NEW YORK- Corporate and government officials told Asia Times that the US market would be vulnerable to harm in the event of an all-out trade war with China because it lacks the factories or experienced labor to substitute Chinese imports that support defence contractors and basic facilities.
Officials from the Biden administration are therefore unlikely to accept calls from China hawks to entirely cut off US tech to China’s semiconductor industry.
On September 14, a group of ten important House Republicans wrote to the US Commerce Department to demand that the trade restrictions put in place in October 2022 be lifted on US microprocessor technology exports to China.
According to the Republicans’ letter,” Recent & nbsp, reports that Huawei Technologies Co.( Huawei ) has developed a smartphone containing 7 nanometer( nm ) chips, capable of supporting 5G, and produced by the Chinese state-owned Semiconductor Manufacturing International Corp ( SMIC ).”
The letter continued,” We are extremely troubled and perplexed about the Bureau of & nbsp, Industry and Security’s ( BIS ) inability to effectively write and enforce export control rules against violators, especially China.
The well-known chip business website Semianalysis.com declared that” US restrictions have failed.” It was referred to as Huawei’s 7 – nm chip, which is essentially incredible,” and” a better designed device than most people in the West realize, with capabilities comparable to Nvidia, Qualcomm, and the best AI processers. It stated that the device was purposefully hampered, had higher produces, and had no access to cutting-edge US intellectual property.
According to the website, China’s progress may be halted by nothing less than a total export ban on all types of silicon products. Half methods won’t work, but a full-scale attack may make it so that internally replicating the silicon supply chain is nearly impossible. It is obvious that the west is also halt China’s fall if decisive action is taken, even though we aren’t specifically supporting any of these,” it wrote.
Unless China completely stops producing semiconductors, the US cannot prevent China from producing high-end chips like the fresh Kirin 9000 computer. With serious monetary repercussions, that may result in a significant disturbance of not only the semiconductor industry but also of dozens of other industries that depend on it.
The likelihood that the US would be able to recruit allies like Japan, South Korea, and the Netherlands is far from certain. In response to Asian needs to keep their current chip factories in China open, the Biden administration complied.
The top chip-making lithography manufacturer in Holland, ASML, won’t sell China its most cutting-edge machinery, but it will keep selling the Deep Ultraviolet ( DUV ) devices that SMIC used to create the new Huawei chip.
The US is not the only nation that you start an economic war with China, even if it could convince other nations to completely ban the country’s chip-making machinery. The destructive effect on the global economy would be unfathomable, and one potential outcome would result in the paralysis of US critical infrastructure.
A potential restrictions on Chinese government officials using Apple smartphones has been the subject of public discussion regarding potential Chinese retaliation against more US export restrictions. However, the thousands of crucial components used in vital system and the US defense industry are evidence of American vulnerability.
For the purpose of producing and dispensing power in 2022, the US imported$ 33 billion in money goods from China. These goods are no longer produced in the United States.
According to professional officials, substituting domestic manufacturing for these goods would result in lengthy lead times and costly costs. A Chinese restrictions on essential parts could lame simple US infrastructure in the event of a full-scale trade war.
Vital infrastructure’s supply chains are acutely and self-inflictedly vulnerable. In fact, almost every component of the technology-based online bright grid is dependent on Chinese-made components, according to Brian Sheahan, a former major US energy regulation official, who wrote in April.” The US and its allies have allowed themselves to become captive to Chinese cartels that control production of electronic components.
Chinese defence companies are also heavily reliant on the US. Raytheon CEO Greg Hayes stated in an interview with the Financial Times on June 19 that his business had” a number of thousand suppliers in China and decoupling is unachievable.” ” Adding that he believed this to be the scenario for everyone” in US manufacturing, we may de-risk but not detach.
Consider the$ 500 billion in trade that comes from China to the US each year, Hayes continued. China is where more than 95 % of rare earth materials or metal are produced or processed. There isn’t any other choice. It would take us a very long time to re-establish that capability, either internally or in other helpful countries, if we had to leave China.
Raytheon manufactures the Javelin anti-tank missiles, Maverick air-to-surface projectiles and Tomahawk cruise rockets as well as other staples of the British army.
However, American efforts to lessen reliance on foreign supply chains for essential products have failed. The major chip manufacturer in Taiwan, TSMC, accepted$ 15 billion in cash incentives and tax credits from the Biden administration to construct a facility in Arizona, but the plant won’t be operational until 2025 due to labor shortages.
US attempts to remove Chinese components in critical facilities may be hampered by the same bottlenecks. Over the next two years, the US faces an air sack in the supply of qualified labor.
The reality is that by the end of 2025, 22 % of skilled manufacturing workers will be retiring. According to the consulting company HBK, this could lead to between 2 million and 3.5 million unfilled manufacturing employment by 2025.
According to calculations from the Federal Reserve, America’s capital investment of manufacturing technology has remained constant since 2000.
US manufacturing equipment orders have remained steady at between$ 1.5 billion and$ 2.2 billion per month, which is roughly half the level prior to the 2008 recession.
America’s trade imbalance increased as the expansion rate of production capital investment fell.
While the US also relies on China for a significant amount of capital goods sources, it is correct that China continues to rely on the West for an array of chip-making products. Both are capable of seriously hurting one another.
The issue is whether they will or not. Officials in the johnson management are wary of escalating the tech war with China to the point where China will retaliate because they are acutely aware of American weaknesses.
Even with a full mobilization, it may take the US many years to develop enough accommodating manufacturing capacity to replace essential Chinese parts.
Follow David P. Goldman at @ davidpgoldman on X, formerly Twitter.