Chip wars: US curbs hobbled the Soviet Union. Can they work against China?

  • Saad Hasan
  • 5 Dec 2022

Enforcing export controls to stop Beijing from acquiring advanced semiconductor know-how won’t be easy.

US has imposed crippling export curbs on China's semiconductor industry. ( AP )

It’s questionable if the export curbs that the US has imposed to frustrate China’s semiconductor ambitions will have the same impact similar measures had on the then Soviet Union’s technological progress.

US President Joe Biden has barred foreign companies from selling advanced semiconductors and chip-making equipment to Chinese firms. In addition, American citizens, green card holders and residents could face penalties if they work in critical areas with Chinese firms, as per the new rules.

Just like the limitations China is facing in light of the ongoing Washington-Beijing trade and chip wars, the Cold War days in the second half of the 20th century weren't any different either. The US and its allies tried every trick in the book to make it difficult for the Soviet Union to acquire Western technology. 

“You could argue that the Soviet Union didn’t catch up (technologically). Their attempts to circumvent the export curbs didn’t succeed because they didn’t have the high-performance computers in 1989 when they went down,” says Dr Mario Daniels, an Amsterdam-based technology historian. 

“China is not the Soviet Union. China is quite advanced and it innovates on a pretty high level.” 

Daniels is the author of Knowledge Regulation and National Security in Postwar America, a book which explains US export control measures since the end of World War I. 

The US is banking on allies -- including the UK, Japan and South Korea -- to remain ahead of China in the semiconductor race. 

Its measures aim to keep Chinese chip-makers at least two generations behind their Western and Southeast Asian peers, making it difficult for semiconductor know-how and products to cross borders. 

Personal computers were a luxury in the former Soviet Union when Soviet leader Mikhail Gorbachev visited an American computer factory in 1990.(AP Archive)

But replicating a Soviet-like encirclement of China won’t be easy as tech information and know-how travel quickly now, and US allies have strong trade linkages with China. 

“The way to circumvent the export controls is different. Back then you didn’t have the internet. You actually had to travel, you had to print out paper and then ship it,” says Daniels. 

In the Cold War era, the international market for high-tech goods was confined between the US and a few of its allies, whereas now there are far more suppliers of semiconductor-related products, he says. 

US export controls, introduced in early October, are already having an impact. Applied Materials, the California-based company specialising in chip-making equipment, has stopped shipping products to Chinese customers.

Earlier this month, the UK government ordered a subsidiary of China’s Wingtech Technology to sell its stake in Newport Wafer Fab, the country’s biggest semiconductor producer. London said it took the decision on national security grounds.

That came on the heels of a German move to block the purchase of Elmos Semiconductor, which makes chips for cars, by a Chinese firm. These events are being seen as the far-reach of US export controls, which other governments have to follow eventually. 

ASML, the Dutch company behind the cutting-edge EUV lithography machines, which are essential for producing advanced chips, has held back shipments to China since 2018 under US pressure.

Washington has been wary of China’s rapid progress in the fields of semiconductors and artificial intelligence. As a result, the US says it is stopping the supply of products to China that has dual use in military applications such as self-guiding missiles.

But Daniels says there’s an economic aspect of the export controls that often gets mixed up with national security concerns.

“That’s the most interesting thing about export controls. On the one hand, they are about national security. But that relationship between national security and economy is very complex, there is a dense connection between the two.”

In August, Biden signed the CHIPS and Science Act 2022, promising billions of dollars in tax acts and subsidies to boost semiconductor production on US soil.

Over the decades, the US has lost its leadership role in chip production. Currently, the US accounts for only 12 percent of global semiconductor output. Most of the chips which power smartphones, computers, electric cars and hundreds of other devices are manufactured in Taipei, Seoul and Beijing.

Even US-based chip firms like Qualcomm depend on factories in China and on the state island to produce chips for their customers.

There’s not a single manufacturing facility in the US that produces advanced 5 nanometer (nm) chips.

But the US still controls essential components of the semiconductor supply chain, which it can use to handicap chip production in other countries.

For instance, the US firms such as Synopsys and Cadence Design Systems are the leaders in the development of software that engineers rely on to design the complex architecture of integrated circuits.

Similarly, other US firms have a strong position in the market for chemicals and equipment, which are used at different stages of semiconductor production.

The Biden administration has introduced, perhaps, the most stringent export curbs but previous US governments have also been keen on countering the rise of Chinese firms.

ZTE, China’s telecom firm, was blocked from doing business in the US by former president Donald Trump, while Huawei, another Chinese telecom equipment maker, was shut out of the 5G market in several countries.

In the late 1990s, US lawmakers prepared the Cox report, which alleged Beijing was stealing critical American technology.

The US even took on Japan, its close ally in the Pacific region, in the 1980s when Intel and other American companies took a beating from the likes of Toshiba and Hitachi.

US policymakers railed against Japan’s semiconductor companies in ways similar to those employed to impede China’s SMIC or Huawei.

“What I see as interesting is that economics becomes more and more part of thinking about national security in a very broad sense,” says Daniels.

“It’s not just about the military. It’s also about where the military gets its technology from. How expensive is it? What companies we have in our nation to support the department of defence? What will we do to keep these companies healthy so they can keep producing technology?”