Yet another setback for China in the chip-technology sector. US computer maker Dell Inc. has decided to reduce dependence on Chinese chips due to growing rivalry between two countries, whose rivalry in the tech sector is becoming ever bigger. Even as Xi government gets ready for Lunar new year 2023 celebrations amidst rising cases of covid 19, multi-national technology company announced that it is seeking to reduce its reliance on chips made in China, including those made by foreign firms. It will stop using Chinese-made chips by next year. It has told suppliers to reduce the amount of other made-in-China components in its products amid concerns over US-China tensions.
The development has come as a setback for China when several cities are making attempts to promote the development of high-end and intelligent manufacturing. It is also a signal of the growing rivalry between the US and China on semiconductors. The US sees China’s use of technological know-how as a threat to its national security.
According to available information, the computer maker Dell late last year told suppliers that it aims to meaningfully lower the amount of Chinese-made chips it uses, including those produced at facilities owned by non-Chinese chipmakers, the report added. Dell has also asked suppliers of other components, such as electronic modules and print circuit boards, and product assemblers to help prepare capacity in countries beyond China, such as Vietnam.
Dell’s decision to look beyond China came after US blacklisted in its trade list Chinese memory chip-maker Yangtze Memory Technology Corp and 21 “major” Chinese players in the artificial intelligence chip sector. According to the 2022 U.S. National Security Strategy (NSS), the People’s Republic of China (PRC) is the United States “only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to do it.” The new battleground of chip technology is aimed at thwarting China’s Chipmaking capabilities and advancement in space, military, and supercomputing.
The US is extremely concerned about Chinese technological rise from early 2000s. U.S.’s threat perception is based on China’s economic strategy. According to 2018 US reports, the Chinese state-led economy attracts foreign firms, indigenizes and gathers the technology at low cost, and then replicates large companies from the Chinese market. And another widely known concern is data security, which puts national security at risk. The Chinese economic venture in different parts of the world, especially the Belt and Road Initiative, has prompted the US to use economic coercion against its rising challenger. Washington has started using technology as a weapon to fight its “war” with China.
Under President Donald Trump’s administration, the first strong sanction was imposed on Chinese tech corporations like Huawei. Under President Joe Biden the US administration has gone all out to halt Chinese growing semiconductor industry. The demand for semiconductors has been multiplying across the globe as it is needed by the manufacturing industry. The global pandemic has increased the demand for semiconductors. Digital and green transformation underpinned by the Russia-Ukraine war and the increasing necessity for Artificial Intelligence, quantum computing, and 5G Technologies have created enormous semiconductor demands. Hence, it has become a focal point in the US-China rivalry.
In October, the US administration published a set of export controls that included a measure to cut China off from certain semiconductor chips made anywhere in the world with US tools. The document imposed restrictions on China’s access to advanced semiconductors – now a necessity in every electronic gadget from mobile to washing machines. Semiconductors are of utmost necessity in technologies ranging from A.I. and sophisticated weapons to medical innovations. The measures to curtail China’s access comes as a setback for its 14th Five years Plan. Washington also has put strict criteria by preventing U.S. citizens and Green Card holders from working for Chinese Chip companies. This also gives a significant blow by cutting off the American talent on which China heavily depends. The US, which is undoubtedly the world’s leading chipmaker, has exercised sanctions on semiconductors to settle its geopolitical rivalry with China on an incredible scale.
US Senate Majority Leader Charles E. Schumer of New York recently stated that companies doing business with the federal government need to cut off their supply of certain Chinese computer chips used in their products to protect the government from cyber warfare and data theft. Schumer did not call for a total ban on Chinese computer chips, but on three chip firms with ties to the Chinese Communist Party. As if it was not enough, several questions have been raised over the quality of Chinese chips or semiconductors in Russia. Ironically, the defect rate of China’s semiconductor exports to Russia surged after the country invaded Ukraine in March, when Western sanctions forced Russian companies to source electronics from new suppliers, according to the Moscow news outlet Kommersant. Since the unprecedented wave of sanctions on Russia, 40 per cent of chips imported from China were found to be defective, while the rate before March was just 2 per cent.