The US-China chip war is still escalating

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The temperature of the US-China tech conflict just keeps rising.

Last week, the Chinese Ministry of Commerce announced a new export license system for gallium and germanium, two elements that are used to make computer chips, fiber optics, solar cells, and other tech devices.

Most experts see the move as China’s most significant retaliation against the West’s semiconductor tech blockade, which expanded dramatically last October when the US limited the export to China of the most cutting-edge chips and the equipment capable of making them. 

Earlier this year, China responded by putting Raytheon and Lockheed Martin on a list of unreliable entities and banned domestic companies from buying chips from the American company Micron. Yet none of these moves could rival the global impact of the gallium/germanium export control. By putting a chokehold on these two raw materials, China is signaling that it, in turn, can cause pain for the Western tech system and push other countries to rethink the curbs they put on China.

But as I reported yesterday, China’s new export controls may not have much long-term impact. “Export control is not as effective if the technologies are available in other markets,” Sarah Bauerle Danzman, an associate professor of international studies at Indiana University Bloomington, told me. Since the technology to produce gallium and germanium is very mature, it won’t be too hard for mines in other countries to ramp up their production, although it will take time, investment, policy incentives, and maybe technological improvement to make the process more environmentally friendly.

So what happens now? Half of 2023 is now behind us, and even though there have been a few diplomatic events showing the US-China relationship warming up, like trips to China made by US officials Antony Blinken and Janet Yellen, the tensions on the technological front are only getting worse.

When the US instituted its chip-related export restrictions in October, it wasn’t clear how much of an impact they would have, because the US doesn’t control the entirety of the semiconductor supply chain. Analysts said one of the biggest outstanding questions was the extent to which the US could persuade its allies to join the blockade. 

Now the US has managed to get the key players on board. In May, Japan announced that it is limiting the export of 23 types of equipment used in a variety of chipmaking processes. It even went further than the original US rules. The US limited the export of tools for making the most cutting-edge chips—those of the 14-nanometer generation and under. Japan’s restrictions extend to older, less-advanced chip generations (all the way to the 45-nanometer level), which has the Chinese semiconductor industry worried that production of basic chips used in everyday products, like cars, will also be affected.

At the end of June, the Netherlands followed suit and announced that it will limit the export to China of deep ultraviolet (DUV) lithography machines used to pattern chips. That’s also an escalation of the previous rules, which since 2019 had only limited export of the most advanced extreme ultraviolet (EUV) lithography machines.

These expanding restrictions likely prompted China to take a page from its enemies’ playbook by instituting the controls on gallium and germanium. 

Yellen’s visit last week shows that this back-and-forth retaliation between China and the US-led bloc is not ending anytime soon. Both Yellen and the Chinese leaders expressed their concern at the meeting about the other side’s export controls, yet neither said anything about backing down. 

If more aggressive actions are taken soon, we may see the tech war expand out of the semiconductor field to involve things like battery technologies. As I explained in my piece on Monday, that’s where China would have a larger advantage.

Do you believe the technological tensions between the US and China will worsen from here? Let me know your thoughts at zeyi@technologyreview.com.

Catch up with China

1. Tesla is laying off some battery manufacturing workers in China as a result of the cutthroat electric-vehicle price competition in the country. (Bloomberg $)

2. China’s top EV maker, BYD, is building three new factories in Brazil to make batteries, EVs, and hybrid cars. They will be built at the location of an old Ford plant. (Quartz)

3. Shenzhen, the city often seen as the Silicon Valley of China, is facing population decline for the first time in decades. (Nikkei Asia $)

4. Five people were arrested by the Hong Kong police for involvement in creating an online shopping app to map out local businesses that support the pro-democracy movement. (Hong Kong Free Press)

5. There’s now an official app for learning how to do journalism in China—with online courses taught about the Marxist view of journalism, why the party needs to control the press, and how to be an “influencer-style journalist.” (China Media Project)

6. During her visit, Yellen sat down for dinner with six female Chinese economists. Then they were called traitors online. (Bloomberg $)

7. A new study says a rapidly growing number of scientists of Chinese descent have left the US since 2018, the year the US Department of Justice launched its “China Initiative.” (Inside Higher Ed). An investigation of the initiative by MIT Technology Review published in late 2021 showed it had shifted its focus from economic espionage to “research integrity.” The initiative was officially shut down in 2022.

8. Threads, the new Twitter competitor released by Meta, hit the top five on Apple’s China app store even though Chinese users have to access the platform with a VPN. (TechCrunch)

Lost in translation

On July 5, the famous Hong Kong singer CoCo Lee died by suicide after having battled depression for several years. The tragic incident again highlighted the importance of depression treatment, which is often inaccessible in China. As the Chinese publication Xin Kuai Bao reported, fewer than 10% of patients diagnosed with depression in China have received any kind of medical treatment. 

But in recent years, as several patents for popular Western brand-name depression drugs have expired, Chinese pharmaceutical companies have ramped up their production of local generic alternatives. There’s also a fierce race to invent home-grown treatments. Last November, the first domestically designed depression drug was approved for sale in China, marking a new era for the industry. There are 17 more domestic treatments in trials right now.

One more thing

Every time high-profile US visitors come to China, Chinese social media always fixates on one thing: what they ate. Apparently, Janet Yellen is a fan of the wild mushrooms from China’s southwest border, which her group ordered four times in one dinner. The specific mushroom, called Jian Shou Qing in China, is also known for having psychedelic effects if not cooked properly. Now the restaurant is cashing in by offering Yellen’s dinner choices as a set, branded the “God of Money” menu, according to Quartz.

China just fought back in the semiconductor exports war. Here’s what you need to know.

MIT Technology Review Explains: Let our writers untangle the complex, messy world of technology to help you understand what’s coming next. You can read more here.

China has been on the receiving end of semiconductor export restrictions for years. Now, it is striking back with the same tactic. On July 3, the Chinese Ministry of Commerce announced that the export of gallium and germanium, two elements used in producing chips, solar panels, and fiber optics, will soon be subject to a license system for national security reasons. That means exports of the materials will need to be approved by the government, and Western companies that rely on them could have a hard time securing a consistent supply from China. 

The move follows years of restrictions by the US and Western allies on exports of cutting-edge technologies like high-performing chips, lithography machines, and even chip design software. The policies have created a bottleneck for China’s tech growth, especially for a few major companies like Huawei.

China’s announcement is a clear signal it aims to retaliate, says Kevin Klyman, a technology researcher on the Avoiding Great Power War Project at the Harvard Kennedy School’s Belfer Center for Science and International Affairs. “Every day the technology war is getting worse,” Klyman says. “This is a notable day that accelerated things further.” 

But even though they immediately sent the price of gallium and germanium up, China’s new curbs are not likely to hit the US as hard as American export restrictions have hit China. These two raw materials, though they are important, still have relatively niche applications in the semiconductor industry. And while China dominates gallium and germanium production, other countries could ramp up their own production and export enough to substitute for the supply from China.

Here’s a quick look at where things stand and what comes next.

What are gallium and germanium? What are they used for?

Gallium and germanium are two chemical elements that are commonly extracted along with more familiar minerals. Gallium is usually produced in the process of mining zinc and alumina, while germanium is acquired during zinc mining or separated from brown coal.

“Beijing likely chose gallium and germanium because both are important for semiconductor manufacturing,” says Felix Chang, a senior fellow at the Foreign Policy Research Institute. “That is especially true for germanium, which is prized for its high electrical conductivity. Meanwhile, gallium has unusual crystallization properties that lead to some useful alloying effects.” Gallium is used in the manufacture of radio communication equipment and LED displays, while germanium is widely used in fiber optics, infrared optics, and solar cells. These applications also make them useful components in modern weapons.

Currently, about 60% of the world’s germanium and 90% of the world’s gallium is produced in China, according to the Chinese metal industry research firm Antaike. But because China doesn’t have the capacity to turn these materials into later-stage semiconductor or optical products, a big chunk of it is exported to companies in Japan and Europe. 

What’s the immediate impact?

