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.
Usually in these types of regulations there are significant loopholes. The CCP will also step up their buying of American lobbyists. Many people and businesses will fall for the easy money that CCP provides.
If any administration is serious about countering CCP, then they must ensure supply chain resilience by forcing critical supplies (medicine, defense systems components, etc) to be sourced from the west in general and significantly favor domestic production.
This is big.About Time too.Too much spying and not enough trust building.Looks like the biden admin has taken the offensive.
So openly admitted WMD/biowarfare against…last i checked: people who can’t fight back (as well as the Russkies, who openly eradicated their biowarfare labd)…is now an openly admitted American strategy.
And Pat Lang is endorsing it.
I am not TTG. I do not edit his material.
Having had a few minutes to think abt this I am at a loss to say why I would oppose such a measure.
It’s good to be skeptical. But seeing conspiracies from a single word that has many definitions is not smart. Biotech has many applications:
– bioinformatics in computing
– food production
– environmental cleanup
Wow. Will this apply in other countries?
I take this statement from Sullivan’s address to mean this policy is aimed at China and Russia although competitors and adversaries could encompass a large part of the world. It’s definitely non one world government talk.
“I argued that after the liberalizing wave of innovations of the early internet era and after the authoritarian counter-revolution of the 2000s, when our competitors and adversaries took advantage of our complacency and inherent openness”
This is what we need to do across the spectrum. There’s a Lam Research facility about five miles west of me, my wife’s worked there as a technician. FormFactor is a stone throw to the south from me, I’ve worked an educational consulting gig there. Our colleges and our young people can totally step up to this. That’s not the kind of messaging we’re hearing, though. I am encouraged that there is a deeper deep state at work here.
The anger in China over Nancy Pelosi visiting Taiwan recently coupled with this Chip Act and now Xi preparing to become dictator for life seems to be a quickening on the road to all out economic war. If media accounts are true, last night, a cluster of Chinese drones lighting up an American destroyer would ad a military component to this war.
Our media has been talking about the CCP Congress meeting where Xi will be given more power. Maybe a tipping point is coming between China and the West.
Will we hear a giant swoosh as Taiwan’s TSMC, Germany’s Siemens, and many non-US tech giants pour into China to take our place.
The situation needs to be constantly monitored and tweaked. Success maybe early on but in the long term as China’s chipmakers adapt it may just give them a stronger hand. We won’t know for many years whether this attempt to slowdown China’s semiconductor capabilities has succeeded or failed.
Meanwhile it will also take many years to develop that “rigorous education and training program for our existing workforce.”
From Schneider’s summary of the Chinese language Lam Research article, it looks like TSMC has chosen the US side over mainland China… at least for now. German companies, like Siemens, may just move Ostpolitik a little further ost.
Will we hear a giant swoosh as Taiwan’s TSMC, Germany’s Siemens, and many non-US tech giants pour into China to take our place.
The companies that support TSMC by making their specialized tools (photolithography stuff, etc.) are likely to stick with TSMC. Some are actually US companies, many others are European puppets of the US.
Puppets? You mean subsidiaries? Have you ever been in business?
I think this is part of a larger struggle between liberal economies and authoritarian ones. I also think that the liberal economies will thrive and the others will not. There has always been a ceiling for state dominated economies and once it is reached, further expansion becomes unavailable. Those economies also rely increasingly on repression and that in itself is limiting. What will also impact the situation is that information is now rather available globally, so any “firewalls” will be less and less effective.
I am sure all this will be disruptive, but when ordinary people have choices, solutions that work are found. Top down systems spend too many resources on paranoia to be able to meet the increasing challenges.
Now the administration need to act against Saudi Arabia and put them back into the medieval construct that they are. If nothing else, as a cautionary tale for others.
The biggest chipmaker in the world, TSMC, was created by Taiwan’s government in a government planned and government financed program to build out Taiwan’s electronics industry. Something like a third of Taiwan’s economy is state owned.
China is quite consciously imitating the Taiwan/Japan/South Korea model that worked so well for the asian tigers. Getting industrial policy right is not entirely easy but China has been doing a pretty good job and we should not underestimate them.
