Is the US-China tech war entering a new, hotter phase? – 2024-04-28 19:09:04

by times news cr

2024-04-28 19:09:04

Information and energy flows underpin all economic activity, and high technology in turn supports both. This determines the high stakes in the technological war between the US and China, the first volleys of which echoed during the term of President Donald Trump (2017-2021), and continued under the administration of Joe Biden.

The confrontation between the two largest economies in the world is changing relations and supply chains around the world, writes the English-language magazine “Economist” (The Economist) in an analysis on the subject.

According to estimates by the International Monetary Fund (IMF), if high-tech trade between the rival blocs were halted, it would cost global gross domestic product (GDP) about $1 trillion, or 1.2 percent of global economic output.

Whether the US or China controls energy and information technology is an “ethno-civilizational question”, explains Evan Ellis of the US Army War College.

The degree of tension is likely to increase in the coming years. Neither Biden nor Trump will deviate from a policy of confrontation with China. This is probably the issue that enjoys the most bipartisan support in Washington. For China, retreating from what it considers to be its rightful place in the global order is unthinkable, Ellis believes.

The next stage of the US-China tech war is likely to play out on two fronts. One is the chip manufacturing that creates the world’s data processing infrastructure, including that which trains and runs artificial intelligence programs.

The other conflicting topic is “green” technologies, which can become the “backbone” of the entire world economy. For Beijing, the strength of Chinese companies involved in such technologies is not just a natural consequence of two decades of targeted industrial policy, but an affirmation of China’s important role as a world leader.

On April 23, the US Congress passed a bill requiring the Chinese owner of TikTok, ByteDance, to sell the platform within 270 days or risk being banned, BTA recalls.

Shortly after, Chinese authorities forced US tech giant Apple to remove WhatsApp and Threads, platforms owned by Meta, from its Chinese app store.

Apart from the online giants, semiconductor manufacturing and energy also remain major fields of confrontation between the two countries.

The U.S. is pushing chipmakers to expand domestic production of cutting-edge technologies. On April 8, the White House announced $6.6 billion in subsidies for Taiwanese manufacturer TSMC to build three new factories in the state of Arizona.

On April 15, another 6.4 billion dollars was allocated to the South Korean “Samsung” (Samsung) to build plants in Texas.

The funds are part of the US CHIPS and Science Act, which provides $280 billion in incentives to set up semiconductor factories and train workers.

To boost green industry in the US, the US government has earmarked a $369 billion green subsidy package to be passed in 2022.

In Washington’s toolbox is the Inflation Reduction Act (IRA), according to which a package of “green” subsidies worth 369 billion dollars is provided. The legislation supports local production of technologies related to the transition to climate neutrality through tax credits.

Against this background, the US maintains high tariffs on imports of Chinese solar panels and electric cars, at 14.25 and 25 percent, respectively.

However, Chinese companies occupy the leading positions in the world in the production of such “green” products: “Longi” (Longi) is the largest producer of solar panels in the world; CATL (CATL) is the largest battery manufacturer in the world, and BYD (BYD) competes with “Tesla” (Tesla) for the title of the largest manufacturer of electric cars.

China’s chip manufacturing, however, has not grown as impressively despite about $150 billion in government subsidies over the past decade. This is, to some extent, a measure of the US’s success in blocking the flow of chip-making technology into the country over the past two years.

The first victim in the technological war between the US and China was Huawei. It was the first Chinese company to be subject to export controls by the Trump administration, which now face similar restrictions.

Companies from a number of sectors related to chip manufacturing are now on high alert. MGI Tech, a subsidiary of Chinese giant BGI that makes genome sequencing equipment, is likely to come under fire.

Representatives of the Republican Party in the USA express their indignation that MGI Tech machines are installed in European hospitals.

Multilateral controls on quantum computing technology exported to China are also likely to be introduced, a Republican representative has explained. Thus, China’s access to quantum computing and sensing technologies can be limited.

Last year, China imposed export controls on gallium and germanium, two materials of particular importance in the chip-making process. The country was the source of 98 percent of the world’s gallium supply in 2022, as well as 60 percent of its germanium supply.

However, material export controls are a relatively “soft” measure compared to the US’s grip on intellectual property.

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