The new export license regime will start being implemented on August 1. Right after it was announced, purchase orders reportedly began swarming into Chinese gallium and germanium producers. The stockpiling has raised the price of the two materials, as well as the stock prices of Chinese companies that produce them

AXT, an American maker of semiconductor wafers, quickly responded to say that its China-based subsidiary would apply for an export license to maintain business as usual.

It’s important to remember that this is not a ban but a licensing system, which means the impact will depend on how difficult it is to secure an export license. “We see no evidence that no licenses will be granted. They will not be granted to US defense contractors, I imagine,” says Klyman, who notes that American defense companies Raytheon and Lockheed Martin were the first two names added to China’s newly established “unreliable entity list” earlier this year.

But the ability to control who can be granted the permits will give China more leverage in trade negotiations with other countries, particularly those—like Japan and Korea—that rely on such imports for their own semiconductor industries. 

Why is China announcing these restrictions now?

The US government has spent the past year lobbying allies to join forces in restricting China from sourcing high-end chipmaking equipment like lithography machines, and the results are showing. In June, both Japan and the Netherlands announced their decisions to restrict the export of chip-related materials and equipment to China. China certainly is feeling the pressure, and its attempts to negotiate with the US on the restrictions have been unsuccessful.

Many experts point to the China visit of Janet Yellen, the US secretary of the treasury, which happened last week, as the major reason these export controls were announced when they were. “Beijing was … sending a signal before the Yellen visit that China will play the game of controlling exports in key sectors of concern to the US government,” says Paul Triolo, a senior vice president for China and technology policy lead at the consultancy Albright Stonebridge Group. Control of gallium and germanium is one of the tools Beijing wields to push the US and its allies back to the negotiation table.

There’s also a strategic concern that holding onto these critical materials could serve China’s interests if a conflict breaks out, says Xiaomeng Lu, director of geotechnology practice at the Eurasia Group. “Russia has been pretty much blocked out of the global tech ecosystem at this point … but they still have oil, they still have food, and that’s how they survived. That’s the worst-case scenario Chinese leadership keep at the back of their mind,” Lu says. “If the worst-case scenario happens, we need to hold the raw materials that we have in our reserve as much as possible.”

What will happen to the gallium and germanium supply chain?

The Chinese government may be seizing stronger control of the supply chain for now, but the added uncertainty of the licensing regime will cause foreign importers of gallium and germanium to look elsewhere for a more reliable supply. Most people agree that these export restrictions may not be beneficial to China in the long run.

“My read is that the US government is happy about this move,” says Klyman. “This forces suppliers to diversify their supply of gallium, germanium, and other critical minerals, and it will cause markets to reinterpret the value of mining in North America and other regions.”

Mining companies in Congo and Russia have already said they intend to increase production of germanium to meet demand. Some Western countries, including the US, Canada, Germany, and Japan, also produce these materials, but ramping up production could be difficult. The mining process causes significant pollution, which was one of the reasons production was offshored to China in the beginning.

“The West will have to accelerate its innovation of new processes to separate and purify rare-earth metals. Otherwise, it may have to relax the environmental regulations that constrain traditional separation and purification techniques in the West,” says Chang.

Could China’s export controls be as successful as the American ones?

Probably not. Germanium and gallium can be mined elsewhere. But cutting-edge technologies are more restricted in their availability; the EUV lithography machines that the US wanted barred from export to China, for example, are made by a single company. “Export control is not as effective if the technologies are available in other markets,” says Sarah Bauerle Danzman, an associate professor of international studies at Indiana University Bloomington.

The US also has other advantages that make export control work more efficiently, she says, like the international importance of the dollar. The US chip curbs have an extraterritorial effect because companies fear being sanctioned if they don’t comply. They could be excluded from receiving payments in US dollars. 

For China, the export controls could hurt its own economy, Bauerle Danzman adds, because it relies more on export trade than that of the US. Restricting Chinese companies from working with the rest of the world will undermine their business. “Unless [China] is going to get Japan and South Korea and the EU to agree to not trade with the US, in order for it to really execute on a strategy like this, it not only has to stop exports to the US—it has to stop exports to basically everywhere,” she says.

Has China restricted the export of critical raw materials before?

This is not the first time China has tried to restrict the export of raw materials. In 2010, it reduced the allotment of rare-earth elements available for export by 40%, citing an interest in environmental conservation. The same year, the country was accused of unofficially banning rare-earth exports to Japan over a territorial dispute. 

Rare-earth elements are used in manufacturing a variety of products, including magnets, motors, batteries, and LED lights. The quota was later challenged by the US, EU, and Japan in a World Trade Organization dispute. China’s environmental protection justifications didn’t convince the settlement panel. It ruled against China and asked it to roll back the restrictions, which happened in 2015. 

This time, the Japanese government has again said it could raise the issue with WTO, but China likely won’t need to worry about it as much as the last time. With the rise in trade protectionism and self-preserving supply-chain policies during the pandemic era, the organization has increasingly lost its authority among member countries. “Today, WTO is less relevant, and China is trying to find a more nuanced policy argument to back up their actions.” says Lu.

It doesn’t need to look far. In December, China filed a dispute with the WTO around the US semiconductor export controls, calling them “politically motivated and disguised restrictions on trade.” In a brief official response, the US delegate to the WTO said every country has the authority to take measures it considers “necessary to the protection of its essential security interests,” an argument that China can easily use for itself. 

Will China have more export controls in the future?

China most likely won’t stop at gallium and germanium when it comes to export controls. Wei Jianguo, a former Chinese vice minister of commerce, was quoted in the state-owned publication China Daily as saying that “this is just the beginning of China’s countermeasures, and China’s toolbox has many more types of measures available.”

Gallium and germanium, while important, don’t represent the worst pain China could inflict on the raw materials front. “It’s giving the global system a little pinch, showing that we have the capability to cause a bigger pain sometime down the road,” says Lu. 

That could come if China chooses to clamp down again on the export of rare-earth elements. Or the materials used in making electric-vehicle batteries—lithium, cobalt, nickel, graphite. Because these materials are used in much greater quantities, it’s more difficult to find a substitute supply in a short time. They are the real trump card China may hold at the future negotiation table.

The chip patterning machines that will shape computing’s next act

When we talk about computing these days, we tend to talk about software and the engineers who write it. But we wouldn’t be anywhere without the hardware and the physical sciences that have enabled it to be created—disciplines like optics, materials science, and mechanical engineering. It’s thanks to advances in these areas that we can fabricate the chips on which all the 1s and 0s of the digital world reside. Without them, modern computing would have been impossible. 

Semiconductor lithography, the manufacturing process responsible for producing computer chips, has 70-year-old roots. Its origin story is as simple as today’s process is complex: the technology got its start in the mid-1950s, when a physicist named Jay Lathrop turned the lens in his microscope upside down. 

Lathrop, who died last year at age 95, is scarcely remembered today. But the lithography process he and his lab partner patented in 1957 transformed the world. Steady improvement in lithographic methods has produced ever-smaller circuitry and previously unimaginable quantities of computing power, transforming entire industries and our daily lives. 

Lathrop in a field standing next to a horse
Jay Lathrop spent summers throughout the 1970s and 1980s working with his friend Jack Kilby on solar technologies.
SMU LIBRARIES

Today lithography is a big business with tiny margins for error. The world leader, the Dutch firm ASML, is also Europe’s largest tech company by market capitalization. Its lithography tools—which rely on the world’s flattest mirrors, one of the most powerful commercial lasers, and an explosion far hotter than the surface of the sun—can pattern tiny shapes on silicon, measuring just a handful of nanometers. This nanometer-scale precision, in turn, makes it possible to manufacture chips with tens of billions of transistors. You probably rely on chips made with these ultra-advanced lithography tools; they can be found in your phone, your PC, and the data centers that process and remember your data. 

Of all the mind-bogglingly precise machines that manufacture chips, lithography tools are the most critical—and the most complex. They require hundreds of thousands of components and billions of dollars of investment. But they are not only the subject of commercial rivalry and scientific wonder; they stand at the center of a geopolitical competition to control the future of computing power. Where computing goes next will be shaped by the evolution of the lithography industry—and the struggle to produce even more precise lithography tools. The history of the technology’s development suggests that any future advances will rely on even more complex and precise machinery, and even more far-flung supply chains, to produce the specialized components required. The speed at which new lithography systems and components are developed—and the question of which companies and countries manage to manufacture them—will shape not only the speed of computing progress but also the balance of power and profits within the tech industry.