I agree that we should not underestimate them, but ending the aiding and abetting is worthwhile. I am sure the Chinese government will direct resources to this effort, but I am not convinced that they will be as successful as those who support a more looser effort. Authoritarian systems also bring paranoia and CYA effects that impede progress.
Jake Sullivan says the post-Cold War era is over. He is right. The world is rapidly bifurcating into US + allies on one side and China/Russia + allies on the other. I don’t think the middle ground will be tenable for much longer as nations are forced to choose to align with one or the other power blocs.
This measure is another dagger to the heart of globalization and well past due, I welcome it. It will be interesting to see what retaliatory measures the CCP takes. The Borg must think they have Russia well and truly on the ropes to open a second front at this time. If anything was going to encourage the Chinese to help out their ‘ally’ in time of war I expect it would be something like this.
I agree with you on many things Barbara Ann. However, I think The Borg expected Russia to win and is playing a weak hand: Tucker Carlson, Tulsi Gabbard, Elon Musk, appease, appease. Defense, Deterrence, Etc, Etc will not be forever viable while playing both sides like Democrat vs Republican. There will come real war and one side will win, the other lose.
If that real war ever comes, the next one will be fought with sticks and stones (Einstein).
My mother told me in 1958 that going into the ground forces was a waste of time since all future wars would be fought by technicians.
In my IOBC we were divided into light and mech tracks based on our first assignments. The only difference was in the last four weeks. Us light guys were constantly reminded that we were an anachronism. In a few years all Infantry was going to be mech. Didn’t work out that way, did it? A couple of the NCOs told us about the interior of a tank hit with a shaped charge like the Dragon and TOW looks like… nothing but burnt oatmeal and ketchup. Damned glad I stayed light Infantry.
Warren Buffet has bailed on China, noting among other things the bi-partisan Chips Act and coming fall out.
“A lot of highly skilled Chinese may have to choose between being patriotic Chinese or ….” They have to be caught then tried first. Jonathan Pollard and Fang Fang are not the only names that comes to mind. Will Biden be expelling all the Chinese students in STEM programs and Chinese professors who are at universities here? If not, why not?
Good question. The thought occurred to me that some patriotic Chinese will become Chinese-American as an act of Chinese patriotism. We need a much better CI effort in our government funded research programs. Kick all Chinese students and professors out of our STEM programs? Carnegie Mellon would become a ghost town. A lot of those Chinese-Americans leaving Chinese chip production/research in response to these export controls are products of STEM programs. Applying restrictions on who participates in US government funded research at our universities is more than reasonable.
Jake Sullivan killed globalism. He assisted getting NATO into a hot war with the Russian Federation and currently the USA in an economic war with China. The White House really does not know what they are doing. I guess they are trying to resuscitate a dying financial hegemony when in fact this is a multi-polar world.
Intel is laying off thousands because the PC & IT sales have crashed. Giga-billionaires have suddenly found themselves in the middle of a World War. Elon Musk is going to continue to pay for Ukraine’s Starlink frontline communication system. Soon they will have to finance the war itself since Oligarchs are the only ones left with any wealth.
Monopolization and privatization caused the baby formula shortage in the USA. The current Adderall shortage to manage Attention-deficit/hyperactivity disorder in kids is due to a labor shortage in the packaging line. American leaders actually think that all the goods manufactured overseas can be magically moved back to North America without creating even more shortages.
Even worse is the austerity and higher interest rates that are being imposed to fight inflation that is actually caused by the shortages due to the pandemics’ missing workers, broken supply lines, wars, and crazy ideologies, not wage inflation. These neo-Paul Volker-FED manipulations assure an economic recession, at best, or more likely a depression.
The World War is already lost if flailing dysfunctional western national governments don’t start rationing, war planning, mobilizing, and taxing profiteers. The new UK PM Liz Truss is reported to have the shelf-life of a lettuce. Who actually did blow up 3 of 4 of the natural gas pipelines that power German industry? Europe is facing a cold, dark, jobless, and polluted winter. Whoever is running things could care less about the suffering and death. There are no diplomatic talks to sign an armistice to end the fighting since they will scuttled by Boris Johnson last April.
