As Congress discussed landmark China law, Beijing shot ahead

In the weeks before the House and Senate ended 13 months of feuds and passed the $280 billion CHIPS and Science Act, China’s major state-backed chipmaker removed a major technology hurdle that left the world a bit of a shock. worried.

Experts are still assessing how China has apparently made a leap forward in its effort to create a semiconductor whose circuits are so small — about 10,000 times thinner than a human hair — that they rival those made in Taiwan, which both China and supplies the West. The Biden administration has gone to great lengths to keep the highly specialized equipment for those chips out of Chinese hands, as advances in chip manufacturing are now being explored as a way to define national power – much in the same way as nuclear tests or precision-guided missiles. were during an earlier cold war.

Whether China can take advantage of the breakthrough on a large scale, nobody knows yet; that can take years. But one lesson seemed clear: As Congress debated and changed and argued about whether and how to support American chipmakers and a wide range of research in other technologies — from advanced batteries to robotics and quantum computing — China moved forward, betting that it would take Washington years to get its act together.

“Our Congress is moving at political speed,” said Eric Schmidt, the former CEO of Google who later headed the National Security Commission on Artificial Intelligence, which last year warned of the enormous dangers of falling far behind in a “fundamental” technology like advanced manufacturing. of semiconductors in a world of fragile supply chains. “The Chinese government is working at commercial speed.”

In China, the drive to catch up and manufacture the most advanced chips is part of the “Made in China 2025” program. That effort began in 2015. While few in Congress want to admit the point, the technologies that will fund the United States when President Biden signs the bill, as he promised on Thursday, largely replicate China’s list.

It’s classic industrial policy, though leaders of both parties shun the term. The words convey a sense of state-controlled planning that contradicts most Republicans and gives direct support and tax cuts to some of America’s largest corporations, making some Democrats tremble with anger.

But 2025 is not far off, meaning the money will just flow as Chinese and other competitors move forward with their next set of goals. Meanwhile, the US semiconductor industry has withered, to the point where none of the most advanced chips are made in the United States, even though the fundamental technology was born here and gave Silicon Valley its name.

All this does not mean that American competitiveness is doomed to fail. Just as Japan once looked like it was the 10-foot-tall tech giant in the late 1980s and early 1990s, but then missed some of the biggest breakthroughs in mobile computing and Windows operating systems and even chip making. , China discovers that money alone does not guarantee technological dominance. But it helps.

It has taken Congress much longer to reach the same conclusion. Still, China has turned out to be one of the few issues Republicans and Democrats can agree on — the bill passed by the House 243 to 187 on Thursday, with one abstention. Twenty-four Republicans voted in favor, notable because GOP leaders urged members to oppose the bill after Senate Majority Leader Chuck Schumer of New York and Senator Joe Manchin III of West Virginia struck a surprise deal on climate, energy and taxes. announced on Wednesday.

China immediately denounced the bill as an isolationist move by Americans seeking to free themselves from reliance on foreign technology — a strategy called “decoupling” that China is trying to replicate itself.

China’s Foreign Ministry spokesman Zhao Lijian told reporters in Beijing that “no restriction or repression will stop China’s progress,” a clear reference to U.S. and European efforts to deny China the technology that would underpin its technological independence. would accelerate.

But the big question is whether Congress’s slowness to wake up to America’s competitive failings doomed the effort. While Biden and lawmakers tried to build support for the bill by describing the chips found in everything from refrigerators to thermostats to cars as the “oil” of the 21st century, the phrase was coined three decades ago. trite.

In the late 1980s, Andrew S. Grove, one of the pioneers of Silicon Valley and an early leader of Intel Corporation, warned of the danger of the United States becoming a “techno colony” of Japan.

The Taiwan Semiconductor Manufacturing Company produces about 90 percent of the most advanced semiconductors. It sells them to both China and the United States.

And as Taiwan Semiconductor and Samsung build new manufacturing facilities in the United States in response to political pressure to address US supply chain concerns, the net result will be that only a single-digit percentage of its production will be on US soil.

“Our reliance on Taiwan for the advanced chips is unsustainable and unsafe,” Commerce Secretary Gina Raimondo noted at the Aspen Security Forum last week. With the demand for more advanced chips growing – each new generation of cars requires more and more semiconductors – “we don’t have enough domestic supply.”

The bill’s $52 billion in federal grants, she argued, would be backed by private money and turn into “hundreds of billions” in investment. She was essentially using the argument the federal government has long used to justify incentives for defense contractors. Politicians knew that insuring risky new spy satellite technology or stealthy drones in Congress was easier to sell if it was described as critical defense spending rather than industrial policy.

But now the logic is turned on its head. What defense contractors need are the most advanced commercial chips — not just for F-35s, but for artificial intelligence systems that could one day change the nature of the battlefield. The old distinction between military and commercial technology has largely been eroded. That’s why, to pass the bill, the government even brought Defense Secretary Lloyd J. Austin III into the pressure campaign, arguing that he couldn’t rely on foreign suppliers for the weapons of the future.

The bill’s authors say that while they are late on the task of rebuilding the industry, it is better to start today than to watch the US lead erode. Senator Todd Young said that while China’s recent advance has been “sobering,” he didn’t think there is “one who can surpass the United States of America if we mobilize our many resources.”

Another benefit of America is “our relationships, economic and geopolitical, with other countries,” said Mr. Young, an Indiana Republican. “China has no friends; they have vassal states.”

Innovation has been an American strong point; the microprocessor was invented here. But time and again, America’s vulnerability is in manufacturing. And China is not the only competitor. To take money out of Congress, Intel and others noted that Germany and other allies were trying to lure it into building “fabs” — the airtight, spotless chip manufacturing centers — on their own territory.

But in the end, it was China that drove the votes.

One of the first reviews of the new Chinese chip, made by Semiconductor Manufacturing International Corporation, came from researchers at the TechInsights company.

After reverse engineering the chip made in China, they concluded that it used circuits that were only seven nanometers wide. As late as 2020, Chinese manufacturers struggled to get below 40 nanometers.

Experts say the chip, made for mining cryptocurrency, may have been based on or stolen from Taiwan Semiconductor. For now, Taiwan Semiconductor remains the world’s leading manufacturer, and its sprawling facilities near Taipei are arguably the island’s best defense against invasion. China cannot afford to risk its destruction. And the United States cannot afford to destroy it.

But that delicate balance won’t last forever. So China has both a commercial and a geopolitical motive to make the world’s fastest chips, and the United States has a competitive motive to prevent Beijing from getting the technology to do so. It is the ultimate arms race of the 21st century.

In the old Cold War against the Soviet Union a generation ago, “the government could afford to sit on the sidelines” and hoped private industry would invest, Mr Schumer said on Wednesday. Now, he said, “we can’t afford to sit on the sidelines.”

Catie Edmondson reporting contributed.