The idea that today’s nanometer-scale manufacturing has its origins in Lathrop’s upside-down microscope lens might seem implausible. But the lithography industry has advanced rapidly. It has enabled chips to follow—and set the pace of—Moore’s Law, the idea that the number of transistors in an integrated circuit doubles roughly every two years.

Lathrop invented the process in the 1950s, at a time when computers used vacuum tubes or transistors so large they were visible to the naked eye—and thus easy enough to manufacture without having to create an entirely new class of tools. 

He wasn’t trying to revolutionize computing; he later recalled that he had “no idea about computers.” As an engineer at the US Army’s Diamond Ordnance Fuze Lab during the mid-1950s, he’d been tasked with devising a new proximity fuze to go inside a mortar shell only a couple of inches in diameter. One of the components his fuze required was a transistor—but the shell was so small that existing transistors were difficult to fit inside.

At the time, transistor manufacturing was in its early stages. Transistors were used as amplifiers in radios, while discrete transistors were beginning to be used in computers the size of rooms. The fuze lab already had some equipment for making transistors, such as crystal growers and diffusion furnaces. But even at an advanced weapons lab, many of the materials and tools needed to fabricate them had to be developed from scratch.

These early transistors were made of a block of the chemical element germanium with different materials layered on top, so they resembled the shape of a desert mesa. These flat-topped blocks of material were made by first covering a portion of the germanium with a drop of wax. A chemical was then applied, which etched away the germanium that wasn’t covered. When the wax was removed, only the germanium that it covered was left behind, sitting on a metallic plate. This system worked well enough for large transistors, but miniaturizing them was all but impossible. The wax oozed in unpredictable ways, limiting the precision with which the germanium could be etched. Lathrop and his lab partner, Jim Nall, found their progress on the proximity fuze stuck in the imperfections of overflowing wax.

Lathrop had spent years looking through microscopes to make something small look bigger. As he puzzled over how to miniaturize transistors, he and Nall wondered whether microscope optics turned upside down could let something big—a pattern for a transistor—be miniaturized. To find out, they covered a piece of germanium material with a type of chemical called a photoresist, which they acquired from Eastman Kodak, the camera company. Light reacts with photoresist, making it either harder or weaker. Lathrop took advantage of this feature and created a “mask” in the shape of a mesa, placing it on the microscope with upside-down optics. Light that passed through holes in the mask was shrunk by the microscope’s lens and projected onto the photoresist chemicals. Where the light struck, the chemicals hardened. Where light was blocked by the mask, they could be washed away, leaving a precise, miniature mesa of germanium. A way to manufacture miniaturized transistors had been found.

Lathrop named the process photolithography—printing with light—and he and Nall filed for a patent. They delivered a paper on the topic at the annual International Electron Devices Meeting in 1957, and the Army awarded him a $25,000 prize for the invention. Lathrop bought his family a new station wagon with the money.

In the midst of the Cold War, the market for mortar fuzes was growing, but Lathrop’s lithography process took off because companies producing transistors for civilian electronics realized its transformative potential. Lithography not only produced transistors with unprecedented precision but also opened the door to further miniaturization. The two companies leading the race to commercial transistors—Fairchild Semiconductor and Texas Instruments—understood the implications early on. Lithography was the tool they needed to manufacture transistors by the millions, turning them into a mass-market good.

Painting with light

Robert Noyce, one of the cofounders of Fairchild, had studied alongside Lathrop when both had been PhD students in physics at MIT. The two of them had spent their weekends in graduate school hiking New Hampshire’s mountains, and they had stayed in touch after graduating. At Fairchild, Noyce moved quickly to hire Nall, Lathrop’s lab partner, and spearheaded his company’s lithography efforts by jury-rigging his own device with a set of 20-millimeter camera lenses he’d bought from a Bay Area photography shop. 

Lathrop, meanwhile, took a job at Fairchild’s competitor, Texas Instruments, driving his new station wagon down to Dallas. He arrived just as his new colleague and lifelong friend Jack Kilby was on the brink of creating a piece of semiconductor material with multiple electronic components built—or integrated—into it. These integrated circuits, it soon became clear, could be efficiently produced only with Lathrop’s lithography method. As chip firms strove to shrink transistors to cram more of them onto chips, photolithography provided the precision that miniaturized manufacturing required.

Fairchild and Texas Instruments made their first lithography machines in house, but the growing complexity of the machines soon attracted new entrants. As the scale of transistors declined from centimeters to millimeters to microns, the importance of precision optics increased. Perkin-Elmer was a Connecticut-based firm that produced specialized optics for the US military, from bombsights to spy satellites. In the late 1960s, it realized that this expertise could be used for lithography, too. It developed a scanner that could project the mask pattern onto a silicon wafer while aligning them with almost flawless precision. The scanner then moved a light across the wafer like a copy machine, painting it with lines of light. This tool proved capable of fabricating transistors as small as a micron—one millionth of a meter. 

Robert Noyce in his office at Fairchild Semiconductor holding diagrams of semiconductors.
Robert Noyce, who later cofounded Intel, launched Fairchild Semiconductor’s lithography program with lenses purchased from a Bay Area camera shop.
TED STRESHINSKY/GETTY IMAGES

But the approach wasn’t practical as chip features got still smaller. By the late 1970s, scanners began to be replaced with steppers, machines that moved light in discrete steps across a wafer. The challenge with a stepper was to move the light with micron-scale precision, so that each flash was perfectly aligned with the chip. GCA, a Boston-based firm that had its origins in spy balloons, devised the first stepper tool, reportedly on the advice of Texas Instruments executive Morris Chang—later the founder of TSMC, which is today the world’s largest chipmaker. 

New England’s specialist lithography firms soon faced steep competition. In the 1980s, as Japanese chipmakers began winning major market share in the production of memory chips, they started buying from Nikon and Canon, two homegrown producers of lithography tools. Around the same time, the Dutch chipmaker Philips spun out its own unit that made lithography tools, calling the new company ASML. 

GCA, which remained America’s lithography champion, struggled to cope with the competition. Its lithography technology was widely recognized as top-notch, but the machines themselves were less reliable than those from its new Japanese and Dutch rivals. Moreover, GCA failed to anticipate a series of chip industry business cycles in the 1980s. It soon found itself financially overextended and, by the end of the decade, on the brink of bankruptcy. Bob Noyce tried to rescue the firm; as the head of Sematech, a government-backed semiconductor research institute intended to revitalize the US chip industry, he poured millions of dollars into GCA. Yet it wasn’t enough to stop the firm from hurtling toward collapse. The lithography industry thus entered the 1990s defined by three firms, two Japanese and one Dutch.

The decline of an industry

The decline of America’s lithography industry coincided with a dramatic leap forward in the field’s technological complexity. Visible light—which has a wavelength of several hundred nanometers—was by the 1980s too broad a brush with which to paint the smallest transistors. So the industry shifted to using new chemicals like krypton fluoride and argon fluoride to create deep ultraviolet light, with wavelengths as low as 193 nanometers. By the early 2000s, after this ultraviolet light itself proved too blunt a tool, lithography machines were created that could shoot light through water, creating a sharper angle of refraction and thereby allowing more precision. Then, after this “immersion” lithography proved insufficient for the finest features on a chip, lithographers began using multi-patterning, applying multiple layers of lithography on top of one another to produce yet more precise patterns on silicon. 

As early as the 1990s, however, it was clear that a new light source with a smaller wavelength would be needed to continue manufacturing ever-smaller transistors. Intel, America’s biggest chipmaker, led the early investments into extreme ultraviolet (EUV) lithography, using a type of light with a wavelength of 13.5 nanometers. This was sufficiently exact to pattern shapes with roughly equivalent dimensions. But only one of the world’s remaining lithography companies, ASML, had the guts to bet its future on the technology, which would take three decades and billions of dollars to develop. For a long time, many industry experts thought it would never work. 

