Mostly , I don't want to involve myself and write articles about geo politics and wars, but when it comes to it being about technology, I can't resist.
The U.S.-China trade war being fought over technology has been surprisingly one-sided. But that's changing.
For nearly four years, Beijing held back — even after the U.S. went for the jugular last fall with broad-based bans on sales of design software, semiconductor manufacturing equipment and advanced chips from companies like Nvidia (NVDA) and Advanced Micro Devices (AMD) to Chinese firms.
Those measures amounted to a "policy of actively strangling large segments of the Chinese technology industry — strangling with an intent to kill," wrote Center for Strategic and International Studies senior fellow Gregory Allen.
China Appeared Penned In
Yet Beijing appeared to be in no position to retaliate. It was penned in by its harsh Covid lockdowns and a more unified front among the U.S. and allies amid China's implicit support of Russia's Ukraine invasion.
China finally returned fire March 31, announcing a security review of U.S. memory-chip giant Micron Technology (MU).
Less than a week later came news that China may restrict exports of rare earth metals. It's the world's main source of the metals, which are crucial to semiconductor manufacturing, EV motors, missile systems and much more.
China's return fire puts American multinationals at higher risk. Beijing is driving home the message that nations lining up behind the U.S. trade war will pay a steep price.
The U.S. also faces the threat of wider economic disruption if China battles back against decoupling by closing off exports of indispensable technologies and materials that it dominates.
U.S.-China Trade War Over Tech
The heating up of the U.S.-China trade war for technological supremacy comes as Congress and the White House move closer to banning TikTok or forcing China's ByteDance to sell it.
Yet Congress has proceeded with little concern about retaliation.
"Chinese leaders are worried about skilled high-tech manufacturers relocating production to India and Vietnam and will not want to accelerate these trends," wrote Adam Segal, who chairs the Council on Foreign Relations program on national security and emerging technology.
If that's right, Beijing may see little upside in going after Apple (AAPL) or Tesla (TSLA), which both manufacture products in China for export as well as domestic sales.
But Beijing appears to have settled on ways to retaliate against U.S.-led chip restrictions without facing such blowback. A ban on exports of rare earth metals might give tech manufacturers more reason to stay in China. China processes 90% of rare earths.
Targeting Micron offers Beijing a way to punish the U.S. while strengthening Chinese chip firms. China also delivered an implicit threat to South Korea, whose memory giants Samsung and Hynix have major operations there.
In fiscal 2022, companies based in China and Hong Kong accounted for nearly $5 billion, or 16%, of Micron Technology's revenue. Those sales could be in jeopardy if Beijing restricts Micron. An outright ban, even on sales to foreign firms whose products are made in China, could be a much-bigger blow.
Micron Technology supplies memory chips for the Apple iPhone.
Despite recent Apple efforts to ramp up production in India, most iPhones are still made in China.
Since one memory chip can be subbed for another, blacklisting Micron wouldn't cause major disruption for its customers. So China wouldn't risk an exodus of high-tech manufacturers.
U.S.-China Trade War Background
As recently as September, Apple planned to use cheaper chips from China's Yangtze Memory Technology for iPhones sold locally. But Apple had to quickly reverse course after the U.S. unloaded its ultimate weapon against China's technology ambitions.
Until then, the U.S. had moved to block access to key technologies for hundreds of entities on a case-by-case basis.
Export bans targeted firms or research centers linked to China's military. Also those engaged in surveillance of the Muslim Uyghur population or charged with violating export rules or intellectual property theft.
Yet those restrictions were too porous to seriously blunt China's technological progress. That may explain why Beijing resisted the urge to retaliate.
"Technological innovation has become the main battleground of the global playing field, and competition for tech dominance will grow unprecedentedly fierce," President Xi Jinping said in a May 2021 address.
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