Tag Archives: dual-use chips

How China Plans to Destroy the U.S. AI Industry

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China’s restrictions on rare-earth materials announced on October 9, 2025 would mark a nearly unprecedented export control*** that stands to disrupt the global economy, giving Beijing more leverage in trade negotiations and ratcheting up pressure on the Trump administration to respond.

The rule, put out by China’s Commerce Ministry, is viewed as an escalation in the U.S.-China trade fight because it threatens the supply chain for semiconductors. Chips are the lifeblood of the economy, powering phones, computers and data centers needed to train artificial-intelligence models. The rule also would affect cars, solar panels and the equipment for making chips and other products, limiting the ability of other countries to support their own industries. China produces roughly 90% of the world’s rare-earth materials.

Global companies that sell goods with certain rare-earth materials sourced from China accounting for 0.1% or more of the product’s value would need permission from Beijing, under the new rule. Tech companies will probably find it extremely difficult to show that their chips, the equipment needed to make them and other components fall below the 0.1% threshold, industry experts said. The rules could cause a U.S. recession if implemented aggressively because of how important AI capital spending is to the economy… “It’s an economic equivalent of nuclear war—an intent to destroy the American AI industry,” said Dmitri Alperovitch, co-founder of the Silverado Policy Accelerator think tank.

Excerpt from Amrith Ramkumar,et al., China’s Rare-Earth Escalation Threatens Trade Talks—and the Global Economy, WSJ, Oct. 9, 2025

***The new export controls mark the first time China has applied the foreign direct product rule (FDPR)—a mechanism introduced in 1959 by the United States and long used United States to restrict semiconductor exports to China. The FDPR enables the United States to regulate the sale of foreign-made products if they incorporate U.S. technology, software, or equipment, even when produced by non-U.S. companies abroad. In effect, if U.S. technology appears anywhere in the supply chain, the United States can assert jurisdiction. See CSIS

The End of Taiwan? The End of U.S. and Europe Combined

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Prosecutors in Taiwan indicted  in August 2025 three people in a case about sensitive chip technology, alleging they stole information from Taiwan Semiconductor Manufacturing (TSMC) to help one of TSMC’s top equipment suppliers, Tokyo Electron, win more orders…Taiwanese officials say the theft of trade secrets has grown over the past decade and point most of the blame at China. Over the past couple of years, Taiwan’s investigation bureau has probed more than 120 cases involving trade-secret theft. “If Taiwan’s technology hub falls or its technologies are lost, the impact will extend beyond Taiwan to the U.S., Europe and the rest of the world,” Sun Chen-yi, deputy director general of the investigation bureau at Taiwan’s Ministry of Justice, said in an interview before his retirement in July 2025.

Excerpt from Yang Jie et al., Three Accused of Stealing TSMC Chip Secrets to Aid Japanese Supplier, WSJ, Aug. 28, 2025

The Cat-and-Mouse Game: US-China, Chip Giants

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The U.S. on March 28 2025 added dozens of Chinese companies to a trade blacklist over national security concerns. American businesses seeking to sell technology to these companies will need approval from the government. Among those added were subsidiaries of Inspur Group, China’s largest server maker and a major customer for U.S. chip makers such as Nvidia, Intel and Advanced Micro Devices. Companies linked to China’s largest supercomputer maker, Sugon, were also added…

Nearly 80 companies were put on the Commerce Department’s blacklist, known as the entity list…including the U.S. server maker Aivres Systems that is wholly owned by Inspur Electronic. The latter is one-third owned by Inspur Group, according to corporate records. Aivres has been assembling high-end artificial-intelligence equipment for Nvidia. The AI-chip giant has said that Aivres will make servers using chips in the Blackwell family, Nvidia’s newest and most powerful processors.  Aivres advertises on its website that it sells servers and infrastructure powered by Blackwell chips, which are banned from sale into China…About two months after Inspur Group was added to the trade blacklist in March 2023, California-based Inspur Systems changed its name to Aivres Systems.

