pick between quitting their jobs and losing American citizenship. Every American executive and engineer working in China’s semiconductor manufacturing industry resigned yesterday, paralyzing Chinese manufacturing overnight. One round of sanctions from Biden did more damage than all four years of performative sanctioning under Trump. Although American semiconductor exporters had to apply for licenses during the Trump years, licenses were approved within a month.
With the new Biden sanctions, all American suppliers of IP blocks, components, and services departed overnight – thus cutting off all service [to China]. Long story short, every advanced node semiconductor company is currently facing comprehensive supply cut-off, resignations from all American staff, and immediate operations paralysis. This is what annihilation looks like: China’s semiconductor manufacturing industry was reduced to zero overnight. Complete collapse. No chance of survival.
[Translation of the DMs in a screenshot:
Person A: Everyone from Lam Research at Yangtze Memory left today, and on the 12th the AMAT folks will leave as well
Person B: Yes. Not just Yangtze, but also HLMC, ICRD’s Jiading fab, Hefei’s CXMT DRAM fab. All leaving. Even Geehy in Hangzhou is pausing operations]
Q: Why hasn’t Chinese media reported on this?
A: I don’t know.
The only possible explanation is that this major story, and its future ramifications, will bring severe damage to the supposedly “continuously flourishing” semiconductor industry and Chinese national security as a whole. The level of embarrassment is on par with Pelosi’s Taiwan visit. Many people don’t understand why this is annihilation.
ASML has stopped providing services and support to mainland China. Given that many of China’s most successful entrepreneurs in recent years in light of Zero Covid and Xi’s leadership have decided to leave the country, these new regs may be the tipping point for a lot of China’s most experienced talent in the chip space.
I will stress again: This round of sanctions means annihilation for China’s semiconductor industry. This is nothing like the 10+ rounds of performative sanctioning during the Trump years – this is a serious act of industry-wide decapitation. Any Chinese company that survives is a company that hasn’t been fully sanctioned yet. Any fully sanctioned Chinese company is 100% doomed; there’s no possibility of survival. American citizens and permanent residents will predictably vote with their feet.”
FWIW, while I think there is certainly a grain of truth in this thread [from @lidangzzz], the impact into the medium term may be a bit overstated. My guess is that companies like LAM out of an abundance of caution paused servicing in order to make sure they were complying with the law. The regs, after all, are not intended to stop US firms from working in China behind the cutting edge, and if that is their impact they may be tweaked in the coming months.
That said, executives in China, many of whom do hold US passports, have a very difficult decision to make. Given that many of China’s most successful entrepreneurs in recent years in light of Zero Covid and Xi’s leadership have decided to leave the country, these new regs may be the tipping point for a lot of China’s most experienced talent in the chip space.
Comment: In conjunction with the recently signed Chip Act, this does appear to be an important national economic and security policy.I have read that some of the companies intending to build major chip fabs in the US are worried about the availability of a qualified workforce. These export controls may help alleviate that worry.
Another China watcher, Julian Ku, noted the following. “It is worth noting that if Chinese-American execs want to avoid sanctions, it is not just about giving up US citizenships. A US Person for export control purposes includes green card holders. So it is about giving up their connection to the US completely.”
A lot of highly skilled Chinese may have to choose between being patriotic Chinese or Chinese-Americans if they want to stay in their field. But this won’t negate the need for a rigorous education and training program for our existing workforce. I believe the Chip Act addresses this.