The Battle for Microchip Technology: China Dependence on Foreign Chips and the Role of Sanctions and Taiwan

news 18-Jun-2023 Technology

Challenges in the Future of Microchip Technology

China heavily relies on the import of modern microchips to advance their technological development, particularly in the fields of artificial intelligence, aerospace, and military. However, U.S. sanctions have caused a bottleneck in this process, and other countries such as the Netherlands and Japan have also joined in the sanctions. China is not yet capable of producing these high-tech microchips on their own and must rely on foreign chips and technology. How are these sanctions affecting China, and how does Taiwan factor into the equation?

Prices for Chips Doubled

In the high-tech district of Nanshan, where numerous tech startups and companies are based, including Huawei, Tencent, and ZTE, Chinese researchers, and developers are working around the clock to experiment, produce, and develop advanced technologies such as artificial intelligence. One robotics startup, Elephant Robotics, relies on foreign-made computer chips to experiment with artificial intelligence technology. However, the price for these chips has doubled since the U.S. sanctions have been put in place. Qiu Lisha, in charge of the startup's foreign market, said that they felt the impact of international sanctions in the past, causing great financial pressure for them.

Restricting High-Performance Chips for Military Use

Since October last year, the United States has imposed new export restrictions on the import and production of advanced microchips, preventing China from obtaining these crucial components. The Netherlands joined the sanctions by halting the export of machines used to produce chips. Recently, Japan has also imposed restrictions. According to Antonia Hmaidi, a researcher at the Berlin-based China research institute, Merics, the intention is to limit China's ability to use these high-performance chips, especially the ones used for military purposes. China is not yet capable of producing them on their own, and experts believe that replacing the machines necessary for production will be a significant challenge for China. This could lead to further escalation in the ongoing battle for advanced microchip technology.

Sanctions Force Chinese Companies to Invest More Time and Money in Research

The sanctions have forced Chinese companies to conduct their own research, investing more time and money, says a professor of economics. However, international observers question whether China can catch up while the competition continues to evolve.

No Interest in Military Confrontation

Taiwan produces 90% of the most advanced microchips, and China claims the island as its own territory, threatening the democratic government with military force. Expert Hmaidi from Merics estimates that high-performance chips could protect Taiwan to some extent from military conflict. A blockade of supply chains around the Taiwan Strait would affect everyone economically, including the United States, which supports Taiwan militarily.

Hmaidi believes that neither China nor the US is ready for military confrontation, stating, "Both sides have a strong interest in not going to war right now." According to her, both parties still share the sentiment that they need to significantly improve their military equipment to ensure victory.

However, a June incident highlights how tense the situation is. A Chinese warship forced a US destroyer away in the Taiwan Strait. Observers warn that such encounters may escalate and unintentionally trigger further escalation.


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