The United States has imposed new trade tariffs on Chinese goods. These tariffs increase costs for businesses and consumers in the US. Higher prices could lead to reduced sales in the US market. In response, China has announced possible retaliatory measures escalating the ongoing trade war between the US and China.

China’s potential investigation into Apple

China’s market regulator, the State Administration for Market Regulation (SAMR), is reportedly preparing an investigation into Apple’s App Store policies. The focus of the probe includes Apple’s 30% commission on in-app purchases and restrictions on third-party payment services and app stores. This follows a previous investigation in 2024, which found Apple’s commission fees to be fair. However, discussions between Chinese regulators, Apple, and developers have continued since then.

How did the market react to this news?

News of the potential investigation led to a 3% drop in Apple’s share price. Investors fear that increased scrutiny in China could impact Apple’s business in one of its largest markets. Apple has not responded to reports of the probe, and Chinese authorities have not officially confirmed the investigation.

China’s actions against other US companies

China is also investigating Google under anti-monopoly laws. Although no specific details were provided, reports suggest the probe could be related to Google’s Android operating system. Additionally, PVH Corp., the parent company of Calvin Klein and Tommy Hilfiger, has been placed on China’s “unreliable entity” list. US biotech firm Illumina has also been added to this list.

What is the impact of US Tariffs on Apple?

Apple has previously sought exemptions from US tariffs, with mixed success. The latest round of tariffs does not exempt Apple, which could increase production costs and affect prices for US consumers.

The tensions between the US and China continue to create uncertainty for businesses and the global economy. If China proceeds with the Apple investigation, it could escalate the ongoing trade conflict and impact the global tech industry.

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Extreme Ultraviolet (EUV) lithography is a critical technology for manufacturing semiconductor chips smaller than 7 nanometers. For years, Dutch company ASML has maintained a global monopoly on EUV machines using the laser-produced plasma (LPP) method. However, since 2019, US-led sanctions have barred ASML from selling advanced EUV equipment to China, tightening restrictions further in 2024 to include EUV masks, etching machines, and other components.

China’s Innovative Approach to EUV

Chinese scientists are now pioneering alternative methods to bypass these sanctions. A breakthrough in EUV light generation has come from adopting the laser-induced discharge plasma (LDP) method, an innovative approach that avoids reliance on LPP technology. The LDP process involves vaporizing tin with lasers and using high-voltage discharge to generate plasma, which produces EUV light. This method is simpler, more cost-effective, and energy-efficient, though challenges remain in optimizing power output.

A significant milestone was achieved by the Harbin Institute of Technology under Professor Zhao Yongpeng, whose team developed a compact and efficient EUV light source using LDP technology. This innovation aligns with photolithography requirements and earned top recognition at the Harbin Provincial Innovation Achievement Competition.

Chinese Institutes make a Breakthrough

In January 2024, the Harbin Institute collaborated with the Shanghai Institute of Optics and Fine Mechanics to enhance EUV light focusing and control. Other institutions, such as Tsinghua University and Guangdong Bay Area Aerospace Information Research Institute, are advancing related technologies, including power optimization and future light sources.

Meanwhile, Shanghai Micro Electronics Equipment (SMEE) filed a patent in 2023 for EUV radiation generators, signaling progress toward domestic lithography equipment. However, SMEE lags behind global leaders like ASML, as it cannot yet mass-produce machines for chips below 28 nm.

Recent Progress and Strategic Investments

China is backing its chip-making ambitions with serious money, increasing its investment from $19 billion in 2014 to $41 billion in 2023. This investment is starting to pay off. SMIC, China’s biggest chipmaker, has already made 7nm chips for Huawei’s Mate 60 Pro smartphone. Another breakthrough is coming from SMEE, which plans to start making 28nm chip-making machines in early 2025. While this is behind the 3nm chips that global leaders can make, it’s still an important step forward.

These 28nm chips are useful in many products like cars and factory equipment, helping China rely less on foreign suppliers. This progress, along with China’s work on EUV technology, shows how the country is pushing ahead despite international restrictions.

Challenges faced by China in Chip Production

China’s semiconductor industry faces hurdles, including dependency on imported components and US-imposed restrictions. Despite this, the country’s multi-pronged approach, including technological innovation, collaboration, and strategic investment, demonstrates its resolve to overcome these barriers and achieve self-reliance in advanced chipmaking.

