Newsletter 
Recent reports suggest that the US government wants to impose a new round of trade restrictions on China. However, some representatives and senators believe that this could lead to a tech “death spiral” since not all allied countries align with the severity of the US measures.
The US reportedly considering a wider chipmaking equipment export ban to China
The next trade restrictions that the Biden administration could impose target chipmaking equipment. The US government would like some of its partners to stop importing this equipment to China. The measure would not apply to equipment from Japan and the Netherlands. However, those countries already have their own restrictions against the import of chipmaking equipment to China, although not as severe as those that the United States has been implementing.
This would be the next step in a policy of trade restrictions that has sought to limit China’s access to the latest manufacturing technologies. Previous restrictions targeted hardware and software whose development involves US technology. The bans have been escalating, as they were first aimed only at 5G technology, which allowed Huawei to use flagship Snapdragon chips for a time but without a 5G modem.
For this reason, Huawei has increasingly turned to local companies to get key components. Currently, the company designs its Kirin chipsets for later production in SMIC’s factories. Although SMIC does not have access to the latest manufacturing processes, Huawei’s investment has helped them make giant strides in recent years. Situations like these, where Chinese companies strengthen themselves in the face of trade restrictions, have worried US government representatives.
California Democrats warn of the US falling into a tech “death spiral”
Regarding the new potential sanctions, California Democrats fear that they could be more harmful than beneficial to the United States. Senator Alex Padilla and Representative Zoe Lofgren sent a letter to the Commerce Department urging it to reconsider further controls. “We ask that you pause additional unilateral export controls until you have adequately justified that such controls will not harm US competitiveness in advanced semiconductors and semiconductor manufacturing equipment,” reads the letter.
Opponents of further restrictions warn that they could lead to a tech “death spiral” in the US. The main argument is that not all US-allied countries are applying such severe trade sanctions. So, the US could gradually fall behind in the industry, becoming less competitive. Of course, such a situation would affect local chip manufacturing companies.
The US government cancelled some subsidies for chip research and development
It is no coincidence that the loudest voices against the restrictions are from California. The state is home to major US chipmaker companies such as LAM, Applied Materials, and KLA. There was already some tension between California Democrats and the Biden administration due to the cancellation of a chip research and development subsidy program. The program would have primarily benefited Applied Materials, Reuters reports.
In the letter, the representatives also urged the United States to pressure allied countries to fall in line on the severity of export controls. Democrats do not totally oppose implementing trade restrictions on China as such. However, they are against measures “with questionable national-security benefits.” Especially when not all of their allies implement the same restrictions and the local tech industries might be affected.