The New Cold War

The publics in most NATO member countries foresee a sharp decline in the influence exerted by the United States in global affairs over the next five years and have little or no appetite for confrontation with China over Taiwan, according to Transatlantic Trends 2022, a detailed report on a new poll released Friday by the German Marshall Fund.
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Among the major findings, the survey found that, while an average of 64 percent of all respondents called the United States the world’s most influential actor today, an average of only 37 percent said it would retain that position just five years from now. China is likely to be the biggest gainer, with an average of 25 percent of respondents believing it will rise to exert the greatest influence by 2027, an increase from 13 percent today. Respondents in France and Italy, in particular, believe that Beijing will have overtaken Washington’s influence by a significant margin by that year.
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https://responsiblestatecraft.org/2022/10/03/poll-europeans-from-nato-countries-embrace-us-defense/

https://asia.nikkei.com/Business/Tech/Semiconductors/U.S.-intensifies-assault-on-China-chip-ambitions

U.S. intensifies assault on China chip ambitions
Strictest ever curbs on exports of advanced tools, AI chips and more

October 8, 2022 00:15 JST

TAIPEI -- The U.S. has introduced sweeping export controls aimed at curbing almost every aspect of China's semiconductor development as part of its toughest crackdown yet on Beijing's tech ambitions.

The U.S. Commerce Department on Friday barred American companies from shipping certain grades of advanced chip equipment to any Chinese client without a license, effective immediately. The same curbs will apply to shipments of American-made electronics parts or other items that China could use to produce its own chipmaking tools and equipment.

Under the new rules "U.S. persons" will also be restricted from providing support to the development or production of chips at Chinese "semiconductor fabrication facilities without a license," starting Oct. 12.

The commerce department also tightened the so-called Foreign Direct Product Rule to restrict China's ability to obtain or build cutting-edge chips used in supercomputers and artificial intelligence applications. These curbs will also apply to global chipmakers, including Samsung of South Korea and Taiwan Semiconductor Manufacturing Co., whose manufacturing relies on American technologies.

The new rules show Washington's determination to restrict China's ability to develop cutting-edge semiconductors and computer systems that are crucial for Beijing's advanced manufacturing as well as many security, space, and defense applications.

"The PRC government is attempting to divert a lot of civilian technologies, particularly in computing, space, AI and communications, into areas of supercomputers in civil-military fusion programs as well as other areas such as surveillance that link with human rights abuses," a senior U.S. Commerce Department official said when outlining some of the reasons for the tighter rules.

They come as the U.S. is attempting to shore up its domestic semiconductor industry, including by offering generous federal and state subsidies for chipmakers.

The restrictions on chip equipment could hit Chinese memory chip champions Yangtze Memory Technologies (YMTC) and ChangXin Memory Technologies particularly hard, as both companies are in the midst of ramping up their output.

They will also create hurdles for Chinese chipmaking equipment makers such as Naura and Advanced Micro-Fabrication Equipment, which are working to help Chinese chipmakers get around U.S. sanctions by building up domestic production tools to replace American counterparts.

YMTC was one of more than 30 companies and research institutions that the U.S. on Friday placed on an "Unverified List" of clients. The list is intended as a red flag to American suppliers to be careful of doing business with those named. If these companies fail to provide documentation required by the U.S., they are likely to be officially blacklisted on Washington's so-called Entity List, alongside the likes of Huawei Technologies.

The U.S. further said on Friday that 28 entities already blacklisted will be subject to enhanced export controls under the Foreign Direct Product Rule, to restrict their ability to source from foreign suppliers using any American technologies.

Under the new rules, a license is required to ship chip equipment that can make processors and other logic chips using 14/16-nanometer technology or better. In logic chipmaking, a smaller nanometer number generally indicates a more advanced chip. The latest iPhone processors are produced with 5-nm chip tech.

For DRAM chips, the restrictions kick in for tools that are 18-nm or better, while for NAND flash memories the rules apply to machines capable of making chips with 128 or more layers.

NAND and DRAM are key types of memory components needed for all electronic devices, from smartphones and computers to servers and connected cars.

YMTC mass-produces 3D NAND flash memory chips on the 128-layer level, about one or two generations behind global leaders, and aims to put the next generation of 192-layer chips into production within a year.

American chip equipment makers such as Applied Materials, Lam Research and KLA are still sorely needed if China is to quickly and smoothly ramp up chip production.

