On October 16, 2022, speaking at the 20th National Congress of the Communist Party of China (CPC), Chinese President Xi Jinping said that China is opposed to protectionism, the erection of fences and barriers, decoupling, disruption of industrial and supply chains, unilateral sanctions, and maximum pressure tactics. He also laid out the party’s vision for 2035 intending to build China into a powerhouse of economic strength, scientific and technological capabilities and overall comprehensive national strength. The path is set for China to join the ranks of the world’s most innovative countries with great self-reliance and strength in science and technology. The message is loud and clear. And tough challenges await both China and the US.
Trade war and technological competition constitute the central issue defining and shaping China-US relations at present. This competition is marked by China’s rise as a major power both in the economic and military realms. Moreover, the CPC has been trying to lure the attention of the developing world by branding its model of development and social system as successful. It may not be an outright export of the Chinese model but it puts an alternate challenge to the liberal democratic values that the Western powers have been promoting. The strategic competition between the US-led western allies and China is not limited to ideological differences but covers a lot more ground that includes military, economic and technological supremacy.
China’s increasing military capability in the Indo-Pacific region is stated to be a major concern for the US and its allies. As a result, the US-led camp has called for a “collective defence” strategy to face the rising strategic and security challenges posed by Beijing’s growing comprehensive national power. Similarly, China has strengthened its strategic partnership with Russia to deal with geopolitical and geostrategic uncertainties. Both China and Russia look at the concept of the Indo-Pacific with suspicion and disdain. This is further collaborated by the joint sea and air patrol exercises conducted by the Chinese and Russian armed forces in the western Pacific. Russian President Vladimir Putin has condemned what he termed as “provocations” by the US over Taiwan.
As expected, the Taiwan issue takes centre stage in Xi Jinping’s address to the 20th National Congress of the CPC. He said that China will never promise to renounce the use of force but will do its utmost to achieve peaceful reunification. By reserving the option of taking “all measures necessary”, Beijing has kept the door open for better cross-strait ties despite the soaring tension. On the national rejuvenation of China, Xi stated that reunification with Taiwan is a certainty. For strategic and military analysts, Taiwan is not just an island aspiring for recognition from other UN members as a full-fledged sovereign country. Reunification of Taiwan with mainland China would have multiple ramifications on the strategic environment and geopolitics.
Speaking at the 18th Shangri-la Dialogue on June 2, 2019, Chinese State Councillor and Defence Minister Wei Fenghe categorically opposed the US “actions and words” on Taiwan and South China Sea issues. He also expressed China’s commitment to fighting till the end for protecting China’s sovereignty, security and development interests. Again, delivering his speech on ‘China’s Vision for Regional Order’ at the 19th Shangri-La Dialogue in Singapore on June 12, 2022, Wei Fenghe stated that China’s “national unification will be absolutely realised” and China is determined to fight any force attempting to split Taiwan from China. It is worth noting that the work report delivered by President Xi Jinping at the 19th National Congress of the CPC on October 18, 2017, underscored that reunification is essential to realising the historic mission of national rejuvenation.
First, Taiwan Semiconductor Manufacturing Co. (TSMC) is a semiconductor giant in the world manufacturing products for various applications including smartphones, high-performance computing, the Internet of Things (IoT), automotive and digital consumer electronics. Founded in 1987, TSMC is one of the few semiconductor companies which can produce 3-nm chips. The high-end chips manufactured by TSMC can significantly alter China’s industrial and military capabilities. Though Taiwan relies on extreme ultra-violet (EUV) lithography machines from ASML, the industrial chain solely dedicated to producing chips and a large pool of skilled manpower is priceless. It makes sense for Washington to disturb the cross-straits relations when Beijing faces sanctions and export controls ban on security reasons from Washington and its allies.
China is the second largest economy in the world challenging the dominance of the US. Beijing has reaped the fruits of economic globalization since the reform and opening up in 1978 under the leadership of Deng Xiaoping. It is a selective choice of globalization with little room for political reform. Unlike the then Soviet Union, China’s rise as a major power is quite unsettling for the US. China is the only competitor against the US on the horizon that threatens Washington’s economic, military and technological dominance. “Make America Great Again” was born as part of Donald Trump’s 2016 presidential campaign and China was a major factor throughout the Trump Administration. Reunification with Taiwan will provide Beijing with much-needed scientific and technological expertise to further its goal of becoming the largest economy shortly. Naturally, China as an economic power has definite military implications.
Secondly, in 1950, former US General Douglas MacArthur described Taiwan (then Formosa) as an “unsinkable aircraft carrier” in the Asia-Pacific. Even today Washington adheres to this policy under the garb of Taiwan’s security. Taiwan is said to be vital to the defence of vital US interests. Moreover, Taiwan is a strategic island for the security and development of Japan, the Republic of Korea and Southeast Asian countries. Controlling Taiwan will give China the strategic reach to break through the second island chain in the western Pacific Ocean. Further, China’s naval expansion and military modernisation would threaten the balance of power between China and the US. At present, China’s major military activities are reportedly conducted mainly within the maritime territories lying between the East China Sea and the South China Sea. In addition to its anti-access/area denial (A2/AD) capabilities, the Chinese military activities beyond the second island chain are becoming routine features with increasing frequency in the recent past.