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Nvidia CEO Jensen Huang recently visited China to celebrate Chinese New Year with employees and reaffirm the company’s commitment to its workforce and technological collaboration. The visit comes amidst ongoing US-China geopolitical tensions and export restrictions on advanced AI chips. Huang aimed to lift employee morale and highlight Nvidia’s dedication to China’s technology sector. The visit highlights the importance of maintaining global cooperation to drive technological progress, even amidst rising geopolitical tensions.

Huang attended events in Nvidia’s Shenzhen and Beijing offices, including a Spring Festival celebration in Beijing. Praising the team, he highlighted Nvidia China’s low turnover rate of 0.9%, compared to a global average of 2%. Over the years, Nvidia’s workforce in China has grown by more than 50%, reaching nearly 4,000 employees. Huang acknowledged the employees’ loyalty and significant contribution to Nvidia’s global success.

China’s Role in Nvidia’s Growth

China is a crucial market for Nvidia, contributing $5.4 billion in revenue during Q3 FY2024, a 34% year-over-year increase. The region accounts for 17% of Nvidia’s total revenue and remains one of the company’s largest markets after the US and Singapore. Nvidia has collaborated with over 3,000 Chinese start-ups and supports 1.5 million local developers using CUDA, its proprietary AI programming platform.

Geopolitical Challenges

The visit coincided with tightened US export controls on AI chips, targeting China. Nvidia has expressed opposition to these restrictions, warning that they could harm innovation and US technological leadership. In response, China announced an antitrust investigation into Nvidia. Despite these challenges, Huang reiterated Nvidia’s commitment to the Chinese market, describing the company’s 25-year journey in China as an honor.

Huang’s visit also fueled speculation about Nvidia’s potential Asia-Pacific headquarters, with Taiwan being a possible location. As China continues to focus on technological self-reliance, Huang emphasized Nvidia’s role in modernizing the sector and reaffirmed the company’s dedication to supporting innovation and collaboration.

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Microsoft has announced a significant relocation offer for its AI employees based in China. The tech giant is giving these workers the choice to move to overseas locations such as the United States, Australia, and Ireland. This decision impacts around 700 to 800 employees, mainly those working on machine learning within the Azure cloud computing team. A small number of these employees may also get opportunities for international rotations.

Employees have until June 7 to decide whether to relocate or stay with the China team in their current roles. This move comes as Microsoft halts new hiring in China, affecting its offices in Beijing, Shanghai, and Suzhou. Despite these changes, Microsoft assures it remains committed to its operations in China and other global markets.

This relocation offer reflects broader geopolitical issues, especially the escalating US-China tech war. AI technology has become a critical point of contention. The Biden administration is considering new restrictions on exporting proprietary AI models to China, adding to existing limits on Chinese firms’ access to advanced semiconductors and chip-making tools. Microsoft continues to navigate these tensions while pursuing business for its AI services in mainland China and Hong Kong.

Last year, Microsoft relocated some top AI researchers from China to a new lab in Vancouver, Canada. This lab is part of a global initiative to integrate talent from various countries, including China. The current relocation offer is seen as a strategic response to the ongoing trade and tech disputes between the US and China.

The US has recently increased tariffs on several Chinese imports, including electric vehicles and semiconductors, which has further strained relations. China has promised to take measures to protect its interests in response to these actions. Meanwhile, Microsoft’s long-term engagement in China, dating back to 1992, underscores its dedication to maintaining a presence in the region despite these challenges.

As the tech industry adapts to geopolitical shifts, companies like Microsoft are making strategic decisions to ensure their operations and talent pools remain robust. The relocation offer to China-based AI employees is a part of these efforts, reflecting the complex interplay of global business and international relations.

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A recent report by the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG) reveals significant projections for the U.S. semiconductor industry by 2032. The findings suggest a remarkable growth trajectory, driven by strategic policies and industry investments.

According to the report, the United States is poised to triple its domestic semiconductor manufacturing capacity over the next decade. This surge is expected to elevate the U.S. share of global chip manufacturing capacity from 10% in 2022 to 14% by 2032.

Several factors contribute to this anticipated growth. The enactment of the Chips and Science Act in 2022 is noted as a pivotal step in bolstering U.S. chip manufacturing capacity. Additionally, strategic investments by industry giants like Taiwan Semiconductor Manufacturing Co (TSMC) in building a 2-nanometer plant in Arizona, with a planned investment of US$65 billion, further solidify the U.S.’s position in the semiconductor landscape.