Producing EUV light at sufficient scale is one of the most complex engineering challenges in human history. ASML’s approach requires taking a ball of tin 30 microns wide and pulverizing it twice with an ultra-high-powered carbon dioxide laser. This explodes the tin ball into a plasma with a temperature of several hundred thousand degrees. The plasma emits EUV light, which then must be collected with the flattest mirrors ever created, each made of dozens of alternating, nanometers-thick layers of silicon and molybdenum. These mirrors are held almost perfectly still by a set of actuators and sensors that, their manufacturer says, are so precise they could be used to direct a laser to hit a golf ball as far away as the moon.

Producing the specialized components in an EUV system required constructing a complex international supply chain. The high-powered laser is manufactured by a German firm called Trumpf, which specializes in precision cutting tools. The mirrors are produced by Zeiss, another German firm with a proud history of expertise in optics. The chamber in which the tin balls are pulverized was designed by Cymer, a San Diego firm later purchased outright by ASML. A machine with hundreds of thousands of components can be produced only with participation from companies on multiple continents, even if its assembly is monopolized by a single firm.

Today, EUV lithography tools are used to produce many of the key chips in phones, PCs, and data centers. A typical smartphone processor will have over 10 billion microscopic transistors, each printed by the photolithography process Lathrop pioneered. Lithography has been used to create transistors by the quintillions, making them the most widely produced manufactured product in human history. 

GCA’s Mann 4800 stepper was a big step forward in resolution for lithography machines. But the Boston based
firm ultimately lost the chip market to Japanese and Dutch rivals.
GCA CORPORATION

Perhaps most important, however, is the role of EUV lithography in producing the chips that advanced data centers require. Large AI systems are usually trained on cutting-edge chips—which means they benefit from the ultra-advanced transistors that only EUV lithography can fabricate efficiently. This has made lithography a matter of geopolitical jostling. As the US tries to stop China’s chip industry from producing cutting-edge AI chips, it has limited Beijing’s access to critical tools. EUV lithography systems are the biggest choke point for China’s chip industry.

The fact that the computing capabilities of the world’s second-largest economy depend on access to a single tool produced by a single company illustrates the central role lithography plays in the world’s tech sector. The industry is extraordinarily complex—the result of intensive research efforts by a worldwide network of experts on optics and materials science, plus billions of dollars of investment. China’s homegrown lithography tools are several generations behind the cutting edge, lacking many of the key components—like the ultra-flat mirrors—as well as the expertise in systems integration.

The industry has come a long way since Lathrop’s work on fuzes. He left Texas Instruments in 1968, having worked there for a decade, and took up a professorship at Clemson University, where his father had studied and not far from where his parents then lived. Lathrop spent the rest of his career teaching, though in the summers during the 1970s and 1980s he would return to TI to work with his old friend Jack Kilby on an unsuccessful effort to develop photovoltaic technology for solar power. Lathrop retired from Clemson in 1988, having left an imprint on thousands of electrical engineering students.

The lithography process he invented, meanwhile, continues to advance. In several years, ASML will release a new version of its EUV technology, called high-numerical-­aperture EUV, which will allow even more precise lithography. Research into a future tool with even more precision is underway, though it is unclear if it will ever be practically or commercially feasible. We must hope it is, because the future of Moore’s Law—and the advances in computing it enables—depend on it. 

Chris Miller is author of Chip War: The Fight for the World’s Most Critical Technology and an associate professor at the Fletcher School at Tufts University.

These simple design rules could turn the chip industry on its head

RISC-V is one of MIT Technology Review’s 10 Breakthrough Technologies of 2023. Explore the rest of the list here.

Python, Java, C++, R. In the seven decades or so since the computer was invented, humans have devised many programming languages—largely mishmashes of English words and mathematical symbols—to command transistors to do our bidding. 

But the silicon switches in your laptop’s central processor don’t inherently understand the word “for” or the symbol “=.” For a chip to execute your Python code, software must translate these words and symbols into instructions a chip can use.  

Engineers designate specific binary sequences to prompt the hardware to perform certain actions. The code “100000,” for example, could order a chip to add two numbers, while the code “100100” could ask it to copy a piece of data. These binary sequences form the chip’s fundamental vocabulary, known as the computer’s instruction set. 

For years, the chip industry has relied on a variety of proprietary instruction sets. Two major types dominate the market today: x86, which is used by Intel and AMD, and Arm, made by the company of the same name. Companies must license these instruction sets—which can cost millions of dollars for a single design. And because x86 and Arm chips speak different languages, software developers must make a version of the same app to suit each instruction set. 

Lately, though, many hardware and software companies worldwide have begun to converge around a publicly available instruction set known as RISC-V. It’s a shift that could radically change the chip industry. RISC-V proponents say that this instruction set makes computer chip design more accessible to smaller companies and budding entrepreneurs by liberating them from costly licensing fees. 

“There are already billions of RISC-V-based cores out there, in everything from earbuds all the way up to cloud servers,” says Mark Himelstein, the CTO of RISC-V International, a nonprofit supporting the technology. 

In February 2022, Intel itself pledged $1 billion to develop the RISC-V ecosystem, along with other priorities. While Himelstein predicts it will take a few years before RISC-V chips are widespread among personal computers, the first laptop with a RISC-V chip, the Roma by Xcalibyte and DeepComputing, became available in June for pre-order.

What is RISC-V?

You can think of RISC-V (pronounced “risk five”) as a set of design norms, like Bluetooth, for computer chips. It’s known as an “open standard.” That means anyone—you, me, Intel—can participate in the development of those standards. In addition, anyone can design a computer chip based on RISC-V’s instruction set. Those chips would then be able to execute any software designed for RISC-V. (Note that technology based on an “open standard” differs from “open-source” technology. An open standard typically designates technology specifications, whereas “open source” generally refers to software whose source code is freely available for reference and use.)

A group of computer scientists at UC Berkeley developed the basis for RISC-V in 2010 as a teaching tool for chip design. Proprietary central processing units (CPUs) were too complicated and opaque for students to learn from. RISC-V’s creators made the instruction set public and soon found themselves fielding questions about it. By 2015, a group of academic institutions and companies, including Google and IBM, founded RISC-V International to standardize the instruction set. 

The most basic version of RISC-V consists of just 47 instructions, such as commands to load a number from memory and to add numbers together. However, RISC-V also offers more instructions, known as extensions, making it possible to add features such as vector math for running AI algorithms. 

With RISC-V, you can design a chip’s instruction set to fit your needs, which “gives the freedom to do custom, application-driven hardware,” says Eric Mejdrich of Imec, a research institute in Belgium that focuses on nanoelectronics.

Previously, companies seeking CPUs generally bought off-the-shelf chips because it was too expensive and time-consuming to design them from scratch. Particularly for simpler devices such as alarms or kitchen appliances, these chips often had extra features, which could slow the appliance’s function or waste power. 

Himelstein touts Bluetrum, an earbud company based in China, as a RISC-V success story. Earbuds don’t require much computing capability, and the company found it could design simple chips that use RISC-V instructions. “If they had not used RISC-V, either they would have had to buy a commercial chip with a lot more [capability] than they wanted, or they would have had to design their own chip or instruction set,” says Himelstein. “They didn’t want either of those.”

RISC-V helps to “lower the barrier of entry” to chip design, says Mejdrich. RISC-V proponents offer public workshops on how to build a CPU based on RISC-V. And people who design their own RISC-V chips can now submit those designs to be manufactured free of cost via a partnership between Google, semiconductor manufacturer SkyWater, and chip design platform Efabless. 

What’s next for RISC-V

Balaji Baktha, the CEO of Bay Area–based startup Ventana Micro Systems, designs chips based on RISC-V for data centers. He says design improvements they’ve made—possible only because of the flexibility that an open standard affords—have allowed these chips to perform calculations more quickly with less energy. In 2021, data centers accounted for about 1% of total electricity consumed worldwide, and that figure has been rising over the past several years, according to the International Energy Agency. RISC-V chips could help lower that footprint significantly, according to Baktha.

