During Mr Donald Trump’s presidency, many people looked afresh at China’s technological prowess. Some concluded that it posed a threat to Western economies, and perhaps even to global security. In news headlines Huawei, a brilliantly successful manufacturer of telecoms equipment, became the face of that threat.
America accused the firm of acting as a conduit for Chinese government surveillance and control. In 2018 America clobbered Huawei. It banned the export to the Chinese firm of American microchips essential for its products. This seems to have had the desired effect. Last year Huawei’s revenues shrank for the first time in a decade, by almost a third.
It was unprecedented for a state to stymie so huge a tech company. Huawei’s revenues were about as big as Microsoft’s. But the feat was not without costs. Because the Trump administration acted without cooperating closely with America’s friends, it prompted investors from far and wide to add missing links to parts of the semiconductor supply chain that are beyond the reach of American law.
Japanese firms, among others, have started quietly marketing their products in such a way as to evade America’s Export Administration Regulations, qualifying them as “ear-free”. American firms, many of which sell billions of dollars of equipment to China every year, began looking for neutral territory from which they might continue to export supplies. Singapore and Malaysia led the way. “Who would willingly sign up to be restricted by the US government?” chuckles a lawyer in Washington, who has been navigating tech clients around the new restrictions.
Meanwhile, Chinese firms, spurred on by billions of dollars of investment by the state, have redoubled their efforts to develop their own versions of chip technologies they had previously imported along supply chains linked to firms in America. The way things began to go, it looked as if the American government would steadily lose its grip over the chip supply chain. To avoid that outcome and to keep a modicum of control over what technology flows into China, it must build a consensus with friendly countries.
Since Mr Joe Biden took office a year ago, his officials have been raising the issue of chip controls whenever they talk to foreign allies. A lobbyist in Washington says that in 25 years, he has never seen semiconductors so consistently top the diplomatic agenda. Governments and companies have been setting up forums to align policy over the trade in chips and the equipment and material used to make them.
Some see a parallel with the Organisation of the Petroleum Exporting Countries, better known as Opec. For decades its members, all oil exporters, have clubbed together to try to control how much oil reaches the world market, in order to influence prices. Today’s new forums mark the first steps towards creating a similar set-up to control the export of semiconductors, in the hope of retaining a technological edge over China. It could be called the Organisation of the Semiconductor Exporting Countries: Osec.
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