The Chips and Science Act has changed the game for the US

The Chips and Science Act has facilitated industry investments, crucial for semiconductor growth. Without this legislation, the U.S. would have captured only 9% of global capital expenditures (capex) by 2032, compared to the projected 28% with the Act in place.

While the report highlights significant growth prospects, it also underscores the importance of supply chain resilience. It warns that industrial policies could create bottlenecks, increasing supply chain risks. Hence, there’s a call for targeted, distributed, and market-based investments to enhance resilience.

The report also talks about the worldwide efforts to strengthen semiconductor industries. Initiatives such as the CHIPS Act in the U.S., the European CHIPS Act, and China’s IC Industry Investment Fund are notable incentives driving global semiconductor investments.

Looking ahead, the report emphasizes the necessity for additional government policy actions to address supply chain vulnerabilities and fortify the U.S. semiconductor industry. Recommendations include expanding critical CHIPS Act incentives, promoting free trade, investing in scientific research, and broadening the STEM talent pipeline.

The CHIPS Act incentives have already spurred substantial investments in the U.S. semiconductor industry. Over 80 new projects across 25 states have been announced, totaling nearly $450 billion in private investments. These projects are anticipated to create over 56,000 jobs in the semiconductor ecosystem, further bolstering the U.S. position in the global semiconductor landscape.

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The technology war between the United States and China has taken a new turn with the emergence of RISC-V, an open-source chip technology. As China intensifies its focus on RISC-V as an alternative to reduce reliance on foreign technologies, the US Department of Commerce has decided to review this development and take new measures against China’s use of RISC V-chip.

RISC-V, known for its versatility and suitability for specialized chips in AI and mobile devices, has garnered significant attention in recent years. China’s rapid adoption of RISC-V is evident, with over 300 Chinese companies leveraging the technology, and major tech giants like Alibaba, Huawei, and Tencent investing in RISC-V-based chips. This concerted effort by Chinese firms underscores the strategic significance of RISC-V in the ongoing technological competition between the two global powers.

The heightened scrutiny from the US stems from concerns about the implications of China’s increasing dominance in RISC-V. Lawmakers have urged the Biden administration to take action to prevent China from leveraging RISC-V to its advantage, citing potential risks to US national security and economic interests. The Commerce Department’s review aims to assess these concerns and explore potential measures to address them.

Google’s recent decision to remove RISC-V support from the Android kernel has further enhanced tensions surrounding the technology. While this move may impede RISC-V chip vendors targeting Android systems, analysts suggest that developers could potentially restore RISC-V support with additional effort. Nevertheless, the implications of Google’s decision highlight the broader ramifications of the US-China technological competition on global innovation and supply chains.

However, controlling China’s access to RISC-V technology presents a formidable challenge for US policymakers. The relocation of RISC-V International to Switzerland in 2020 was a strategic move aimed at insulating the organization from geopolitical influences and limiting US regulatory options. Imposing restrictions on RISC-V could disrupt the global supply chain and also hinder US companies’ participation in international RISC-V development efforts.

As the Commerce Department navigates these complexities, it must strike a delicate balance between safeguarding national security interests and preserving the competitiveness of US companies in the global marketplace. The outcome of this review will not only shape the future trajectory of RISC-V technology but also influence the broader dynamics of the US-China technological rivalry.

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To address national security concerns, the US Department of Commerce has embarked on a thorough review of China’s involvement in open-source RISC-V chip technology. RISC-V, a burgeoning alternative to proprietary technologies like those from Arm Holdings, has garnered significant attention for its versatility, spanning applications from smartphone chips to cutting-edge AI processors.

With major Chinese tech firms, including Alibaba Group Holding, using RISC-V, the strategic competition over advanced chip technology between the US and China has intensified. This has prompted 18 US lawmakers to urge the Biden administration to prevent China from attaining dominance in RISC-V technology.

In light of these concerns, the Commerce Department has confirmed its commitment to evaluating potential risks and exploring appropriate measures within its jurisdiction. However, it is also striving to proceed cautiously to avoid obstructing the participation of US companies in international collaborations concerning RISC-V technology.

Previous restrictions on transferring 5G technology to China have highlighted difficulties for US companies in global standards organizations, which could endanger US dominance in the sector. In this context, the Commerce Department’s examination of China’s role in RISC-V technology emphasizes the wider geopolitical consequences of technological rivalry.