However, Intel and Arm’s chips remain popular, and it’s not yet clear whether RISC-V designs will supersede them. Companies need to convert existing software to be RISC-V compatible (the Roma supports most versions of Linux, the operating system released in the 1990s that helped drive the open-source revolution). And RISC-V users will need to watch out for developments that “bifurcate the ecosystem,” says Mejdrich—for example, if somebody develops a version of RISC-V that becomes popular but is incompatible with software designed for the original.

RISC-V International must also contend with geopolitical tensions that are at odds with the nonprofit’s open philosophy. Originally based in the US, they faced criticism from lawmakers that RISC-V could cause the US to lose its edge in the semiconductor industry and make Chinese companies more competitive. To dodge these tensions, the nonprofit relocated to Switzerland in 2020. 

Looking ahead, Himelstein says the movement will draw inspiration from Linux. The hope is that RISC-V will make it possible for more people to bring their ideas for novel technologies to life. “In the end, you’re going to see much more innovative products,” he says. 

Sophia Chen is a science journalist based in Columbus, Ohio, who covers physics and computing. In 2022, she was the science communicator in residence at the Simons Institute for the Theory of Computing at the University of California, Berkeley.

These simple design rules could turn the chip industry on its head

RISC-V is one of MIT Technology Review’s 10 Breakthrough Technologies of 2023. Explore the rest of the list here.

Python, Java, C++, R. In the seven decades or so since the computer was invented, humans have devised many programming languages—largely mishmashes of English words and mathematical symbols—to command transistors to do our bidding. 

But the silicon switches in your laptop’s central processor don’t inherently understand the word “for” or the symbol “=.” For a chip to execute your Python code, software must translate these words and symbols into instructions a chip can use.  

Engineers designate specific binary sequences to prompt the hardware to perform certain actions. The code “100000,” for example, could order a chip to add two numbers, while the code “100100” could ask it to copy a piece of data. These binary sequences form the chip’s fundamental vocabulary, known as the computer’s instruction set. 

For years, the chip industry has relied on a variety of proprietary instruction sets. Two major types dominate the market today: x86, which is used by Intel and AMD, and Arm, made by the company of the same name. Companies must license these instruction sets—which can cost millions of dollars for a single design. And because x86 and Arm chips speak different languages, software developers must make a version of the same app to suit each instruction set. 

Lately, though, many hardware and software companies worldwide have begun to converge around a publicly available instruction set known as RISC-V. It’s a shift that could radically change the chip industry. RISC-V proponents say that this instruction set makes computer chip design more accessible to smaller companies and budding entrepreneurs by liberating them from costly licensing fees. 

“There are already billions of RISC-V-based cores out there, in everything from earbuds all the way up to cloud servers,” says Mark Himelstein, the CTO of RISC-V International, a nonprofit supporting the technology. 

In February 2022, Intel itself pledged $1 billion to develop the RISC-V ecosystem, along with other priorities. While Himelstein predicts it will take a few years before RISC-V chips are widespread among personal computers, the first laptop with a RISC-V chip, the Roma by Xcalibyte and DeepComputing, became available in June for pre-order.

What is RISC-V?

You can think of RISC-V (pronounced “risk five”) as a set of design norms, like Bluetooth, for computer chips. It’s known as an “open standard.” That means anyone—you, me, Intel—can participate in the development of those standards. In addition, anyone can design a computer chip based on RISC-V’s instruction set. Those chips would then be able to execute any software designed for RISC-V. (Note that technology based on an “open standard” differs from “open-source” technology. An open standard typically designates technology specifications, whereas “open source” generally refers to software whose source code is freely available for reference and use.)

A group of computer scientists at UC Berkeley developed the basis for RISC-V in 2010 as a teaching tool for chip design. Proprietary central processing units (CPUs) were too complicated and opaque for students to learn from. RISC-V’s creators made the instruction set public and soon found themselves fielding questions about it. By 2015, a group of academic institutions and companies, including Google and IBM, founded RISC-V International to standardize the instruction set. 

The most basic version of RISC-V consists of just 47 instructions, such as commands to load a number from memory and to add numbers together. However, RISC-V also offers more instructions, known as extensions, making it possible to add features such as vector math for running AI algorithms. 

With RISC-V, you can design a chip’s instruction set to fit your needs, which “gives the freedom to do custom, application-driven hardware,” says Eric Mejdrich of Imec, a research institute in Belgium that focuses on nanoelectronics.

Previously, companies seeking CPUs generally bought off-the-shelf chips because it was too expensive and time-consuming to design them from scratch. Particularly for simpler devices such as alarms or kitchen appliances, these chips often had extra features, which could slow the appliance’s function or waste power. 

Himelstein touts Bluetrum, an earbud company based in China, as a RISC-V success story. Earbuds don’t require much computing capability, and the company found it could design simple chips that use RISC-V instructions. “If they had not used RISC-V, either they would have had to buy a commercial chip with a lot more [capability] than they wanted, or they would have had to design their own chip or instruction set,” says Himelstein. “They didn’t want either of those.”

RISC-V helps to “lower the barrier of entry” to chip design, says Mejdrich. RISC-V proponents offer public workshops on how to build a CPU based on RISC-V. And people who design their own RISC-V chips can now submit those designs to be manufactured free of cost via a partnership between Google, semiconductor manufacturer SkyWater, and chip design platform Efabless. 

What’s next for RISC-V

Balaji Baktha, the CEO of Bay Area–based startup Ventana Micro Systems, designs chips based on RISC-V for data centers. He says design improvements they’ve made—possible only because of the flexibility that an open standard affords—have allowed these chips to perform calculations more quickly with less energy. In 2021, data centers accounted for about 1% of total electricity consumed worldwide, and that figure has been rising over the past several years, according to the International Energy Agency. RISC-V chips could help lower that footprint significantly, according to Baktha.

However, Intel and Arm’s chips remain popular, and it’s not yet clear whether RISC-V designs will supersede them. Companies need to convert existing software to be RISC-V compatible (the Roma supports most versions of Linux, the operating system released in the 1990s that helped drive the open-source revolution). And RISC-V users will need to watch out for developments that “bifurcate the ecosystem,” says Mejdrich—for example, if somebody develops a version of RISC-V that becomes popular but is incompatible with software designed for the original.

RISC-V International must also contend with geopolitical tensions that are at odds with the nonprofit’s open philosophy. Originally based in the US, they faced criticism from lawmakers that RISC-V could cause the US to lose its edge in the semiconductor industry and make Chinese companies more competitive. To dodge these tensions, the nonprofit relocated to Switzerland in 2020. 

Looking ahead, Himelstein says the movement will draw inspiration from Linux. The hope is that RISC-V will make it possible for more people to bring their ideas for novel technologies to life. “In the end, you’re going to see much more innovative products,” he says. 

Sophia Chen is a science journalist based in Columbus, Ohio, who covers physics and computing. In 2022, she was the science communicator in residence at the Simons Institute for the Theory of Computing at the University of California, Berkeley.

Chinese chips will keep powering your everyday life

China Report is MIT Technology Review’s newsletter about technology developments in China. Sign up to receive it in your inbox every Tuesday.

What’s better to do at this time than to indulge in some predictions for 2023? This morning, I published a story in MIT Technology Review’s “What’s Next in Tech” series, looking at what will happen in the global semiconductor industry this year. 

To give you a brief overview, I was told by many experts that the already-stressed global chips supply chain will be challenged even more by geopolitics in 2023

Over much of 2022, the US started to take steps to freeze China out of the industry—even forming an alliance with the Netherlands and Japan to restrict chip exports to the country. The measures have pushed the once market-driven business to come up with contingency plans to survive the cold-war-like environment—like diversifying from the Chinese supply chain and building factories elsewhere. We may see more similar plans announced in the next year. And at the same time, the US government’s punitive restrictions will start to be enforced and industrial subsidies for domestic chip makers will start to be doled out, meaning new companies may end up on top while others may get penalized for still selling to China.

To learn more about how the US, China, Taiwan, and Europe may navigate the industry this year, read the full article here.