Excerpts from Liza Lin, Trump Takes Tough Approach to Choking Off China’s Access to U.S. Tech, WSJ, Mar. 26, 2025

The Battle to Block Access to AI

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The U.S. is imposing some of its strongest measures yet to limit Chinese advances in artificial intelligence, requiring companies to get government approval to export certain information about their AI models and set up large AI computing facilities overseas.

The rules, in January 2025, are a final push by the Biden administration in a yearslong effort to use export controls to stem China’s advances in chip-making and AI, and they have sparked a backlash from companies including Nvidia. The rules impose caps on how many advanced AI chips can be exported to certain countries and require a license to export the data that underpins the most sophisticated AI systems.

Strict sales restrictions on these chips are already in place for China, Iran and other U.S. adversaries, and the new rules carve out exemptions for a group of 18 close U.S. allies and partners. These include countries such as the U.K., France and Germany, a senior administration official said. But a broad category of more than 120 other countries, including U.S. allies in the Middle East and Asia, are set to face new hurdles in setting up huge AI computing facilities.

While the impact of the rules isn’t yet clear, they threatened to limit sales of AI chips from Nvidia, which has built a large business out of satisfying demand for AI infrastructure in countries such as the United Arab Emirates and Saudi Arabia. Company officials said they expected to bring in almost $10 billion of revenue last year from so-called “sovereign AI,” where countries around the world increasingly see AI computing facilities as national assets.

Under the new rules, companies that produce AI models—the likes of OpenAI and Google—would need export licenses to send the “weights” attached to those models to many foreign countries. Model weights are the secret sauce in advanced AI systems like ChatGPT, a series of digital knobs that fine-tune their performance.

Excerpts from Asa Fitch and Liza Lin U.S. Targets China With New AI Curbs, Overriding Nvidia’s Objections, WSJ, Jan. 13, 2025

The US-China Supercomputer Rivalry

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For decades, American and Chinese scientists collaborated on supercomputers, tennis-court-size machines essential to improving artificial intelligence, developing vaccines and predicting hurricanes. But Chinese scientists have become more secretive as the U.S. has tried to hinder China’s technological progress, and they have stopped participating altogether in a prominent international supercomputing forum.

The new secrecy also makes it harder for the U.S. government to answer a question it deems essential to national security: Does the U.S. or China have faster supercomputers? Some academics have taken it upon themselves to hunt for clues about China’s supercomputing progress, scrutinizing research papers and cornering Chinese peers at conferences.

Supercomputers have become central to the U.S.-China technological Cold War because the country with the faster supercomputers can also hold an advantage in developing nuclear weapons and other military technology. “If the other guy can use a supercomputer to simulate and develop a fighter jet or weapon 20% or even 1% better than yours in terms of range, speed and accuracy, it’s going to target you first, and then it’s checkmate,” said Jimmy Goodrich, a senior adviser for technology analysis to Rand Corp., a think tank.

The forum that China recently stopped participating in is called the Top500, which ranks the world’s 500 fastest supercomputers. While the latest ranking, released in June 2024, says the world’s three fastest computers are in the U.S., the reality is probably different. Officially, the fastest computer on the Top500 sits at the Energy Department-sponsored Oak Ridge National Laboratory, in Tennessee. Called Frontier, it is about the size of two tennis courts, cost $600 million to construct and has an electricity bill of about $20 million a year, said Dongarra, who also works at Oak Ridge. It uses tens of thousands of computer chips.

Dongarra doesn’t think Frontier is actually the world’s fastest supercomputer. Scientific papers suggest that certain Chinese machines are better. One has been referred to in state media as a prototype Tianhe-3, after a Chinese term for the Milky Way galaxy, while the other is a model in the Sunway series of supercomputers.

Excerpts from Stu Woo ,US China Rift Hits Supercomputer Ties, WSJ, July 24, 2024

Great Fear and Uphill Struggle: US, Japan and China

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In Japan’s glory days of the the late 1980s, the country accounted for about half of the global semiconductor industry, and the U.S. was left to beg, plead and threaten as it tried to get a small slice of the Japanese market. A bestselling book in Japan during the Cold War’s waning days called “The Japan That Can Say No” suggested that Tokyo could leverage its dominance in semiconductors to control the world’s military balance—and perhaps help the Soviet Union instead of the U.S.

