The outer edge of computing technology has become a foreign policy battlefield. President Joe Biden has argued that the future should be Made in America, and to make that happen, his administration has moved to disrupt China’s ability to produce cutting-edge tech in the present with new export controls. But each workaround unveiled by China represents a new test of the export control approach. This summer, telecom giant Huawei sent geopolitical shockwaves across the Pacific with the release of a smartphone boasting a more advanced chip than China’s domestic producers — led by the Shanghai-based Semiconductor Manufacturing Industrial Corporation — had previously been able to create. Now, it’s a Huawei laptop that’s causing a stir over recent reports that the new model features a chip that is a generation beyond the one in this summer’s smartphone. Details remain sketchy, and Huawei did not immediately respond to a request for comment. But the effectiveness of the current U.S. approach has already come under growing scrutiny. One recent analysis by the semiconductor research platform TechInsights found that the new Huawei smartphone model revealed significant progress in substituting homegrown alternatives for several advanced components the company had previously acquired from the West. Meanwhile, lawmakers continue to fret over China’s progress. Speaking Thursday on the Senate floor, Republican Dan Sullivan of Alaska called out the willingness of Western financial managers to invest in Chinese high-tech firms, including chip manufacturers, “a giant American national security issue.” To make sense of the current state of the embargo, DFD caught up with James Lewis, a veteran of the Commerce and State departments and a long-time watcher of U.S.-China tech competition. Lewis now serves as senior vice president and director of the strategic technologies program at the Washington-based Center for Strategic and International Studies think tank. He shared three big takeaways about the state of the U.S. tech blockade. Now is not the time for U.S. policymakers to panic. Recent reports say that the processor in the new Huawei laptop is a five nanometer design — a reference to the microscopic scale at which cutting-edge chips are etched in exquisite detail to make them super-efficient — representing an advance from the seven nanometer smartphone chip that made news this summer. While a 5nm Chinese chip would represent a milestone, initial news of tech breakthroughs from China is often less than it appears, Lewis said. “The Chinese tend to tell fibs,” Lewis said. “The fact that they can make one doesn't mean they can make them at scale.” Lewis’ CSIS colleague, Gregory Allen, tells DFD that his recent conversations with contacts working in Huawei’s supply chain have led him to conclude that the first batch of five-nanometer chips being used for this new laptop model were stockpiled in China before the imposition of export controls. Rather than being a sign of China’s present manufacturing capabilities, Allen, a former director of strategy and policy for the Pentagon’s Joint Artificial Intelligence Center, said he sees the new laptop model as a likely sign of Huawei's confidence that Chinese firms will be able to make or acquire fresh supplies of five-nanometer chips in the near future, when pre-embargo stockpiles run out. That doesn’t mean the U.S. tech blockade is working. The imposition of sweeping new semiconductor export controls last October hit China’s tech sector hard. However, the blockade is arguably backfiring as the resultant Chinese investment in domestic capabilities is starting to show results. “The problem is this was a tool designed for the Soviet Union in the 1980s,” Lewis said. “China is not the Soviet Union. The Soviets were sluggish. They didn't have a tech base.” Lewis suggests three modifications to the U.S. approach: First, move faster to implement the CHIPS Act, which is meant to bring the manufacturing of advanced semiconductors to the U.S. Also, let American companies sell advanced chips to China for civilian purposes. “We’re not going to stop the Chinese, but we can at least make money off of them,” Lewis argues. And rather than focus on keeping advanced chips out of China, focus instead on tightening restrictions on the manufacturing equipment used to produce the most advanced chips, a more targeted goal that could still allow the U.S. and its allies to retain their edge in cutting-edge computing components. Don’t expect the U.S. to change course before the 2024 election. Any shift that looks like going soft on China is going to be a tough sell in an election year, Lewis said. That’s why he does not anticipate immediate results from calls for the Commerce Department to loosen export restrictions on chips themselves, in favor of a focus on manufacturing equipment.But he said that policymakers should acknowledge the shortcomings of the current approach. “It’s ok to not lighten up, as long as we don't pretend it’s working,” he said. “Let’s revisit this question a year from now.”
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