But I also want to highlight something that didn’t make it into the story—a rather unintended outcome of the chip tech blockade. While the high-end sector of China’s chip industry suffers, the country may take a bigger role in manufacturing older-generation chips that are still widely used in everyday life. 

That may sound counterintuitive. Weren’t the US restrictions last year meant to severely hurt China’s semiconductor industry? 

Yes, but the US government has been intentional about limiting the impact to advanced chips. For example, in the realm of logic chips—those that perform tasks, as opposed to storing data—the US rules only limit China’s ability to produce chips with 14-nanometer nodes or better, which is basically the chip-making technology introduced in the last eight years. The restrictions don’t apply to producing chips with older technologies. 

The consideration here is that older chips are widely used in electronics, cars, and other ordinary objects. If the US were to craft a restriction so wide that it destroyed China’s entire electronic manufacturing industry, it would surely agitate the Chinese government enough to retaliate in ways that would hurt the US. “If you want to piss somebody off, push them into a corner and give them no way out. Then they’ll come and punch you really hard,” says Woz Ahmed, a UK-based consultant and former chip industry executive. 

Instead, the idea is to inflict pain only in selective areas, like the most advanced technologies that may power China’s supercomputers, artificial intelligence, and advanced weapons. 

[US] policies have a very limited immediate impact on the Chinese domestic chip industry because very few Chinese companies have achieved advanced processes, except HiSilicon,” says He Hui, a research director at consulting firm Omdia who focuses on China’s semiconductor market. “But HiSilicon was already [placed on the blacklist] three years ago.” 

And lower-end, legacy chips are also the subsector where China already has a significant advantage. We are not talking about chips used in powering the artificial intelligence of a self-driving car, but the chips that control a specific part, like airbags. As the technology of the Internet of Things rapidly develops, it still requires many small chips that don’t need to be so advanced. 

“That stuff is still going to be made in China, at least based on the current settings that the Biden administration has conveyed. So that obviously leaves a big incentive and a big market for foreign companies—European, Japanese, and South Korean—to continue working with the Chinese,” says John Lee, the director of East West Futures Consulting who researches the global impacts of China’s tech industries. 

Part of the reason China maintains an advantage here is that in a market of mature, lower-end technologies, price is the most important thing. And China has been historically great at low-cost mass production, thanks to low labor costs and generous industrial subsidies from the government.

A future where China fully dominates in low-end chips has already spooked some Western observers. A report published in Lawfare calls this possibility “a huge supply chain vulnerability.” “The Chinese could just flood the market with these technologies. Normal companies can’t compete, because they can’t make money at those levels,” Dan Hutcheson, an economist at research firm TechInsights, told Reuters.

Other countries, including the United States, will still try to get a slice of the market for legacy chips. The US CHIPS Act that became law last year set aside $2 billion specifically for incentivizing domestic production of these technologies. Experts also say the European Union may introduce its own chip legislation in the next two years. 

But this is an industry that takes an infamously long time to see capital investment turn into actual products. And even as foreign companies like Taiwan-based TSMC announce investment plans for US-based factories, they likely won’t shift more capacity to the US without consistent government support, which is hard to guarantee in America’s polarized and volatile political environment. “I think we still need to wait and see whether [these companies] are willing to keep and carry out their promises,” says He Hui.

Lee calls this dynamic one of the more interesting trends that may come out of the current fight over chip controls. “A lot of this capacity is already in China. Most of the new capacity at these [mature] nodes is being built in China, and there’s a limited capacity [of chipmaking equipment supply], even if the money and the political will is there to develop this in the US and EU,” Lee says. The footprint of China in “supplying the more mundane, high-volume, lower-margin, lower-sophistication, but still indispensable chips,” he adds, “is becoming bigger rather than smaller.”

So looking ahead, we’re left with two key questions: Will China’s legacy chip industry prosper while the country struggles to build the high-end sector? Or will the US government introduce more restrictions to throttle China further? As much as I love predictions, I don’t think we will get definitive answers to these questions in 2023. We should keep them in mind as we watch the semiconductor industry navigate a new era of geopolitical volatility.

What impact will it have if China dominates low-end chip manufacturing? Let me know your thoughts at zeyi@technologyreview.com

Catch up with China

1. Chinese state media used to be the main force engineering rage and patriotic sentiment on social media, but individual pro-government accounts have picked up the baton in recent years. (Nikkei Asia $)

2. Chinese researchers and officials have begun uploading genome sequence data of recent covid cases to a global academic database, showing that sub-variants like XBB that are spreading across the world are also circulating in China. (Financial Times $)

3. Millions of Chinese elders have been left vulnerable to the current wave of covid infections in the country, and many have already died. Here’s the moving story of one mother who didn’t survive in Wuhan. (The Atlantic $)

4. ByteDance employees inappropriately accessed the data of two Western journalists and several other US users in an attempt to stop leaks, the company disclosed in an internal investigation. (New York Times $)

5. Tencent finally won state approval to release three of its most successful international games domestically—including the Pokémon franchise game it co-developed with Nintendo. (Bloomberg $)

6. Hacked emails from a Russian state broadcaster detail how Chinese and Russian state media work together to exchange news and social content. (The Intercept)

7. The European Union offered to ship free covid vaccines to China. China rejected it. (Financial Times $)

8. As hospitals become increasingly strained across China, worried individuals are stocking up on oximeters to monitor blood oxygen levels at home. (Pandaily)

Lost in translation

As Beijing positions itself as a global climate leader, local governments are capitalizing on the business of environmental protection and becoming important players. In the last five years, according to a recent analysis from Chinese think tank Qingshan Research, 17 out of China’s 34 provincial governments have formed state-owned “super companies” that focus on getting government contracts in the environmental sector. While they differ in size and expertise, most of these companies offer services in wastewater treatment, garbage disposal, environmental monitoring, or climate investment management. 

As state-owned companies, they have government endorsement and funding, and they often enjoy preferential treatment in the procurement process. But they also have to compete with private companies and each other. The leaders have been getting contracts that are worth hundreds of millions of dollars per year, while others have struggled to secure enough deals or have ended up on the brink of bankruptcy.  

One more thing

Did you have any difficult conversations about politics with your family last week? You’re not alone. So many young people in China are doing this that when they express their non-mainstream political opinions for the first time, often in front of friends and family, they post about it on social media and call this moment their “政治出柜”—coming out of the political closet. It happened a lot during the protests against zero covid last year, when young people went to the streets or voiced support for the protesters on their WeChat timelines and in their family group chats. For some, it takes as much courage to come out about their nonconformist political beliefs as to come out about sexuality, if not more.

What’s next for the chip industry

The year ahead was already shaping up to be a hard one for semiconductor businesses. Famously defined by cycles of soaring and dwindling demand, the chip industry is expected to see declining growth this year as the demand for consumer electronics plateaus.

But concerns over the economic cycle—and the challenges associated with making ever more advanced chips—could easily be eclipsed by geopolitics.

In recent months, the US has instituted the widest restrictions ever on what chips can be sold to China and who can work for Chinese companies. At the same time, it has targeted the supply side of the chip industry, introducing generous federal subsidies to attract manufacturing back to the US. Other governments in Europe and Asia that are home to major chip companies have introduced similar policies to maintain their own positions in the industry.  

As these changes continue to take effect in 2023, they will throw a new element of uncertainty into an industry that has long relied on globally distributed supply chains and a fair amount of freedom in deciding who they do business with.

What will these new geopolitical machinations mean for the more than $500 billion semiconductor industry? MIT Technology Review asked experts how they think it will all play out in the coming year. Here’s what they said.

The great “reshoring” push

The US committed $52 billion to semiconductor manufacturing and research in 2022 with the CHIPS and Science Act. Of that, $39 billion will be used to subsidize building factories domestically. Companies will be able to officially apply for that funding in February 2023, and the awards will be announced on a rolling basis. 

Some of the funding could be used to help firms with US-based factories manufacture military chips; the US government has long been concerned about the national security risks of sourcing chips from abroad. “Probably more and more manufacturing would be reinstated within the US with the purpose to rebuild the defense supply chain,” says Jason Hsu, a former legislator in Taiwan who is currently researching the intersection of semiconductors and geopolitics as a senior fellow at Harvard’s Kennedy School. Hsu says that defense applications are likely one of the main reasons the Taiwanese chip giant TSMC decided to invest $40 billion in manufacturing five- and three-nanometer chips, currently the two most advanced generations, in the US. 