Today, the great fear driving chip investments in both U.S. and Japan is China. The U.S. policy calls for helping allies such as Japan build a supply chain that is less exposed to risks posed by a hostile Beijing. While the U.S. is expanding its own chip production through the Chips and Science Act, which includes some $53 billion of spending, people involved in the Rapidus project (between U.S. and Japan) said the U.S. needed further global diversification. ..The Rapidus project aims to get Japan back into the heart of the business of chip making by building facilities on the northern island of Hokkaido, known for its ski resorts. Rapidus says it wants to begin pilot production in 2025 and full-scale production in 2027. Some 6,000 workers are being drafted to put up the factory.

Japan’s Ministry of Economy, Trade and Industry has said that it intends to help Rapidus achieve its goals, and that it wants the Japanese semiconductor industry to have revenue of some $100 billion in 2030, triple the 2020 figure. The ministry is pitching in billions of dollars for additional projects in Japan. TSMC is building an $8.6 billion factory on the southern island of Kyushu and is in talks about a second. Assuming it gets the money, Rapidus still has to master a level of manufacturing technology attained so far by only two companies, TSMC and South Korea’s Samsung Electronics. Both are projected to have the ability to mass-produce 2-nanometer chips by 2025.

Excerpts from Peter Landers and  Yang Jie, Japan’s Plan to Become a Chipmaking Champ Hinges on This Football-Loving Engineer, WSJ, July 6, 2023

How to Exclude China from the Global Technology Base: the Role of IMEC

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The Interuniversity Microelectronics Centre (IMEC) located in Leuven, Belgium, does not design chips (like America’s Intel), manufacture them (like TSMC of Taiwan) or make any of the complicated gear (like ASML, a Dutch firm). Instead, it creates knowledge used by everyone in the $550bn chip business. Given chips’ centrality to the modern economy and increasingly to modern geopolitics, too, that makes it one of the most essential industrial research-and-development (R&D) center on the planet. Luc Van den hove, IMEC’s boss, calls it the “Switzerland of semiconductors”.

IMEC was founded in 1984 by a group of electronics engineers from the Catholic University of Leuven who wanted to focus on microprocessor research. In the early days it was bankrolled by the local Flemish government. Today IMEC maintains its neutrality thanks to a financial model in which no single firm or state controls a big share of its budget. The largest chunk comes from the Belgian government, which chips in some 16%. The top corporate contributors provide no more than 4% each. Keeping revenue sources diverse (partners span the length and breadth of the chip industry) and finite (its standard research contracts last three to five years) gives IMEC the incentive to focus on ideas that help advance chipmaking as a whole rather than any firm in particular.

A case in point is the development of extreme ultraviolet lithography (EUV)…It took 20 years of R&D to turn the idea into manufacturing reality. IMEC acted as a conduit in that process… Advanced toolmakers want a way to circulate their intellectual property (IP) without the large companies gaining sway over it. The large companies, meanwhile, do not want to place all their bets on any one experimental idea that is expensive (as chipmaking processes are) and could become obsolete.

IMEC’s neutrality allows both sides to get around this problem. It collects all the necessary gear in one place, allowing producers to develop their technology in tandem with others. And everyone gets rights to the IP the institute generates. Mr Van den hove says that progress in the chip industry has been driven by the free exchange of knowledge, with IMEC acting as a “funnel” for ideas from all over the world…IMEC’s revenues, which come from the research contracts and from prototyping and design services, doubled between 2010 and 2020, to €678m ($773m).

The deepening rift between America, home to some of the industry’s biggest firms, and China, which imported $378bn-worth of chips last year, threatens IMEC’s spirit of global comity. China’s chip industry is increasingly shielded by an overbearing Communist Party striving for self-sufficiency, and ever more ostracized by outsiders as a result of American and European export controls. All this limits the extent to which IMEC can work with Chinese semiconductor companies…IMEC would not comment on individual partnerships but says it has “a few engagements with Chinese companies, however not on the most sensitive technologies, and always fully compliant with current European and US export regulations and directives”.

Excerpts from Neutral but not idle: IMEC offers neutral ground amid chip rivalries, Economist, Sept. 25, 2021