Why did the US semiconductor giant persuade Biden to abandon restrictions? Interrupting the positive cycle of R&D, talent is being lost

Text/Wang Xinxi

The Biden administration's restrictive policies on Chinese semiconductors have made US chip giants and industry groups increasingly worried.

Reuters quoted sources on the 18th as saying that senior US government officials, including Secretary of State Blinken, met with executives of the three major US chip giants Intel, Qualcomm and Nvidia on July 17. The U.S. Semiconductor Industry Association also called on the Biden administration to "not further restrict" chip sales to China until assessing the impact of the restrictions.

What wind direction do they see? What exactly are you worried about?

Recently, the New York Times published a long article called "This is an Act of War": Decoding the US Chip Blockade of China", which pointed out why the United States launched this war, "because the United States wants to influence China's artificial intelligence industry, essentially to eradicate China's entire advanced technology ecosystem."

"If successful, it could affect the progress of a generation in China, and if it fails, it could have counterproductive results or affect the future of the U.S.-China competition and the global order for decades to come."

For the current technical advantages of the United States, the New York Times is optimistic, saying that in an EUV lithography machine, a laser made in Germany alone contains 457329 components, which is extremely complex, and such components of similar complexity exceed 100,000 in a complete EUV lithography machine.

The EUV lithography machine is only a part of chip manufacturing, and it is undoubtedly difficult to ascend to the sky with the power of China to reproduce the wisdom crystallization of decades of division of labor and cooperation among all mankind in just a few years.

But despite this, the American Semiconductor Industry Association and the American semiconductor giants have reacted, and the old US restriction policy, which may not be able to restrict China in the end, is now making its own people confused.

Since it is difficult to ascend to the sky, why do the American chip giants oppose it?

First of all, the US chip sanctions are interrupting the positive cycle of US chip research and development.

Data show that the scale of the Chinese market accounts for 30% of the world semiconductor market. The United States accounted for only 41.8% of chips in its own market, 50% of chips in the European market, and 42.8% of chips in the Japanese market. In the Chinese chip market, the United States has a 53.4% share. Qualcomm accounted for more than 60% of revenue in the Chinese market, Intel achieved $17.125 billion in revenue in China, accounting for 27%, and the Chinese market revenue accounted for 47% of NVIDIA's global revenue in fiscal 2023.

U.S. politicians cut off Chinese chips. We will get hurt, but American companies also self-harm 800, and in the case of a massive reduction in profits, over time, the problem will become serious.

If you don't sell them to China, who can digest these chips, and the pace of China's independent substitution is also steadily advancing. Previously, data showed that Huawei has completed the replacement of more than 13,000 components, and has replaced more than 4,000 boards on its own circuit boards, and Chinese companies cut imports of 97 billion chips last year, and in the first three months, compared with last year, it was reduced by 32.1 billion.

According to the American Semiconductor Association, semiconductor purchases in China last year were $180 billion, more than one-third of the global total of $555.9 billion, making it the largest single market. This is an important reason why the Semiconductor Industry Association of America has called for no further restrictions.

It can be seen that the fatal point of such sanctions is that it will lead to a sharp decline in the revenue and profits of giants such as Qualcomm and Intel in the United States, which is likely to lead to the collapse of their internal incentive system, which itself suppresses the profit acquisition and continuous R&D investment ability of their domestic giants.

The iterative upgrade of chips requires a lot of R&D investment, without profit, there will be a lack of funds in the R&D field, if the R&D cycle is interrupted, then the impact is also fatal, and the competitiveness of the future continuous leading is weakened.

In fact, since the beginning of sanctions against Huawei in 2019, the US chip war has been fought for 4 years, and the lethality to China is not as great as imagined. The United States is also very clear that it is very difficult to crush China's chip industry through sanctions. Instead, China's chip industry has a huge internal circulation opportunity.

The US chip sanctions have allowed more chip talents to see domestic opportunities

Under the sanctions of the United States, it was originally that American companies occupied these markets and were actively relinquished, and this market vacuum needs to be filled urgently, and a large number of chip talents in the United States have returned to China.

Now the US chip war, its own company market is small, the production capacity of the US chip giant can not find a replacement for China's market to digest production capacity, so it is more and more anxious and more volumed. Compared with the poor supply of the US chip market, sales are blocked, and the opportunities for R&D talents are smaller, and the opportunities for the Chinese market are obviously more.