This is so insane that the USA could put Chinese nationals in camps for the duration and vice versa in China. Instead, will American Ex-Pats be allowed to stay in China for the jobs, pay, and coronavirus free workplaces; or forced to return to the USA jobless?
Will the escalation of the World War continue into a global nuclear holocaust that destroys human civilization?
“Monopolization and privatization caused the baby formula shortage in the USA.”
What government run baby formula plant was privatized? The FDA orderded a plant closed for cleanliness reasons, the foundation of which did not actually exist, and refused to allow it to reopen for weeks. That was the root cause.
“Even worse is the austerity and higher interest rates that are being imposed to fight inflation that is actually caused by the shortages due to the pandemics’ missing workers, broken supply lines, wars, and crazy ideologies, not wage inflation.”
We should just keep printing money then. It’s not like it devalues currency like all the other times in the past it has been done.
That sounds like a good thing. We over medicate kids. Humans survived ADHD for millenia without drugs. This is hardly a crisis.
I include “fees for service” under privatization. If regulators are paid in part by the companies, it is human nature not to see what they don’t want you to see. Drug and food safety regulation, inspection and prosecution must be paid by taxes or you get more situations like Abbott formula shortage. Ineffective government plant inspection and no alternative manufacturing plants which were not required by agencies buying baby formula caused the shortage. After the fact; “In February, Abbott closed its infant formula plant in Michigan after the Food and Drug Administration found contamination at the facility from the bacteria Cronobacter sakazakii. Four infants who ate powered formula from the plant were hospitalized with Cronobacter, two of whom died.” The FDA is hiring consultants to scrutinize what went wrong in the Agency.
Unless government by and for the people is restored, Insiders will never end “fees for service” or close “the revolving door” to stop the corruption. This is how corporations feed off of public monies and cut their costs. The Pentagon is infected with cost overruns that end up being paid to military contractors and ineffective equipment like the M247 Sergeant York. Boeing’s self-certification of the 737 MAX led to two crashes.
Yes, it is easier to transfer dollars electronically to corporations and oligarchs rather than doing the hard work of diplomatically ending the wars, fixing the supply blockages, and assuring that workers are healthy and workplaces are safe. The movement of money upwards will halt the day when you no longer can buy anything with the digital dollars, democracy is restored, or the current world war goes nuclear.
So the government did not own any babyformula plant. The “fees” for service come via the administartive state. Get your congressman to do something about that. The regulatory capture you are complaining about did not prevent the regulators from shutting down that plant, or forbidding that plant to reopen for months. Cost are decidedly not cut because some corporation gets a government contract or a subsidy, just the opposite happens in most cases.
“Boeing’s self-certification of the 737 MAX led to two crashes.” No, that was the use of one instrument instead of two. How many aircraft were self certified with no failures globally before that problem developed? Better double down on regulatory agencies.
I had an Irish friend who occasionally visited the old country on the British side. He was having a drink in a pub near the border when a guy asked him if he knew any of “the naughty boys “ which was slang for the IRA. jack said “I might”. The fellow explained that he was an electrical engineer, sent to repair the cross border power lines that the IRA were regularly destroying. “Could you please get the boys to understand that the electricity is not flowing from Eire to northern Ireland, it’s the other was around?”” The bombing isn’t hurting the British.”
Jack arranged for the bombing to stop.
Sullivans prohibition reminds me of Jack Clark’s story. We assume that the technology transfer is one way from the West to China. While it may be true of certain very cutting edge technologies right now, there will be others where z’we” are learning from “them”.’’
Furthermore on the technical side, there is I think, very little that cannot be reverse engineered, so this is a very short term tactic.
In addition, lawyers will make this morph into secondary sanctions where foreign firms with american employees, even one, dare not. deal with China. Guess what happens then?
That’s a great story, and other than the flow of electricity being a use of technology itself, quite apt. The Chinese have been giving us new tech, or at least the output of biotech, for a couple of years now. Their social media credit system is inpiring lots of tech, or tech employees, to put similar systems in place. The Anglo response to the latter, or extension thereof, was on display in the art galaries and milk aisles of the UK this weekend. Over here it is inspiring the climatists, the LGBTQ, and is developing into a tyranny of the wokies of all stripes. With much government support, too.
