America’s Aggressive Chip Strategy Forces China Into a Corner

China’s government is protecting some of its chipmakers by spending lavishly to shore them up, just as weak demand is making it hard for chip manufacturers across the globe. But China’s semiconductor industry also faces a problem that its counterparts elsewhere don’t have to worry about: unremitting hostility from the US government. Beijing could try to spend its way out of that problem, too, but there may be things about cutting-edge semiconductor production that money can’t buy.

China’s chip industry has always lagged behind the US’s, and it has relied on Western technologies for the most advanced semiconductors, chipmaking equipment and knowledge. After years of mounting tension, the Biden administration spent much of  2022 coming up with ways to cut off China from such technology, as it attempted to slow down its advancement in chips, artificial intelligence applications and military tech. The effect could be to “freeze in place” the country’s semiconductor industry, according to Reva Goujon, director at Rhodium Group LLC. “The US is basically creating a new playbook here,” she says.