China’s military institute, the PLA’s Academy of Military Sciences, has notably adopted open-source RISC-V technology, utilizing it in patents for high-performance chips to improve reliability in cloud computing and smart cars. Chinese state entities and research institutes have made substantial investments in RISC-V projects, aiming to contest the dominance of Western architectures such as x86 and Arm.

While RISC-V has yet to surpass the dominance of x86 and Arm architectures, its advantages in cost-effectiveness, customizability, and energy efficiency have made it an attractive prospect for chipmakers and OEMs. However, the increasing adoption of RISC-V in China, supported by substantial government funding, has raised concerns about its potential impact on US technological leadership and national security interests.

As the Commerce Department continues its review, the outcome will likely shape the trajectory of US-China technological competition and influence policies regarding the transfer of advanced chip technologies.

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Smaller Chinese semiconductor design firms have encountered challenges in securing advanced packaging services domestically, prompting them to seek alternatives. Malaysia, a significant player in the global semiconductor supply chain, has emerged as an appealing destination for Chinese chip firms. Unisem, majority-owned by China’s Huatian Technology, and other Malaysian chip packaging companies have reported increased business and inquiries from their Chinese counterparts.

The factors driving Chinese interest in Malaysia include the positive perception of Malaysia’s relationship with China, affordability, a skilled workforce, and access to sophisticated equipment. Unisem Chairman John Chia emphasized that the business dealings are legitimate and compliant, despite concerns over potential reactions from the US. Notably, Unisem’s customer base in Malaysia is predominantly from the United States.

Malaysia currently contributes 13% to the global market for semiconductor packaging, assembly, and testing, with ambitions to increase this share to 15% by 2030. Chinese chip firms, including Xfusion and StarFive, are actively planning expansions in Malaysia, joining the ranks of global giants like Infineon and Intel, which have already made multibillion-dollar chip investments in the country.

Amid the global semiconductor landscape’s evolving dynamics, other countries such as Vietnam and India are also positioning themselves as alternatives for chip manufacturing services. This trend reflects a broader industry shift where Chinese companies seek to assemble their chips outside China, mitigating geopolitical risks and gaining easier access to non-Chinese markets.

As Malaysia continues to attract substantial investments in the chip industry, the collaboration between Chinese semiconductor design companies and Malaysian chip packaging firms underscores the industry’s adaptability and the pursuit of strategic partnerships in response to geopolitical uncertainties.

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In a landmark move, the United States government has granted indefinite waivers to South Korean technology giants, Samsung Electronics and SK Hynix, allowing them to supply US-made chip equipment to their Chinese factories without the need for separate US approvals. This decision marks a resolution of a significant trade issue for these semiconductor companies, eliminating the uncertainty caused by the previous requirement of one-year waivers on US sanctions regarding advanced technology imports to China.

Samsung Electronics and SK Hynix, together commanding nearly 70 percent of the global DRAM market and 50 percent of the NAND flash market, play a pivotal role in the semiconductor industry. China’s integral part in its production capabilities cannot be overlooked, with a substantial portion of Samsung’s flash memory chips and SK Hynix’s dynamic random access memory (DRAM) and NAND capacity being sourced from the country.

The US had previously imposed stringent restrictions on China’s access to semiconductor technology due to national security concerns, tightening these controls in August 2022. This decision to grant indefinite waivers not only stabilizes the global semiconductor supply chain, vital for electronics and telecommunications, but also carries significant geopolitical implications, involving the US, South Korea, and China in the context of the global technology and semiconductor industry.

Central to this development is the World Trade Organization (WTO) involvement, with China having raised concerns about the stability of global industrial supply chains due to the US’s chip export control measures. The indefinite waivers not only address these concerns but also emphasize the importance of US machinery, enabling Samsung and SK Hynix to import advanced American equipment crucial for their semiconductor manufacturing operations in China.

The Biden administration’s decision to grant these waivers represents a shift in US policy, reflecting a more nuanced approach to semiconductor exports to China. For Korean chip companies, this decision not only solidifies their position as key suppliers but also provides them with the confidence to plan long-term investments and capital spending in China, reducing uncertainties that previously hindered their strategic planning.