Thirdly, Taiwan, officially, the Republic of China (ROC) was expelled from the UN on October 25, 1971. And the People’s Republic of China (PRC) led by Chairman Mao Zedong replaced its membership in the UN. However, the democratic transition in Taiwan since 1987 following the lifting of almost four decades of martial law marked the beginning of a new era. Since then, Taiwan has been China’s nemesis. Undoubtedly, China claims it as its alienable part. However, Taiwan’s political ideology poses a threat to its ideological foundation. A democratic world under the leadership of the US has been campaigning in favour of Taiwan’s separate identity. This gives birth to a Taiwanese national identity though the majority population inhabiting the islands of Taiwan is Han Chinese in ancestry. Mainland China’s one-party system as a successful model in comparison with democratic Taiwan is inherent in the debate on the “one country, two systems” principle proposed by Beijing. Taiwan has rejected it.
Getting Ready for Industry 4.0
As far as technological competition is concerned, Washington noted the ‘Made in China 2025’ seriously as a game-changing path chosen by Beijing. It was released in 2015 as a ten-year plan to develop ten high-tech industries in China. Development of indigenous technologies, innovation under one-party rule, technology transfer, the attraction of global talents, protection of intellectual property rights and high investment in R&D are central themes of the ‘Made in China 2025’.
It was termed a “threat to U.S. technological leadership” by the Council on Foreign Relations, an American think tank. The major concern has been the Chinese government-sponsored subsidies to strengthen the technological and manufacturing base. Besides, there were issues related to technology transfer and intellectual property theft. China has been countering the US moves as unfair trade practices and violations of the WTO agreements.
China’s successful development of 5G technology opened pandora’s box of technological competition between the US and China. This advancement in telecom technology will have a massive impact on technological innovation and the transformation of the manufacturing sector. It is not just about the speed of network service. Latency is the time it takes for devices to respond to each other over any wireless network. Because of low latency, the fast response of 5G enables robotic-assisted surgery, autonomous driving vehicles, artificial intelligence (AI), robotics, and the Internet of Things (IoT). There are a whole lot of industries waiting to get this application and the economic potential of such innovations are immense. It constitutes part of the Fourth Industrial Revolution (Industry 4.0).
A simple definition of the Internet of Things (IoT) stands for a collective network of smart devices and the technology used to facilitate communication between devices and the cloud, as well as between the devices themselves. The devices fitted with sensors share the data with a common network to share the data among the devices. It is a new generation technology of smart living using smart devices. Smart technology and devices are a new trend in the 21st century.
Moreover, military and defence applications of 5G have immense potential to disrupt military technological advancement. High speed, greater bandwidth and lower latency provide a major boost to intelligence, surveillance and reconnaissance (ISR) capabilities. In addition, the development of AI-enabled weapon systems in China is one key area relating to the technological breakthrough provided by the 5G network.
Nancy Pelosi’s Taiwan Visit
During her visit to Taiwan on August 2, 2022, Nancy Pelosi, speaker of the US House of Representatives expressed commitment to the security of Taiwan. She also referred to the “shared values of democracy and freedom” as part of defending the democratic world against coercion and aggression. This is the political and ideological part of why and how Taiwan is at the heart of the China-US competition. The visit soon followed by other delegations from the US and its allies to Taiwan raised serious concerns over the ‘one China principle’ in the eyes of Beijing.
Nancy met with the founder of TSMC, a major semiconductor firm based in Taiwan with a large share in medium-to-high-end chips. Paul Francis Pelosi, husband of Nancy Pelosi is said to be investing in the semiconductor industry. Although the business interest of Nancy’s family is well-known, the semiconductor industry is a key factor influencing the US policy towards Taiwan. The Joe Biden Administration is not blind to the significance of semiconductors containing China’s economic and military rise with major implications for the Indo-Pacific region and global peace and order.
Meanwhile, US President Joe Biden has stated categorically that Washington would militarily defend Taiwan from “an unprecedented attack” not long after Nancy Pelosi’s visit to Taiwan. It is a break from the “strategic ambiguity” maintained by the successive US administrations. It certainly reflects the high stakes involved in the Taiwan question.
In the wake of the US export control for high-end semiconductors and technology, China has been poaching expertise from Taiwan to build up the Chinese semiconductor industry. As a result, a large number of Taiwanese engineers associated with TSMC have joined China’s efforts to establish its domestic semiconductor industry.
In this context, the US proposal to form the “Chip 4 alliance” which includes Taiwan, the Republic of Korea and Japan, is a major effort to strengthen control and regulation of the flow of manpower and technology in the high-end semiconductor sector. Moreover, Washington is gearing up to strengthen its leadership position in the semiconductor value and supply chains and also to contain China. Unlike Semiconductor Manufacturing International Corporation (SMIC) of China, both TSMC and Samsung have the expertise to manufacture high-end chips for 5nm and 3 nm.
