China Calls Top Chip Execs For Emergency Talks After Biden Unleashes Economic War

Last week, President Biden announced new restrictions on US firms selling semiconductors to China, including restrictions on US citizens working at Chinese chip plants. Nobody might have noticed, but this is a full-blown economic war on China, a means to prohibit the country’s rise as a high-tech superpower. 

Since the new restrictions, China’s Ministry of Industry and Information Technology (MIIT) has summoned executives from the country’s top chip firms for emergency meetings over the past week to evaluate the damage, according to Bloomberg. Execs from Yangtze Memory Technologies Co. and supercomputer firm Dawning Information Industry Co. met with MIIT. 

Biden’s strategy to paralyze its most dangerous opponent since the end of the Cold War could be promising. People familiar with the closed-door discussions between MIIT and top Chinese execs say there’s a lot of uncertainty on how to move forward. For now, there was no mention of counter-measures. MIIT said there would be enough domestic demand for the affected chip companies with US expertise pulled out of factories and chip shipments from the US and elsewhere stopped. 

The discussions revealed that some participants feared the US strategy could doom China’s ambitions to accelerate the development and production of advanced chips. Someone familiar with the meetings said at least one person explained to MIIT that the country’s cutting-edge chipmaking could be in trouble. 

An example of how the new restrictions have already wreaked havoc in the industry is AI chipmaker Biren’s release of a new general-purpose graphics processing unit, “setting a new record in global computing power.” However, the firm contracted with Taiwan Semiconductor Manufacturing Co. to produce its chips using advanced 7-nanometer technology. There’s a risk that TSMC may terminate any dealings with the company because of Biden’s new restrictions. Biren has no options to manufacture advanced GPUs domestically due to the lack of high-tech chip equipment and the lack of personnel. 

We noted mid-last week that US personnel pulled out of state-owned Yangtze Memory Technologies Co., while Netherlands-based ASML Holding NV halted shipments for Chinese chip companies. There are even reports that Dawning Information, China’s top builder of supercomputers, is scrambling as its access to premium US chips has vanished. 

Over the weekend, we cited Rhodium Group China expert Jordan Schneider — whose blog, China Talk, can be found here, outlined Biden’s new chip export controls and other restrictions are a massive blow to “CCP’s science and technology ambitions.” He continued:

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.

The Biden administration’s technological decoupling appears to be hitting China’s bottom line. This escalation could hinder the country’s rise as a great power. Why? Because it could have far more significant economic impacts than just the word “semiconductor.” 

These advanced chips are used in fifth-generation fighter jets, hypersonic missile development, stealth drones, nuclear weapons, and all other sorts of intelligent war machines and may undercut China’s goal of dominating global artificial intelligence by the end of the decade. Meanwhile, this gives the US some time with the $52 billion CHIPS Act Congress recently passed to rebuild the domestic semiconductor industry and spur innovation. 

China still has to deliver a response to the new US measures. What that may be is a big question. The second question is if Biden’s gamble will work. Or, like anything the Biden administration touches, it entirely backfires…