This decision highlights the intricate dynamics within the semiconductor industry, entwining trade policies, national security considerations, and the actions of major players such as the US, South Korea, and China. The grant of indefinite waivers ensures the stability of the global technology and semiconductor markets, reinforcing the interconnectedness of economies in an increasingly complex world.

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In a significant move, the US Commerce Department has added 42 Chinese companies to its export blacklist, accusing them of aiding Russia’s military and defense industrial base amidst the ongoing conflict in Ukraine. The companies, including semiconductor players in Hong Kong and mainland China, allegedly supplied US-origin integrated circuits to importers associated with the Russian military sector after March 1, 2023.

The microelectronics in question are crucial for Russia’s precision guidance systems in missiles and drones, which have been deployed against civilian targets in Ukraine. The Commerce Department’s action reflects its determination to halt the flow of US-origin items to Russia’s military, emphasizing the gravity of the situation.

Apart from the 42 Chinese entities, seven other companies from Britain, Estonia, Finland, Germany, India, Turkey, and the United Arab Emirates also found themselves on the US export control list. These additions underscore the global implications of the conflict and the collaborative efforts to curb support for Russia’s military activities.

The move by the US drew swift condemnation from Beijing, which vehemently opposed the decision, labeling it as “a typical act of economic coercion and unilateral bullying.” The Chinese Ministry of Commerce criticized the US for abusing export control measures, urging an immediate correction of these practices and an end to the unjust suppression of Chinese companies. China declared its intent to take all necessary measures to defend the legitimate rights and interests of its firms affected by the blacklist.

The US decision reflects a broader international effort to prevent the proliferation of advanced precision-guided weapons systems. The situation highlights the intricate challenges faced by nations in balancing economic interests and national security concerns in the face of global conflicts.

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In a move that is set to exacerbate already tense relations between the United States and China, the U.S. government is finalizing updated regulations regarding the export of chip-making equipment to China. These rules, aimed at tightening restrictions and closing existing loopholes, specifically target shipments of semiconductor equipment and advanced artificial intelligence chips.

The initial restrictions on chip-making equipment exports to China were put into effect on October 7, 2022, causing strains in the bilateral relationship between the two economic powerhouses. The updated rule, titled “Export Controls to Semiconductor Manufacturing Items, Entity List Modifications,” has been posted on the Office of Management and Budget website, following a typical procedure involving agreement among various departments including State, Defense, Commerce, and Energy.

The specifics of the regulation were revealed by an anonymous source familiar with the matter, as government rules are usually kept confidential until a consensus is reached among the concerned departments. The Biden administration’s approach involves publishing both rules simultaneously. While a spokesperson for the Department of Commerce refrained from commenting on the matter, it is anticipated that these new restrictions will limit China’s access to crucial chip-making tools and advanced AI chips from the U.S.

The implementation of these enhanced export controls is expected to further strain U.S.-China relations. With tensions already high between the two nations, these restrictions could have far-reaching consequences for the global technology supply chain, impacting industries and economies worldwide. The move is indicative of the United States’ commitment to safeguarding sensitive technologies, even at the cost of diplomatic relations, in an era where advancements in semiconductor technology are at the forefront of global economic competition.

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In a move aimed at safeguarding national security interests, the U.S. Commerce Department has unveiled its final regulations to prevent semiconductor manufacturing subsidies from benefiting countries considered potential threats, such as China and Russia. These rules mark the last step before the Biden administration can distribute $39 billion in subsidies allocated for semiconductor production, research, and workforce development under the “Chips and Science” law, which provides a total of $52.7 billion.

The newly introduced regulations, initially proposed in March, establish strict rules around the utilization of U.S. funding. They restrict recipients from expanding semiconductor manufacturing operations in countries like China and Russia, which are viewed as national security concerns. Additionally, the rules discourage recipients from engaging in joint research projects or technology licensing with entities from these countries.

Commerce Secretary Gina Raimondo emphasized the need for vigilance, stating, “We have to be absolutely vigilant that not a penny of this helps China to get ahead of us.” Under the regulations, the Commerce Department has the authority to reclaim federal awards if recipients violate the imposed restrictions.

The policy imposes a ten-year ban on grant recipients significantly increasing semiconductor manufacturing capacity in nations flagged as concerns. It also prohibits beneficiaries from collaborating on joint research initiatives or licensing technologies from unreliable foreign parties. However, the regulations permit the use of global standards, patent licensing, and foundry and packaging services.

