US Allies Hesitant to Control Chips Because of Chinese Retaliation, BIS Leader Says
The U.S. is trying to convince more of its allies to increase export controls on advanced semiconductors and chip making equipment destined to China, but some haven’t committed, in part because they’re worried about possible trade retaliation from Beijing, said Alan Estevez, undersecretary of the Bureau of Industry and Security.
Estevez, speaking during an event this week hosted by the Aspen Institute, said some American trading partners believe that the U.S. can “absorb more retaliation” than they can, “and they're probably right about that because of the nature of their economies.
“So we're cognizant of that,” he said, “and we're working with them.”
Estevez in March said BIS was pushing some foreign governments to stop their semiconductor companies from servicing certain advanced chip tools under pre-existing contracts with Chinese customers (see 2403270038). One of those countries is thought to be the Netherlands, which houses major chip equipment maker ASML.
Estevez this week declined to say exactly how he’d like the Netherlands and other major chip technology producing countries -- such as Japan -- to increase their controls. He added that the U.S. is speaking to other countries besides those two (see 2312140054).
“It’s not just Japan and the Netherlands,” he said. It’s all “allied nations that have interests in the semiconductor ecosystem.”
BIS is focusing on countries where there are semiconductor supply chain “choke points,” but there are also “key components of those tools that are made in other nations.” Estevez said BIS is trying to convince those nations to impose more restrictions by speaking with them about the risks posed by “China controlling an artificial intelligence capability inside their military complex.”
“That should frighten people and it should frighten our allies,” Estevez said, “and it does frighten our allies.”
Although the technology industry appears to largely be complying with the U.S. chip restrictions -- either by stopping certain sales or relocating their production and their supply chains away from China -- companies are still concerned about trade retaliation from Beijing for other goods they want to sell in the Chinese market, said Stephen Biegun, senior vice president of Boeing and a former State Department official. He noted that China has “begun to take steps to put pressure on those companies,” including through its own export controls or market access limits.
“Many” of those companies “have other parts of their business that need to scale” in China, Biegun said, “and so they'll be watching for the risk of retaliation.”
Estevez said BIS is working to make its chip restrictions a “more broad-brushed control in a multilateral sense,” so that more countries can join. He also acknowledged that the controls are “definitely impacting revenue” of some American firms, but he said China is working to “de-Americanize” its technology industry anyway, “in some part because of what we're doing, but in some part because they want to build their own capacity.”
“We're protecting the long game here, not the short game,” Estevez added. “And, frankly, a lot of the companies that I'm impacting are still doing quite well.”
Eric Schmidt, the former CEO of Google and chair of the Special Competitive Studies Project, specifically pointed to U.S. chip company Nvidia. “Nvidia, last week, was the most valuable company in the entire world,” he said.
Biegun pointed to several things BIS can do to help businesses, including giving more “clarity” around its chip controls, which export control lawyers, technology companies and trade groups have called the most complex rules ever released by the agency (see 2211010042 and 2302020034). He also said companies want the restrictions to be applied evenly across the U.S. and its trading partners.
“There's going to need to be international cooperation on some of these policies,” Biegun said, “because it's not going to help American companies if European or Japanese or Korean companies are moving in to fill the markets as the United States tech industry is excluded.”
Biegun said he has spoken to people in China who also want more clarity around U.S. export controls, especially the Biden administration’s small-yard, high fence strategy -- a plan to place tight export rules around only a limited set of advanced technologies.
China’s “concern is that there'll be a creeping yard growing or an increasingly high fence,” Biegun said, “and they kind of want to know where the lines are. “