President-elect Joe Biden’s presidential campaign was defined in large part by extreme differentiation from the incumbent. While Trump was erratic, Biden was stable. While Trump was ruthless, Biden was compassionate. But while Biden can continue to emphasize his differences with the outgoing president on matters of character and personality, there is at least one area in which he should continue the policy begun by the Trump administration. For all their disagreements, the president-elect should build upon his predecessor’s hardline approach against companies with ties to China’s military.
The People’s Republic of China has long sought to assert its economic and military power on the global stage. Under its “Made in China 2025” plan, which debuted in 2015, the Chinese government, working through state-backed companies, plans to dominate the key technologies that will determine both economic and military advantage in the 21st century, especially artificial intelligence and 5G capabilities. To that end, the government has not only heavily subsidized domestic research, but has begun to loot U.S. technology, equipment, and knowhow through forced technology transfers, espionage, and outright theft.
To achieve its dominance, China is actively ramping up its ability to produce semiconductors, the substances at the heart of every computer chip. The “Made in China 2025” plan pledges $120 billion to support the country’s indigenous semiconductor manufacturing industry, with a stated goal of producing 70 percent of domestic semiconductor consumption within the next five years.
Once almost exclusively dependent on foreign-made chips, China has made significant strides in recent years to bolster its semiconductor manufacturing capabilities. A recent report found that one Chinese facility jumped multiple generations of technology, a feat that should have taken years, in a matter of months.
China’s race to establish its semiconductor industry poses a threat to U.S. national security. Semiconductors are a “dual-use” technology, in that they have both civilian and military capabilities. The same technology that allows a refrigerator to communicate with a smartphone can allow reconnaissance and weapons systems to communicate. The U.S. military is the most technologically sophisticated in the world, and that sophistication is a large part of what makes it the most fearsome fighting force in history. But, if a challenger like China achieves technological parity, relying on technology could become a vulnerability. By copying, appropriating, or stealing American technology, the Chinese can exploit vulnerabilities in U.S. defense systems and apply U.S. technologies to its own military weapons.
The Trump administration has sought to cut off the flow of sensitive semiconductors and semiconductor manufacturing equipment to China through export controls. Since March 2019, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has added 153 Chinese State Owned Enterprises (SOE) to the Entity List, requiring U.S. companies to obtain a license to sell them sensitive technology.
In September, the BIS added a new restriction that requires U.S. semiconductor and equipment makers to get a license to sell to China’s largest semiconductor manufacturer, Semiconductor Manufacturing International Corporation (SMIC). The new requirement came after reports that SMIC was secreting sensitive information to China’s military, the People’s Liberation Army (PLA). The rule stopped short of adding SMIC to the Entity List.
At least two other major Chinese semiconductor makers are known to have ties to the PLA: ChangXin Memory Technologies and Yangtze Memory Technologies Company. In the near-term, U.S. policymakers should put those SOEs, along with SMIC, on the Entity List to stop further technology that could be used against us from reaching the PLA.
Under the 2018 Export Controls Act, the president has broad discretion to implement export controls on dual-use technology. The current system is porous, with plenty of strategically significant technologies not subject to strict enough controls for the system as a whole to be effective. If Congress decides not to update and tighten the restrictions on dual-use technology exports, the Biden administration should use the authority Congress has delegated it to do so.
China’s attempt to commandeer control of modern technologies began in full under President Obama, whose China policy took a less conciliatory turn at the end of his presidency. President Trump continued the late-Obama-era policy toward China by treating it as the strategic competitor it is. President-elect Biden would be wise to hold the course and take the necessary measures to protect America’s semiconductor industry. Otherwise, China will have an advantage in global economic markets and on the battlefield.
If America is to maintain its position in the international system, it must protect the engines that drive its unrivaled economic productivity, especially technology innovation. But perhaps more importantly, if American military might is to continue to act as a deterrent to another great power war, our military supremacy must never be uncertain. If China is allowed to use American technology to power is own economic and military rise, both of these important advantages could disappear.