Furthermore, the rules define “material expansions” as any increase in production capacity exceeding 5% and link such expansions to the addition of cleanrooms or other physical space. Beneficiaries are barred from constructing additional cleanrooms or manufacturing lines that would augment a facility’s production capacity by more than 10%.

Additionally, the regulations identify specific semiconductors crucial to national security, subjecting them to more stringent controls. This category encompasses current-generation and mature-node processors for quantum computing and those used in radiation-intensive conditions and specialized military applications.

These final regulations signal the U.S. government’s commitment to maintaining a competitive edge in semiconductor technology while safeguarding against potential threats to national security.

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The Chinese Embassy in the Netherlands has strongly objected to the newly imposed regulations limiting exports of advanced semiconductor equipment, asserting that they exploit export control measures and contradict the principles of free trade and international trade rules.

On Friday, the Dutch government issued a ministerial order restricting the export of specific advanced semiconductor equipment, widely believed to be targeting China due to pressure from the United States. In response, China’s Ministry of Commerce issued a statement urging the Netherlands not to impede bilateral cooperation in the semiconductor industry and to refrain from misusing export controls.

In response to the newly imposed restrictions on semiconductor equipment exports by the Dutch government, the Chinese Embassy in the Netherlands has called for an immediate correction of what it deems as mistaken practices. The embassy urged the Netherlands to consider the maintenance of international trade rules and the overall state of China-Netherlands economic and trade cooperation. Additionally, the embassy expressed willingness to collaborate with the Dutch side to explore mutually beneficial solutions and promote the healthy development of bilateral economic and trade relations.

The statement, made in response to media inquiries, highlighted the frequent and varied communication between the two countries on this matter. The Chinese government emphasized the importance of open dialogue and cooperation in the semiconductor sector.

The Dutch government’s decision to impose new restrictions on the export of certain semiconductor equipment aligns with the U.S.-led efforts to curtail the supply of high-tech components to China.

The move is likely to escalate tensions between China and Western nations, as the global semiconductor industry plays a crucial role in various sectors, including defense, electronics, and automotive industries. Restrictions on the export of semiconductor equipment can have significant implications for technological development and international trade relationships.

The response from the Chinese Embassy emphasizes the importance of maintaining fair and open trade practices while urging the Netherlands to reconsider the impact of these restrictions on bilateral cooperation.

The development comes amidst ongoing geopolitical and economic frictions between China and several Western countries, particularly the United States. The control and regulation of advanced technologies, including semiconductors, have become key points of contention in this dynamic.

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DJI has strongly refuted recent online rumors claiming that the company has refused to pay fines and is exiting the US market. The company said that it has not issued any official statements or external communications conveying such information.

In a recent ruling by a federal court in Texas, DJI was found to have infringed upon the intellectual property of Textron, an aerospace technology company based in the United States. Following a trial that lasted for a week, the jury concurred with Textron Innovations, a subsidiary of Textron, in their claim that DJI’s drones violated two patents, ‘vehicle following’ and ‘ automatic hovering’ associated with drone flight control systems. The court then ordered DJI to pay damages totaling $279 million. 

In response to the verdict, DJI released an official statement expressing its strong opposition to the ruling. The company stated that it will actively pursue all available means to defend its legal rights in this matter. DJI said that it has independently developed its technologies, having clear distinctions from Textron’s patents. While Textron’s vehicle-following technology incorporates both the position and direction of the followed vehicle, DJI drones solely rely on the position of the subject being tracked.

Similarly, DJI’s automatic hovering feature does not operate through a pilot inside the vehicle controlling it with mechanical and hydraulic systems, as claimed in Textron’s patent. Instead, DJI’s hovering functionality is based on a drone operator using a handheld remote controller. These differences underline DJI’s unique approach to technology development and refute claims of patent infringement. It further stated that “Textron is a military helicopter company. DJI is a civilian drone company. No commonality exists between the technologies,” 

Founded by Frank Wang in 2006, DJI started as a small venture in a college dorm room. It has since grown into a prominent tech company with thousands of employees, a quarter of whom are engaged in research and development activities. DJI’s products have found applications in military settings, joining the ranks of various other technology companies in this regard. However, in December 2021, the United States government placed DJI on an investment blacklist due to allegations of its involvement in surveillance activities targeting Uighur Muslims in China’s Xinjiang region.