According to a Boston Consulting Group analysis, there are at least 23 types of chipmaking equipment for which American companies control more than 65% of global supply.

The new rules on advanced chipmaking tools apply only to U.S. companies and not foreign players such as ASML and Tokyo Electron. However the U.S. is working closely with "like-minded" allies to persuade them to similarly restrict exports of technology that China could use to build advanced chips used in weapons, supercomputers and surveillance applications that violate human rights, according to a senior Commerce Department official.

"We've briefed and consulted with close allies and partners on these controls, in the new obligations that they create related to chips designed with U.S. tools, software or equipment or tooling experts involving U.S. persons," the official said. "We expect all countries to comply with these measures as we do with all of our export controls."

Mark Li, a veteran semiconductor analyst with Sanford C. Bernstein, sees the American move as set to substantially slow China's chip development.

"If the ban also widens to bar U.S. citizens or people to provide support to Chinese companies, that could have a big effect too," Li said. "After all, talents and their know-hows are great assets to develop next generation chip technologies."

We Are Suddenly Taking On China and Russia at the Same Time
Oct. 12, 2022; By Thomas L. Friedman;
https://www.nytimes.com/2022/10/12/opinion/china-semiconductors-exports.html

In case you haven’t noticed, let me alert you to a bracing turn of events: The U.S. is now in conflict with Russia and China at the same time. Grandma always said, “Never fight Russia and China at the same time.” So did Henry Kissinger. Alas, there is a strong case in the national interest for confronting both today. But have no doubt: We are in uncharted waters. I just hope that these are not our new “forever wars.”

The struggle with Russia is indirect, but obvious, escalating and violent. We are arming the Ukrainians with smart missiles and intelligence to force the Russians to withdraw from Ukraine. While taking nothing away from the bravery of the Ukrainians, the U.S. and NATO’s support has played a giant role in Ukraine’s battlefield successes. Just ask the Russians. But how does this war end? No one can tell you.

Today, though, I want to focus on the struggle with China, which is less visible and involves no shooting, because it is being fought mostly with transistors that toggle between digital 1s and 0s. But it will have as big, if not bigger, an impact on the global balance of power as the outcome of the combat between Russia and Ukraine. And it has little to do with Taiwan.

It is a struggle over semiconductors — the foundational technology of the information age. The alliance that designs and makes the smartest chips in the world will also have the smartest precision weapons, the smartest factories and the smartest quantum computing tools to break virtually any form of encryption. Today, the U.S. and its partners lead, but China is determined to catch up — and we are now determined to prevent that. Game on.

Last week, the Biden administration issued a new set of export regulations that in effect said to China: “We think you are three technology generations behind us in logic and memory chips and equipment, and we are going to ensure that you never catch up.” Or, as the national security adviser Jake Sullivan put it more diplomatically: “Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible” — forever.

“The U.S. has essentially declared war on China’s ability to advance the country’s use of high-performance computing for economic and security gains,” Paul Triolo, a China and tech expert at Albright Stonebridge, a consulting firm, told The Financial Times. Or as the Chinese Embassy in Washington framed it, the U.S. is going for “sci-tech hegemony.”

But where does this war end? No one can tell you. I don’t want to be ripped off by a China that is increasingly using technology for absolute control at home and creepy power-projection abroad. But if we are now locked on a path of denying China advanced technologies forever — eliminating any hope of win-win collaborations with Beijing on issues like climate and cybercrime, where we face mutual threats and are the only two powers that can make a difference — what kind of world will that produce? China should be asking the same questions.

All I know for sure is that regulations issued Friday by President Biden’s Commerce Department are a formidable new barrier when it comes to export controls that will block China from being able to buy the most advanced semiconductors from the West or the equipment to manufacture them on its own.

The new regulations also bar any U.S. engineer or scientist from aiding China in chip manufacturing without specific approval, even if that American is working on equipment in China not subject to export controls. The regs also tighten the tracking to ensure that U.S.-designed chips sold to civilian companies in China don’t get into the hands of China’s military. And, maybe most controversially, the Biden team added a “foreign direct product rule” that, as The Financial Times noted, “was first used by the administration of Donald Trump against Chinese technology group Huawei” and “in effect bars any U.S. or non-U.S. company from supplying targeted Chinese entities with hardware or software whose supply chain contains American technology.”