“output of biotech”
Well done, sir. It’s worth remembering, however, that while they have done the R&D, we helped foot the bill via the graces of the NIH and Dr Fauci; also worth remembering that, while on one hand Speaker Pelosi visited Taiwan, on the other she’s consistently blocked investigation into the origins of the virus, and the Pelosi family has done million-dollar deals on the mainland. The Biden family has done billion-dollar deals.
Google, banned from operating in China, has helped and is probably still helping build their surveillance apparatus. Twitter, also banned in China, employs a large number of Chinese nationals apparently engaged in pro-China censorship on its platform. Blackrock was encouraging investment in China’s dumpster fire of an economy (as opposed to our dumpster fire) as late as this summer.
All this is to say that the globalist West–even those leading the charge–is not necessarily anti-China or even anti-CCP; rather, they really would prefer someone besides Comrade Winniepooh be in charge. Sullivan may indeed be nailing shut the coffin lid of globalism, but if by some miracle Pooh is dethroned next week, they will change their tune on China fast enough to give you whiplash.
Fauci did quite a few evil things since he was brought to D.C. to fight aids. Curing that or even finding a vaccine for it wasn’t one of those things. Neither was closing the gay bath houses. (He didn’t even try stopping gay hedonist festivals when ‘monkey’ pox recently reared its behind.)
Google and Twitter both have a multitude of foreign nationals here on their payroll. I doubt any of them are loyal to the US. I linked to a Google video back around the time Trump was first elected where the executives stated quite openly that they would be fighting on behalf of all those foreign nationals here. Apparently 10,000 colleges and universities in the US can’t educate enough people to Google’s standards. Blackrock’s executives, on the other hand, especially Mr. Fink, are especially devious. He’s pushing the corporate ESG stuff as a precursor to Chinese style social scoring for the control it brings those in power.
I forgot to add that the US government is apparently OK with China operating a counterintelligence center (the so-called police station) in NYC.
And I suppose I will–reluctantly–issue two corrections to my previous screed. The text should have read:
“Capitalism with Chinese characteristics” turns out to be synonymous with crony capitalism…
striking the subsequent mention of crony capitalism, and:
We will be far less free.
One major issue completely ignored by this article and analysis is the western investors in these companies, which are being gutted by the removal of their biggest growing market. You seem to forget that economics drives politics. Last week, ASML’s share price took a dump, down over 12%. TSMC likewise saw a huge fall. Does this engender good will with western citizens and corporations? There are a number of very negative effects of this action. I remember reading an interview with the CEO of ASML; he laid things out very clearly, and he was very unhappy. Incensed may be a more appropriate descriptor.
I paraphrase what he said: First, American and European companies lose jobs, many jobs, as their sales take the major hit from the loss of their biggest growth market. Next, China pours huge resources, both financial and human capital, into the development of domestic semiconductor manufacturing equipment. The CEO of ASML was clear: China already has these machines, even EUV lithography, the cutting edge necessary for 5nm chips. He seemed to think that although China will not be able to immediately ramp up production, they are most likely well on the way to reverse engineering and building these machines. So if we’re talking about a year, or five years, the end result is that by denying them western machinery, we streamline their journey to successful domestic capacity. So, now the CEO pointed out that once China develops domestic capacity, the western companies will have lost the China market forever. The final blow comes when China makes adjustments and develops smooth production of the machinery and starts EXPORTING it, undercutting the prices of ASML, Lamm Research, Applied Materials, etc.
My conclusion is that denying technology was a strategy that was successful in previous centuries, from the time of European colonialism (how many men did the Brits need to take India?) until the age of the internet. The genie is out of the bottle, and those who seek to employ this tactic today are just admitting that they are unable to compete. This is clearly the case with Huawei, the first company that developed a turnkey 5G system.