But “reshoring” commercial chip production is another matter. Most of the chips that go into consumer products and data centers, among other commercial applications, are produced in Asia. Moving that manufacturing to the US would be likely to push up costs and make chips less commercially competitive, even with government subsidies. In April 2022, TSMC founder Morris Chang said that chip manufacturing costs in the US are 50% higher than in Taiwan

“The problem is going to be that Apple, Qualcomm, and Nvidia—they’re going to buy the chips manufactured in the US—are going to have to figure out how to balance those costs, because it’s going to still be cheaper to source those chips in Taiwan,” says Paul Triolo, a senior vice president at the business strategy firm Albright Stonebridge, which advises companies operating in China.

If chip companies can’t figure out how to pay the higher labor costs in the US or keep getting subsidies from the government—which is hard to guarantee—they won’t have an incentive to keep investing in US production in the long term.

And the United States is not the only government that wants to attract more chip factories. Taiwan passed a subsidy act in November to give chip companies large tax breaks. Japan and South Korea are doing the same.

Woz Ahmed, a UK-based consultant and former chip industry executive, expects that subsidies from the European Union will also be moving along in 2023, although he says they likely won’t be finalized until the following year. “It’ll take them a lot longer than it will [take] the US, because of the horse trading amongst all the member states,” he says.

Navigating a newly restricted market

The controls the US introduced in October on the export of advanced chips and technologies represented a major escalation in the stranglehold on China’s chip industry. Rules that once barred selling this advanced tech to a few specific Chinese companies were expanded to apply to virtually all entities in China. There are also novel measures, like restricting the sale of essential chipmaking equipment to China.

The policies put the industry in uncharted enforcement territory. Which chips and manufacturing technologies will be considered “advanced”? If a Chinese company makes both advanced and older-generation chips, can it still source US technologies for the latter? 

The US Department of Commerce answered some questions in a Q&A at the end of October. Among other things, it clarified that less advanced chip production lines can be spared the restrictions if they are in a separate factory building. But it’s still unclear how—and to what extent—the rules will be enforced. 

We’ll see this play out in 2023. Chinese companies will likely look for ways to circumvent the rules. At least one has already tried to make its chips seem less advanced. Non-Chinese companies will also be motivated to find work-arounds—the Chinese market is gigantic and lucrative. 

“If you don’t have enough enforcement people on the ground, or they can’t get the access, as soon as people realize that, lots of people will break the rules,” Ahmed says.

Several experts believe that the US may hit China with yet more restrictions this year. Those rules may take the form of more export controls, a review process for outbound US investments, or other moves targeting chip-adjacent industries like quantum computing. 

Not everyone agrees. Chris Miller, an international history professor at Tufts University, thinks the US administration may take a break and focus on the current restrictions. “I don’t expect major expansion of export controls on chips [in 2023],” says Miller, the author of the new book Chip War: The Fight for the World’s Most Critical Technology. “The Biden administration spent most of the first two years in office working on those restrictions. I think they are hoping that the policy sticks and they don’t have to make changes to it for some time.”

How China will respond

So far, the Chinese government has had little response to the new US export controls except for some diplomatic statements and a legal dispute that it filed with the World Trade Organization, which is unlikely to yield much result. 

Will there be a more dramatic response to come? Most experts say no. China doesn’t seem to have a big enough advantage within the chips sector to significantly hit back at the US with trade restrictions of its own. “The Americans own enough of the core technology that they can [use it] against people who are downstream in the supply chain, like the Chinese. So by definition, that means [China doesn’t] have tools for retaliation,” says John Lee, the director of East West Futures Consulting. 

But the country does control 80% of the world’s refining capacity for rare-earth materials, which are essential in making both military products like parts for fighter jets and everyday consumer device components like batteries and screens. Restricting exports could provide China with some leverage. The Chinese could also choose to sanction a few US companies, whether in the chip industry or not, to send a message.

But so far, China doesn’t seem interested in a scorched-earth path when it comes to semiconductors. “I think the Chinese leaders realized that that approach will be just as costly to China as it would be to the US,” says Miller. The current Chinese chip industry cannot survive without working with the global supply chain—it depends on other companies in other countries for lithography machines, core chip IP, and wafers, so avoiding aggressive retaliation that further poisons the business environment is “probably the smartest strategy for China,” he says. 

Instead of hitting back at the US, China is likely to focus more on propping up the domestic chip industry. It’s been reported that China may announce a trillion yuan ($143 billion) support package for domestic companies as soon as the first quarter of 2023. Offering generous subsidies is a tried and tested method that has helped boost the Chinese semiconductor industry in the last decade. But there remains the question of how to allocate that funding efficiently and to the right companies, especially after the efficiency of China’s flagship government chip investment fund was questioned in 2022 and shaken by high-level corruption investigations

The Taiwan question

The US doesn’t call all the shots. To pull off its chip tech blockade, it must coordinate closely with governments controlling key processes of chipmaking that China can’t replace with domestic alternatives. These include those of the Netherlands, Japan, South Korea, and Taiwan.

That won’t be as easy as it sounds, because despite their ideological differences with China, these places also have an economic interest in maintaining the trade relationship.

The Netherlands and Japan have reportedly agreed to codify some of the US export control rules in their own countries. But the devil is in the fine print. “There are certainly voices supporting the Americans on this,” says Lee, who’s based in Germany. “But there’re also pretty strong voices arguing that to simply follow the Americans and lockstep on this would be bad for European interests.” Peter Wennink, CEO of Dutch lithography equipment company ASML, has said that his company “sacrificed” for the export controls while American companies benefited.

Fissures between countries may grow bigger as time goes on. “The history of these tech restriction coalitions shows that they are complex to manage over time and they require active management to keep them functional,” Miller says.

Taiwan is in an especially awkward position. Because of their geographical proximity and historical relationship, its economy is heavily entangled with that of China. Many Taiwanese chip companies, like TSMC, sell to Chinese companies and build factories there. In October, the US granted TSMC a one-year exemption from the export restrictions, but the exemption may not be renewed when it expires in 2023. There’s also the possibility that a military conflict between Beijing and Taipei would derail all chip manufacturing activities, but most experts don’t see that happening in the near term. 

“So Taiwanese companies must be hedging against the uncertainties,” Hsu says. This doesn’t mean they will pull out from all their operations in China, but they may consider investing more in overseas facilities, like the two chip fabs TSMC plans to build in Arizona. 

As Taiwan’s chip industry drifts closer towards the US and an alliance solidifies around the American export-control regime, the once globalized semiconductor industry comes one step closer to being separated by ideological lines. “Effectively, we will be entering the world of two chips,” Hsu says, with the US and its allies representing one of those worlds and the other comprising China and the various countries in Southeast Asia, the Middle East, Eurasia, and Africa where China is pushing for its technologies to be adopted. Countries that have traditionally relied on China’s financial aid and trade deals with that country will more likely accept the Chinese standards when building their digital infrastructure, Hsu says.

Though it would unfold very slowly, Hsu says this decoupling is beginning to seem inevitable. Governments will need to start making contingency plans for when it happens, he says: “The plan B should be—what’s our China strategy?”

This story is a part of MIT Technology Review’s What’s Next series, where we look across industries, trends, and technologies to give you a first look at the future.

China is copying Russia’s election interference playbook

China Report is MIT Technology Review’s newsletter about technology developments in China. Sign up to receive it in your inbox every Tuesday.

Last week I was in Boston attending EmTech MIT, our signature annual event, and since then I’ve been thinking about all the interesting ideas I heard—from programming vaccines to work against different diseases to increasing access to prostheses in postwar Sierra Leone. You know, even as so many depressing things are happening around us, these conversations gave me a bit more hope for our future.