This last rule is huge, because the most advanced semiconductors are made by what I call “a complex adaptive coalition” of companies from America to Europe to Asia. Think of it this way: AMD, Qualcomm, Intel, Apple and Nvidia excel at the design of chips that have billions of transistors packed together ever more tightly to produce the processing power they are seeking. Synopsys and Cadence create sophisticated computer-aided design tools and software on which chip makers actually draw up their newest ideas. Applied Materials creates and modifies the materials to forge the billions of transistors and connecting wires in the chip. ASML, a Dutch company, provides the lithography tools in partnership with, among others, Zeiss SMT, a German company specializing in optical lenses, which draws the stencils on the silicon wafers from those designs, using both deep and extreme ultraviolet light — a very short wavelength that can print tiny, tiny designs on a microchip. Intel, Lam Research, KLA and firms from Korea to Japan to Taiwan also play key roles in this coalition.


The point is this: The more we push the boundaries of physics and materials science to cram more transistors onto a chip to get more processing power to continue to advance artificial intelligence, the less likely it is that any one company, or country, can excel at all the parts of the design and manufacturing process. You need the whole coalition. The reason Taiwan Semiconductor Manufacturing Company, known as TSMC, is considered the premier chip manufacturer in the world is that every member of this coalition trusts TSMC with its most intimate trade secrets, which it then melds and leverages for the benefit of the whole.

Because China is not trusted by the coalition partners not to steal their intellectual property, Beijing is left trying to replicate the world’s all-star manufacturing chip stack on its own with old technologies. It managed to pilfer a certain amount of chip technology, including 28 nanometer technology from TSMC back in 2017.

Until recently, China’s premier chip maker, Semiconductor Manufacturing International Company, had been thought to be stuck at mostly this chip level, although it claims to have produced some chips at the 14 nm and even 7 nm scale by jury-rigging some older-generation Deep UV lithography from ASML. U.S. experts told me, though, that China can’t mass produce these chips with precision without ASML’s latest technology — which is now banned from the country.
This week I interviewed U.S. Secretary of Commerce Gina Raimondo, who oversees both the new export controls on chips and the $52.7 billion that the Biden administration has just secured to support more U.S. research on next-generation semiconductors and to bring advanced chip manufacturing back to the U.S. Raimondo rejects the idea that the new regulations are tantamount to an act of war.

“The U.S. was in an untenable position,” she told me in her office. “Today we are purchasing 100 percent of our advanced logic chips from abroad — 90 percent from TSMC in Taiwan and 10 percent from Samsung in Korea.” (That IS pretty crazy, but it IS true.)

“We do not make in the U.S. any of the chips we need for artificial intelligence, for our military, for our satellites, for our space programs” — not to mention myriad nonmilitary applications that power our economy. The recent CHIPS Act, she said, was our “offensive initiative” to strengthen our whole innovation ecosystem so more of the most advanced chips will be made in the U.S.

Imposing on China the new export controls on advanced chip-making technologies, she said, “was our defensive strategy. China has a strategy of military-civil fusion,” and Beijing has made clear “that it intends to become totally self-sufficient in the most advanced technologies” to dominate both the civilian commercial markets and the 21st century battlefield. “We cannot ignore China’s intentions.”

So, to protect ourselves and our allies — and all the technologies we have invented individually and collectively — she added, “what we did was the next logical step, to prevent China from getting to the next step.” The U.S. and its allies design and manufacture “the most advanced supercomputing chips, and we don’t want them in China’s hands and be used for military purposes.”

Our main focus, concluded Raimondo, “is playing offense — to innovate faster than the Chinese. But at the same time, we are going to meet the increasing threat they are presenting by protecting what we need to. It is important that we de-escalate where we can and do business where we can. We don’t want a conflict. But we have to protect ourselves with eyes wide open.”

China’s state-directed newspaper Global Times editorialized that the ban would only “strengthen China’s will and ability to stand on its own in science and technology.” Bloomberg quoted an unidentified Chinese analyst as saying “there is no possibility of reconciliation.”

Let’s go back to mercantilism and trade blocs!

Branko Milanovic
Oct 18

I went to Rana Faroohar’s book party in New York tonight. Faroohar has a new and important book, “Homecomings” that dissects globalization as we know it and looks ahead. I have not read the book, and did not even ask Faroohar for a free copy (which were aplenty at the party tonight): the reason is that I know how authors struggle to write cute dedications in the midst of a party, and I did not feel like imposing this onto Faroohar. (In addition, I think I can afford to buy the book). But I have read her articles in the Financial Times, and was told at the party tonight that she had an important--programmatic—op-ed in today’s issue of the Financial Times. So I bought today’s FT. The link to Faroohar’s article is here.