There’s one other thing I wanted to mention, related to the banning of US citizens working in the semiconductor industry in China. I live in Taiwan, and I have many friends who know Taiwanese people working in the industry in China. I did an experiment this past week, asking a large group of my trainees whether they thought Tsai Ying-wen, President of Taiwan, would similarly implement a ban on citizens of the Republic of China (yes, that is Taiwan’s name) working in the semiconductor industry in China. It was unanimous. Everyone laughed and said that is was utterly impossible. I played dumb and asked why that was so. They all used the same reasoning: she and her party would lose the next election if she dared such a move. So you see, people are practical, especially Chinese people. And believe me, the people in Taiwan are Chinese people, regardless of their demands that they are Taiwanese, not Chinese.
And the Uygher people have a star on the PRC flag. Hey, look frankie, man, you need to spread the word to your circle of acquaintances that making Muslims say “Praise to the Communist Party” instead of “Praise to Allah” is a bad idea. Like, a really fucking bad idea.
It is well past time for the US to ensure supply chain resilience. Depending on CCP manufacturing is like Germany becoming dependent on Russian energy. It appears a German security official has been arrested for collaboration with the Russians. When will Schroeder be exposed for pushing German reliance on Russian energy while double dealing as a director of Gazprom. How many American officials and academics and think-tankers are on CCP payroll?
We need a major counter-intelligence effort to uncover the extent of CCP influencers and espionage. But….with the FBI CI loaded with political guys like Peter Strzok how will CI efforts work?
Epoch finally did a well researched article on this ‘decoupling’
I am including a few key points from the article as the main article will be behind a paywall.
The tech decoupling started during the Trump Administration and is accelerating under the Biden Admin.
The internet ‘chatter’ you found did get the timing – Epoch said that the tech decoupling moved into this ‘phase’ 5 days before the CCP 20th congress – so 10/7/22 for a start date (or thereabouts)
The effected corporations (according to Epoch) are Yangtze Memory Technologies. Changxin Memory Technologies. Shanghai IC R&D Center Jiading Factory, Hefei Changxin Memory Technologies (to name the big ones – and several others.
An important quote (IMO)
“Chio Jiunn Rong, an Economics professor at National Central University in Taiwan told the Epoch Times on Oct 14: ‘It’s very likely to form a trend. Previously capital was leaving China, and the next trend is technology professionals leaving China.'”
Chiou went on to say
“that the indirect effect is that after the chip industry is hobbles. China’s overall economy will be impacted, which will effect other fields, and even people in the field of business management will probably leave China.”
from another web page go to it was mentioned that Xi has been buying Natural Gas (and I believe also Oil) from Russia at a reduced price – that finally answers my question about why the Yuan (regular Yuan not digital) was gaining value so fast against the Ruble…
Thanks for this post TTG
I was re-reading this post and suddenly really noticed this sentence . . . ” To put it simply, Biden has forced all Americans working in China to pick between quitting their jobs and losing American citizenship.” Is that sentence “over-written” or am I overinterpreting it or does it really say that and mean it? And if it is so, is that a correct understanding of what this policy really says?
I do not know enough to know about my own Constitution to know if a President in particular or the Executive Branch in general can strip a US citizen of citizenship by policy decree. Can they do that? If so, does that power extend to “born here” citizens as well as voluntary join-up citizens?
I doubt these export controls can strip anyone of US citizenship, but they can make US citizens and green card holders subject to arrest, imprisonment and/or fines. They can also make life difficult for any company that wants to continue doing business with the US. The controls can’t touch non-US persons or anyone who has nothing to do with the US. That’s the choice these controls puts before Chinese-Americans.
I hope your interpretation is the correct one, because my immediate tinfoil reaction was that this was indeed an announcement of de-citizening anyone violating this doctrine, which may seem like just deserts in this case.
But would also be setting a precedent whereby an future Woke President might seek to de-citizenise millions of Americans who are not Woke enough. Or whereby a future AntiWoke President might seek to de-citizenise millions of Americans who are too Woke. Or any other excuse which future power would seek to make use of this precedent for.
So I would be glad if this does not and cannot involve actual revocation of citizenship.
Priorities at our premier counter-intelligence agency?
Then you have this:
CCP have many powerful people in business and government as their cheerleaders. How will this work out? Similar to how it worked out for Germany where a former chancellor got paid to be on the board of Gazprom?