According to a commentary published on the website of the US media "Foreign Policy", in the face of an increasingly suspicious research environment, more and more Chinese scientists are leaving the United States to work abroad. "It is absolutely devastating that Chinese scientists are leaving the United States, and many of the researchers that the United States relies on in the field of advanced technology are from China," he said. "Universities are suffering from geopolitical tensions, which will certainly hinder the ability of American universities to attract the best and brightest."

It is obvious that for talents, where the opportunities are great and the prospects are good, they will flow.

And what are the opportunities in the Chinese market? The first is the huge demand, followed by the improvement of the industrial chain, the foundation is relatively better, and it is currently at the node of technological breakthrough, in such a node, for talents, it is actually a dividend period, because it does not take too long to reap the dividends of development.

For example, the Indian chip industry also has opportunities, but India's foundation is poor, waiting for the improvement of India's industrial chain and independent breakthrough of chips, I am afraid it will take decades or more. However, China, it is estimated that in 3~5 years, there may be a big breakthrough.

This is also why a large number of chip talents have returned to China.

This is a war, but the United States is approaching defeat

Among the current U.S. exports, the most lucrative are chips. The United States has upgraded restrictions, and China is definitely increasing its investment in independent research and development in the semiconductor field. For the US chip giants, the best outcome is that the blockade is successful and unblocked.

However, if the blockade fails, these companies will not only lose the Chinese market forever, but may even lose their excess profits and eat into their global market, and face more severe challenges in the future.

Because even if it is difficult to climb to the sky, China is the only country that hopes to conquer the chip industry, and China is also an extremely rare country in the world with a complete industrial system, and it can be seen from SMIC's results that the revenue of 28nm and 14nm processes accounted for 18% of the total revenue.

Speaking of this, the New York Times also revealed a deep concern in the report, the New York Times said:

"These controls cannot contain China once and for all. Even at their best, they are a delaying tactic designed to give the United States and its allies room to expand their leadership in key technologies. The question is how much time BIS can buy for the West. ”

The New York Times believes that if the United States cannot win, it must fight, and there is no way back, so China can only give up illusions and take the initiative to face the war. Judging from the mood revealed by the New York Times, the mentality of the United States has changed from wanting to win to being afraid of losing.

The reason for this change is that in the years of US sanctions, China's semiconductor situation is not as bad as imagined. And as the darkest hour passes, China is crossing rock bottom and is in a state of imminent reversal.

The U.S. semiconductor giants see the folly of U.S. regulatory policy

Because if the restrictions are really effective, the premise is that China has no chip-making capacity at all. If China does not have the ability to manufacture its own chips at all, as soon as the export of foreign chips stops, our planes, shells, and aircraft carriers cannot be built, satellites cannot go to the sky, and even many key enterprises can only stop production, which is the real stuck neck.

But from the current actual situation, in the past few years of US sanctions, our impact has not been as big as imagined, we can produce 12nm and above chips, basically can meet most of our military, science and technology and ordinary civilian needs.

Americans limit our access to chip technology, and the only impact is high-end chip products, such as mobile phones, tablets, and computers. These products are equipped with low-end chips, which can be used normally, and the performance difference is very subtle. Most of the chips in the automotive industry are self-sufficient.

However, these restrictions have a great impact on American companies. As mentioned earlier, if the US semiconductor giants can't hold on, it may even interrupt their positive cycle of research and development. Then this may well lead to the defeat of this war for the United States.

In fact, the reason why the US semiconductor chip giants want to lobby Biden is because they see the stupidity of the US sanctions policy, because if their domestic companies are broken, even if others have not yet developed, you lose.

The three major semiconductor giants in the United States have also seen that the way to defeat China's chip industry may be dumping, not sanctions, "making is better than buying, buying is better than renting", itself is a strategy pursued by many Chinese enterprises, especially under the influence of the global open division of labor in the past, this value has largely affected many domestic scholars and corporate decision-makers, even when Huawei was suppressed the most, many people in the industry believe that the supply chain has been globalized, and it is impossible for a country to get the entire industrial chain, and it is unrealistic.

Originally, there were different opinions within China on whether the chip industry with such a huge investment should develop independently, but now with the deepening of control, a unified understanding of autonomy has gradually formed in China.

Therefore, interrupting the positive cycle of research and development, forcing talents to leave, US chip sanctions, knocking their own people confused, China's situation is that it is currently in the darkest time before dawn, maybe wait another 3~5 years, the sky will dawn. From the current situation, the country is at the inflection point of the bottom up, and the eagerness of the US semiconductor giants may see that the policy of the old United States is close to failure.

Author: Wang Xinxi TMT Senior Reviewer This article is not reprinted without permission