Meanwhile, China’s SMIC is reported to have mastered 7nm chips using DUV machines following the US ban on the export of EUV machines for manufacturing high-end chips. It is reported that SMIC has successfully entered mass production of 28nm, 14nm, 12nm and n+1 chips domestically. Moreover, the company is reported to have succeeded in developing 7nm chips based on TSMC’s 7nm chip design.
China National Integrated Circuit Industry Investment Fund was set up in 2014 to prop up the value chain of the integrated circuit industry. It shows seriousness on the part of China to enhance self-reliance on the key component towards building China into a major scientific and technological power. Till now, Beijing’s efforts have paid very little to master the lithography machine. Without the EUV machine produced by ASML Holding, manufacturing high-end chips and mass production will remain a far cry. Beijing is mobilizing the whole country to work in unison to make breakthroughs in the core technologies of lithography machines.
China and CHIPS Act
Export controls and regulations are not new to China. There is change and continuity in the US policy towards China. During the 1970s, the US changed its policy towards China to relax restrictions put on sales of high-technology and equipment that comes under “dual-use” technologies, a term which signifies technological applications for both civilian and military usages. Again, Washington followed a policy of “China Preferential” allowing China access to high-technology items from the US while denying the same to other communist countries. The basket became larger in January 1980 following the Soviet Union’s invasion of Afghanistan. Under the leadership of US President Jimmy Carter, the then US Defence Secretary Harold Brown visited Beijing to convey further relaxation on the part of Washington to share technology and equipment of a “dual-use” nature. Thus, China was winning in the technology sector during the Sino-Soviet split.
The signing of the CHIPS and Science Act by US President Joe Biden on August 9, 2022, is a landmark in terms of technological competition between the US and China. The White House issued on August 25, 2022, an Executive Order on the Implementation of the CHIPS Act of 2022. Passing of the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022 by the US Government for “transformative investments to restore and advance” the US leadership in the research, development and manufacturing of semiconductors goes beyond the competition in the cutting-edge technology with China. It also aims at reducing dependence on China and acts on the vulnerability of relying on the current supply chains for critical technologies. The Act favours self-reliance and cooperation with allied and partner countries. But the core element in it is “ensuring long-term leadership” in the microelectronics and critical industries.
While semiconductor is a core industry of a nation’s economic sustainability and growth, it also lies at the heart of military technological competition. As China continues its journey on the path of military modernization to build world-class armed forces by 2035, technological advancement and innovation can contribute to military-industrial transformation with the help of dual-use technologies. The US has a long history of the blockade against supplying dual-use technologies to China.
The Trump Administration marked a major shift in the Sino-US relationship as far as the export ban measure is concerned. On May 15, 2019, then-President Trump issued an executive order to ban the use of telecommunications equipment from foreign firms deemed a national security risk. The ban hit hard on Huawei and ZTE, two major Chinese telecom companies. It was further consolidated by signing into law the Secure Equipment Act of 2021 under the leadership of President Joe Biden.
In the latest move, the US Commerce Department has issued an export control rule blocking China’s access to advanced chip design software. This is another blow to China’s efforts to develop advanced chips domestically. The restrictions on electronic design automation (EDA) which came into effect on August 15, 2022, will affect Beijing’s technological push to design and manufacture chips with Gate-All-Around Field-Effect Transistors (GAAFET) structure used for AI applications. This is a key technology to designing 3nm and more advanced chips.
As per the agreement reached among 42 participating countries in the Wassenaar Arrangement, in December 2021, Washington banned the export of the software. This multilateral export control regime established in 1996 aims at controlling the export of conventional arms and dual-use goods and technologies. Moreover, the restriction also covers the export of gallium oxide and diamond used in chip making as part of curtailing dual-use materials.
The ban has, however, created room for Chinese EDA suppliers to gain market share which was earlier dominated by the US-based Synopsys and Cadence and Germany-based Siemens with a total of 77 per cent of market share in China. Some of the major Chinese EDA companies include Shanghai-based Primarius Technologies, Zhejiang-based Semitronix and Beijing-based Empyrean Technology.
The much-talked visit to Taiwan by Nancy Pelosi, speaker of the US House of Representatives, threatened major escalation across the Taiwan straits in recent times. Beijing also took note of the change in the foreign policy of the US towards China as the latter emerged in the international order as a major economic and military power. Similarly, the Taiwan issue has regained its position as a major regional flash point which threatens military confrontation between China and the US. The departure from strategic ambiguity to commitment to defend Taiwan by the US armed forces poses some serious questions amidst the escalation of tensions between the US and China in the Indo-Pacific region.
The writer is a former Research Associate/Associate Fellow at the Centre for Air Power Studies (CAPS), New Delhi and Research Fellow at Indian Council of World Affairs (ICWA), New Delhi. He is also an Imphal-based independent researcher and founder of Wakonpung, a community library and sustainable livelihood initiative.
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