China ups the ante in chips conflict with the US

Export ban pits Beijing against Washington in a semiconductor showdown at the World Trade Organization

China has upped the ante and put all its chips on the table in a high-stakes gamble to thwart the United States at the World Trade Organization.

Earlier this week, Beijing filed a dispute with the WTO against Washington’s semiconductor export ban, escalating the tech war between the world’s two biggest economies.

The move also comes just weeks after US President Joe Biden held “open and candid” talks with China’s leader Xi Jinping at the G20 summit on the Indonesian island of Bali.

Chips were probably off the menu that day. But they were back on the bill of fare in Geneva on Monday.

“In recent years, the US side has continuously overstretched the notion of national security, abused export control measures, [and] hindered the normal international trade of chips and other products,” the Ministry of Commerce in Beijing said in a statement via China’s diplomatic mission in Geneva.

“[Taking] legal action within the WTO framework [is a] way to address our concerns and to defend our legitimate interests,” the MoC added, according to Chinese media reports.

Sound bytes:

  • Diplomatic relations between Beijing and Washington continue to be strained despite the Bali tête-à-tête.
  • At the core of the White House’s export controls on semiconductors are “national security” issues.
  • Measures by the US will “prevent American companies from exporting technology to Chinese groups engaged in producing high-end chips,” the Financial Times reported.
  • That just about covers every modern device, “including the latest electric vehicles, smartphones, and artificial intelligence,” as well as military and intelligence applications, the FT pointed out.

These targeted actions relate to national security.

Adam Hodge, spokesperson for US Trade Representative’s office

Reaction to the news: “As we have already communicated to the [People’s Republic of China], these targeted actions relate to national security, and the WTO is not the appropriate forum to discuss issues related to national security,” Adam Hodge, a spokesperson for US Trade Representative’s office, said in a statement as reported by the Reuters news agency.

Delve deeper: Export controls come off the back of the “Fab 4 Chip Alliance,” involving the semiconductor superpowers of South Korea, Taiwan, the US, and Japan. Between them, they could “strangle” China’s high-tech industry, the battleground of Cold War 2.0.

Between the lines: “China is mighty upset with US chip export controls, accusing the US of ‘protectionist practices.’ But after decades of engaging in these practices themselves, it must have struck a nerve to have the shoe on the other foot,” Dmitri Alperovitchm, the chairman of think-tank Silverado Policy Accelerator in Washington, said on a Twitter thread.

Big picture: Semiconductors are the new oil of the 21st century. They power everything in today’s high-tech society. Quite simply, they are the advanced guard of Cold War 2.0 between China and the US alliance of major democracies.

China Factor comment: Prepare for a pyrotechnics show that threatens to burn down supply chains and reshape the technological landscape.