America’s Growing Technology Offensive: Its History and the Limitations of China’s Response

Kim Kisoo 

Senior Research Fellow, 

The Sejong Institute 

(kskim@sejong.org)​

China took the 2008 financial crisis as a sign of America’s decline. When Xi Jinping became president in March 2021, he declared the famous Chinese Dream and ‘the great revival of the Chinese nation’ which was followed by a new expansionist foreign policy called the “New Type of Great Power Relations.” Xi Jinping sought to gain the consent of the U.S. by explaining the terms to President Obama at the U.S.-China summit in September 2015. In other words, he demanded recognition of China’s superior status in the West Pacific. But shortly afterwards, President Obama rejected by saying that "we cannot allow countries like China to write the rules“ of the global order.”

The outlined event clearly showed that China was going to challenge the U.S. hegemony and that the U.S. was going to deny such attempts. But does China really have the ability to materialize its challenge? Following such trend, the Trump administration began the U.S. pressure on China. During the early days of the administration, the goal was to reduce China’s trade surplus with the U.S. which amounted up to $400 billion yearly. Accordingly, massive tariff retaliations began in April 2018 to which China eventually gave in by signing in January 2020 a bilateral trade agreement that contained tangible concessions from China.

Meanwhile, the U.S. began to identify China’s weaknesses. One was an understanding of the economic structure that China could be weakened by separating or decoupling it from the world economy. The other was an elaborate calculation reversely using China’s technological inferiority. Beginning with a suspension of transactions between Chinese telecommunication company, ZTE, and U.S. companies in April 2018, technology sanctions were imposed on Chinese high-tech companies. In the end, transactions of U.S. firms with Huawei, China’s largest IT company were suspended in May 2019 followed by a ban on the exports of all semiconductors made by American equipment to Huawei in September.

The Biden administration elaborately revised the Trump administrations’ China policy. Firstly, it focused on pressuring China by advocating for shared values through a liberal alliance. Arguing that technology of a country that does not share its values is authoritarian and anti-democratic, it linked technology to values.  On top of that, a very sophisticated technology offensive followed with the US proposal of the East Asia Semiconductor Supply Chain Network or the ‘Chip 4’ in March 2022 being the prime example. It puts forth a plan for the U.S., South Korea, Japan and Taiwan to jointly control the production and supply of semiconductors.

The Biden administration identified China’s biggest weakness to be semiconductors. China’s absolute dependence for semiconductors externally is reflected in its $370 billion worth of semiconductor imports in 2021. During his visit to Tsinghua Unigroup factory in April 2018, Xi Jinping appealed that as “semiconductor processing is the heart of manufacturing, one is not strong without a strong heart regardless of one’s size. Please make major breakthroughs in the semiconductor sector and rise to the top of the world’s memory semiconductor technology.” Further showing China’s vulnerable position, the self-sufficiency rate of semiconductors in goods produced by Chinese companies is only about 6%.

The ‘Chips for America’ Act announced in August 2022 includes government investment of $280 billion in maintaining its technological superiority in semiconductors. This was followed by a shocking measure by the US Department of Commerce on October 7, 2022 which banned exports of high performance computing chips used in AI or supercomputers and American manufacturing equipments for computers to China. While the ban on exports to Huawei targeted a single company, China as a whole became the target of sanctions by this measure.

Will China be able to grow its semiconductor industry? It will extremely difficult for China to overcome the U.S. dominance in semiconductor manufacturing equipment and design and its insignificant level of semiconductor self-sufficiency. It was simultaneously reported that KLA, a U.S. semiconductor equipment company, would stop supplying South Korea’s Hynix factories in China and that it would allow its equipment to be brought into Samsung and SK factories in China for a year. This suggests that it is becoming increasingly difficult for Korean companies to manufacture semiconductor in China revealing that the manner in which the decoupling of Korean, Chinese, and American economies is materializing.​