           Faroohar’s point is not new, but is told with unusual clarity and it comes at the right time. It is that the West should abandon globalization. Instead of it, the West should revert to trade blocs, in this case created between the nations sharing certain political values and geopolitical interests. It should use “friend-shoring”, the new term invented by Chrystia Freeland, the Canadian vice-Premier, whose recent talk at the Brookings Institution in Washington is quoted with approval by Rana Faroohar.

           There are two reasons why the West should abandon globalization. The first is that it was not good, economically, for its middle classes.  The “elephant graph”, originally produced by Christoph Lakner and myself, tells that story in a nutshell: the period of high globalization between 1988 and 2008, was good for Asian middle classes and the global top one-percenters, but not for the Western middle classes. Second, geopolitically, globalization helped the rise of China which is already now, but will be even more so in the future, the main military and political competitor of the United States. China today accounts for 21% of the global GDP vs America’s share of 16% while in 1988 the percentages were respectively 3.6% and 20%.

           Now, these two arguments why globalization should be scrapped in favor of regional blocs do make perfect sense from the point of view of Western governments’ political interests. The idea was, to the great but undeclared chagrin, of the American liberals first raised by Donald Trump. Now the liberals, in this respect like in several others, are happy to follow in Trump’s footsteps.

           The problem is how to explain this volte-face to the rest of the world. The Western narrative has, since 1945, been built precisely on the opposite view: open trade helps all the countries and leads to peaceful coexistence. While one need not subscribe to the Montesquieu-Bloch-Doyle view of trade as an engine of peace, the economic arguments in favor of open trade were always strong. China and India and Indonesia and Vietnam and Bangladesh made them even stronger.

Now, the West that was the principal ideological champion of free trade has soured on it because it no longer works in its favor. But whether it does or does not, is, from a global perspective, immaterial: the idea of open trade was not based on particular benefits to one side—as mercantilism was—but to the mutual benefits for most. The gains were not, ever, thought to involve absolutely everybody, but the idea was that the losing parties would be compensated domestically, or at least that their particular losses will not be allowed to derail the entire process.

           We are now told that we need to go back to the drawing board. But we are not allowed to call these reversals by their real names. Their real name is trade blocs. They have existed before: there were called UK imperial preferences, Japan’s co-prosperity zone, Grosse Deutschland’s Central European area, Soviet Council for Mutual Economic Assistance. They also responded to geopolitical interests of the countries that introduced them. For some 80 years they were held to have been ideologically retrograde, part of “beggar-they-neighbor” quasi autarkic policies. Now, we are to believe that  “friend-shoring” is somehow different. It is not. It just mercantilism under a new name and trade blocs in a different  costume.

           There is a further problem. The West was “in charge” of the dominant economic ideology. That ideology pervaded all international organizations. If the West is now going for “friend-shoring”, how is the IMF to explain to Egypt, Paraguay, Mali, and Indonesia that they should continue with open trade? If globalization is (rightly) credited with raising incomes in Asia and with the greatest reduction in global poverty ever, are we now to reverse policies on global poverty and to argue that regional trade blocs should become the economic basis from which to proceed? Who is going to tell this to the IMF, the World Bank and the WTO?

           If the West abandons globalization, this is fully understandable from the mercantilist perspective of national grandeur. Colbert would approve. But one should not delude himself/herself in believing that the rest of the world can just be flipped on the drop of the hat, and would not notice the enormity of the ideological change that this implies. And would not wonder if the initial impulse that advocated economic openness might not have been based on geopolitical concerns that are now found wanting.


           One simply cannot maintain the universal validity of an ideology that one does not follow.

NEW: The US has raised with European allies the idea of drawing upon lessons from the export control regime they’re using to punish Russia to target China, we’re told.
EU unconvinced, but discussions continue in the context of the next TTC meeting. https://t.co/Sgi7YiLAxD

— Jorge Valero (@europressos) October 31, 2022

The government is set to ban Chinese-funded Confucius Institutes from British universities, Home Office minister Tom Tugendhat has said.

https://www.cityam.com/tugendhat-confirms-uk-will-ban-chinese-confucius-institutes-at-universities/