Researcher: Export Controls Should Make China Tech Goals ‘as Expensive and Complicated as Possible'
No policy option available to the U.S. government, including lifting export controls, will persuade China to stop trying to de-Americanize and decouple its semiconductor equipment sector, the Center for Strategic and International Studies argued in a new report this week.
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The report, authored by Gregory Allen, director of the CSIS Wadhwani AI Center, said export control critics sometimes argue that those restrictions cut off a source of important revenue for U.S. chip companies, which means they have less money to devote to domestic research and development. Critics also argue that export controls may incentivize Chinese firms to invest in or buy from other foreign competitors, which hurts U.S. technological competitiveness.
But both those arguments also “assume that the strategic approach of the Chinese government and Chinese firms depends solely or primarily upon U.S. actions,” the report said. If, for example, the U.S. were to allow China to freely buy advanced American-made nuclear submarines, U.S. companies would earn large profits in the short-term, but CSIS said China would “obviously take the submarines they could get and reverse engineer the technology as fast as possible and transfer that technology to their domestic submarine industry.”
This shows that the U.S. may be better off imposing some level of export controls, the report said, but crafting them in a thoughtful way.
“As the United States and allied governments consider reforms to semiconductor equipment controls, they should focus less on how to change China’s goals and more on how to make achieving those goals as expensive and complicated as possible.”
The report also examines the impact of U.S. and allied export controls on the global chip tooling industry. It notes that Applied Materials, Lam Research and KLA Corp. -- the world’s leading chip manufacturing equipment companies -- have continued to rely heavily on sales to China, even as the U.S. has imposed strict export controls on advanced chip and chip equipment destined to China.
Those three companies’ revenue growth from China “outperformed growth in the rest of the world every year” from 2016 through 2024, the report said, adding that Tokyo Electron and Advantest, two top Japanese chip tooling firms, also saw “superior performance in China compared with the rest of the world.”
This is likely because Chinese firms shifted their purchases of international chip equipment “so that they occurred prior to expected future export controls” imposed by the U.S., the report said. CSIS also said ASML and other firms expect Chinese semiconductor manufacturers to likely decrease purchases of equipment soon because they’ve struggled to use up the equipment they stockpiled, “effectively confirming that many tools that have been sold to China are still likely awaiting installation and remain unused.”