I also hosted three discussions about the global technology challenges facing the world. Obviously, a big focus was China—which, as you newsletter readers know, is one of the most important tech players today. My guests tackled crucial questions, like: Why are the recent chip export controls particularly significant? And how do we understand them from not just a geopolitical perspective—but a moral one? I also had a conversation focused on social media disinformation, which proved to be extremely timely given reports last week of China-based bot networks that were trying to influence US politics ahead of today’s midterm elections. 

Well, these conversations weren’t exactly the hopeful kind, but they gave me some needed clarity about what’s happening on the other side of the Pacific. The China news cycle has always been busy (that’s why this newsletter exists!), but it’s also good to take a beat, have a chat, and understand where we’re at regarding US-China relations. 

In case you missed the event this year, here are the China-related highlights I think you’ll be interested in:

What’s the strategy—and real rationale—behind US restrictions on China?

It has been several years since US-China relations took a clear dive, and academics and tech workers on both sides are now accepting that tensions will not resolve anytime soon. When I asked Matt Sheehan, a global technology fellow at the Carnegie Endowment for International Peace, how he feels about US-China relations today, he said he’s “on edge” because “there’re a lot of decisions being made in rapid succession with hugely uncertain outcomes.”

One of these big decisions is the Biden administration’s escalation of restrictions on chip exports to China. While people are still trying to understand the policy in real time, it has become clear that the administration’s moves are not just a matter of adding more Chinese companies or more chip technologies to a list of targets, but a change in the US government’s mindset when it comes to containing China.

For a long time, the main question on Chinese export control was whether to “do as much damage as you can today versus to preserve your leverage on a longer time scale,” said Sheehan. 

The latter—continuing to sell chips and relevant technologies to China in hopes that the country won’t develop its own self-sufficient ecosystem—is what the US has been doing. But that’s going to change, according to Sheehan: “I think this latest control kind of firmly settles that debate within [Washington] DC on the side of doing damage today. People decided that leverage is eroding naturally over time anyway, and we have to use this leverage while we can.”

Photo from EmTech MIT showing speakers Yangyang Cheng, Matt Sheehan, and Zeyi Yang

But it’s also important to scrutinize the justifications for these export controls. Are they really based on addressing human rights concerns, as often claimed, or are they merely more political games? Yangyang Cheng, a fellow at Yale Law School’s Paul Tsai China Center, noted in the panel that the policies are “logically inconsistent and morally indefensible” if the reasoning “is not because building weapons is bad or building different types of surveillance systems is bad, but because I want to build better weapons and better surveillance systems.”

She’s seen the latter reasoning appear more often as China has risen as an economic juggernaut. This is a lasting trend from Obama to Trump to Biden, she noted. While there are real concerns about the increasingly frequent human rights abuses and authoritarian crackdowns in today’s China, “these issues have not been addressed by these technological competitions and tensions,” Cheng said. “However, they are being used as a rhetorical shield for the US government to advance domestic interests and geopolitics agendas.”

China has copied Russia’s election interference playbook—but may not be as good at it

The night before I talked to Renée DiResta—the technical research manager at the Stanford Internet Observatory, who has studied foreign influence on social media for years—she co-published a report on the latest foreign misinformation campaigns on Twitter.

She and her colleagues recently analyzed three China-based and three Iran-based networks of accounts that pretended to be ordinary Americans on the right or left of the political spectrum. According to data provided by Twitter, the platform removed the accounts at the end of October. 

The phony accounts’ strategy for stoking the political conflicts in an already polarized America closely resembled the activity of the fake Russian accounts that thrived before the 2016 elections—riling up partisans on both sides of the political aisle.

One of the three China-based account networks, containing just 300+ tweets, supported Democratic candidates in Florida and tweeted positively about gun control and abortion access. Another network pushed right-wing talking points, like the false claim that the 2020 election was stolen, and heavily retweeted Republican provocateurs like Representative Lauren Boebert. Of all these accounts, the most influential one posed as “Ultra MAGA BELLA Hot Babe”; the combination of soft porn and pro-Trump messaging gained it 26,000 followers, 400,000+ likes, and 180,000+ retweets over six months.

To be fair, even with clear models in past Russian influence campaigns, I’m impressed with how Chinese accounts pulled off this stunt. Besides language proficiency, it requires knowledge of Americans’ daily life, pop culture, and political reality to fake a believable persona. It’s a warning sign that they are getting better at more sophisticated manipulation of social platforms.

But at the same time, Chinese efforts were less effective in other ways. When compared with Russian interference, which focuses almost solely on issues already consuming American politics, China- and Iran-based actors are often more obvious in their geopolitical interests, DiResta said.

Another one of the China-based networks is a good example: through 1,872 accounts and 310,043 tweets (mainly in English and Mandarin), this network mostly talked about issues in Hong Kong, Taiwan, and Xinjiang. This kind of content often fails to get high engagement numbers. Sometimes, it just serves as a megaphone for state-controlled accounts. “So the point is not the bots. The bots are a tool to push forth the messaging from the real mouthpiece,” DiResta said.

So what’s the big picture? We still don’t know what Musk’s takeover will mean for Twitter, but we do know that nothing will stop foreign governments, including China, from trying to maintain their narrative on US-based social platforms. And it’s truly fascinating to identify how these governments learn from each other yet also diverge in their tactics.

Catch up with China

1. Eric Schmidt, Google’s former CEO, has become one of the most influential voices drumming up an artificial-intelligence arms race between the US and China. But he may have conflicts of interest. (Protocol)

2. Chinese officials are considering phasing out zero-covid policies, cutting down on mandatory quarantine days and the number of PCR tests required. But don’t expect it to happen overnight. (Wall Street Journal $)

  • A China correspondent for FT documented his firsthand experience over 10 days at a covid quarantine center in Shanghai. (Financial Times $)

3. China will soon approve the Pfizer/BioNTech covid vaccine (though only for expats), says German chancellor Olaf Scholz. It would be the first mRNA vaccine used in the country. (Politico)

  • The new German administration promised to be tougher on China but is divided on how far it should go. (Financial Times $)

4. The Taiwanese company Foxconn, known for making iPhones, has long said it wanted to build electric vehicles. Now it’s getting investment from Saudi Arabia to manufacture them in the kingdom. (Nikkei Asia $)

5. How the vibrant world of Uyghur-language websites and apps went silent as software developers and IT specialists in Xinjiang were taken into detention in recent years. (Wired $)

6. Lured by the promise of legitimate employment, as many as 100,000 foreigners are being held captive in Cambodia by Chinese cybercriminals and forced to run online scams. (Los Angeles Times $)

  • One of the scam products is fake LinkedIn profiles of people who pose as employees of prestigious companies and coax victims into crypto investment frauds. (MIT Technology Review)

7. China’s first message for this week’s climate summit COP27: Rich countries should give more financial aid to their developing peers. (Bloomberg $)

Lost in translation

“Zoom-bombing” is taking off in China again as Chinese classrooms move online amid local covid restrictions this year. It can have dire unintended consequences; a Chinese middle school teacher died of sudden cardiac arrest in late October after her history class was hit. The news revived discussions about a practice that was popular in 2020, in which uninvited people show up in remote meetings (sometimes serious ones!) to blast music, porn, and curses. Reporters from the Chinese publication Legal Daily joined an online community where “bombers” discuss new tactics and share information about meetings they can bomb. The majority of these members are young—born after 2000—and some volunteered access to their own remote school classes in order to disrupt them. Such activities are illegal and can be considered a criminal act, lawyers say. Digital platforms started suspending group chats for bomber communities following news of the death.

One more thing

The 1982 Bollywood song “Jimmy Jimmy Aaja Aaja” is having an unexpected cultural moment in China. Since the catchy lyric “Jimmy, Aaja” sounds similar to the Mandarin phrase “Jiemi, najia,” which means “who can lend me rice,” the song is getting dubbed under videos of people wearing Indian clothing and dancing with empty containers. You can read these videos, which received millions of views, as a satirical protest against the unpredictable local lockdowns that make basic grocery items hard to access. Or you can just appreciate this rare crossover moment between Chinese and Indian pop culture.

Coincidentally, I’m off to the grocery store, as I’m running out of rice myself. So see you next week!

Zeyi