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The European Union is reportedly making plans to introduce new laws to address the potential dangers of Chinese technology. One proposal being considered is the implementation of a screening process for investments going out of the EU that specifically target China. Additionally, the EU is looking at developing a coordinated response to address any risks associated with Beijing’s use of technology. The scope of the proposed laws is intended to go beyond current restrictions, bans, and investigations focused on apps such as TikTok.

Last week Ursula von der Leyen, the President of the European Commission said that it is important for the EU to be ready to establish protective measures against the potential exploitation of trade and investment by China. 

She further emphasized that preventing China from acquiring “sensitive technologies” that can be utilized to suppress human rights or impose security restrictions is crucial and China’s evolving policies may necessitate the creation of new protective measures for key sectors. In cases where dual-use purposes cannot be ruled out or there are concerns about human rights, there must be a distinct demarcation regarding whether exports or investments align with the EU’s security interests.

These statements come right after the ban of the Chinese app Tiktok. Back in February, TikTok was banned by the European Commission and the EU Council on staff phones. This followed in the footsteps of the US federal government and over 25 states who had already prohibited the use of TikTok on official work devices. Canada, Belgium, and Britain have also implemented similar measures.

Though the EU has only banned TikTook from staff phones, it is planning to concentrate its defenses on safeguarding other “sensitive high-tech areas” such as microelectronics, robotics, quantum computing, biotech, and artificial intelligence. 

Von der Leyen emphasized the importance of preventing EU companies’ knowledge, expertise, and resources from being used to strengthen the military and intelligence capabilities of systemic rivals. She called for a review of any potential gaps in the EU’s existing toolbox that may enable the leak of sensitive technologies through investments in other nations. The focus, according to von der Leyen, should be on emerging technologies that have the potential to develop military capabilities and pose a risk to national security.

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China saw a sharp fall in its semiconductor imports in the first two months of 2023. According to the data published by the Chinese customs department, the country’s chip imports fell by 27% in January and February 2023. It is unsurprising that imports have declined, considering that China experienced a 15% decrease in semiconductor imports last year, the first drop of this magnitude in two decades.

According to data published by the General Administration of customs, China imported 67.6 billion Integrated Circuits (IC) in the last two months which is 26.5% less than the imports for the same period in the previous year.  The total value of imports also fell from $68.8 billion to $47.8 billion, which is a 30.5 % fall. Even though the global chip prices are falling, China is not able to take the advantage of the competitive pricing as it is facing major restrictions on trade from the US.

The ongoing US-China Trade War:

Last year the US banned the sale of advanced chips used for artificial intelligence and cloud computing to China. The Biden administration not only banned the sale of chips but also the sale of semiconductor technology, manufacturing equipment, and personnel. The US has not only banned its companies from exporting semiconductors and related technology to China but also roped in allies like Japan, Netherlands, Taiwan, and South Korea to stop their companies from exporting semiconductors to China. 

The sanctions and curbs have limited China’s options for import as major semiconductor companies like Nvidia, ASML, Tokyo Electronics, and more are now barred from selling their advanced technology and products to China. To make matters worse, Washington is now planning to limit the use of semiconductors manufactured within China by foreign companies that use US technology. This means companies like Samsung and SK Hynix which have their fabrication units in China may not be allowed to manufacture and sell chips made in China. 

Effects of US sanctions on the Chinese Semiconductor Industry:

The US-China trade war started in 2018 when then-president Donald Trump imposed sanctions and tariffs on exports to China in order to stop alleged unfair trade practices and intellectual property thefts.

The US has already added Chinese tech giants Huawei and ZTE to the infamous entity list.  The list has more than 639 Chinese or China-related businesses and individuals on the trade blacklist. Companies on the entity list are banned from receiving  US-origin goods, services, and technology.

China’s biggest chipmaker SMIC is also on the entity list. This has hindered the expansion plans of SMIC as the mass production at SMIC Jingcheng is postponed by a couple of quarters due to a delay in getting bottleneck equipment from foreign companies. 

China is the world’s largest semiconductor market and accounts for almost one-third of global sales. The semiconductor industry plays a vital role in the country’s technology sector and accounts for almost 30% of the GDP.  However, the country is not self-sufficient in this field, as it is heavily dependent on foreign nations for advanced technology and equipment.

Though the semiconductor imports have declined in 2023, other manufacturing industries have revived and grown in the last two months after China withdrew its zero-covid policy in December 2023.  

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(source)

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Germany is planning to ban components made by Chinese companies like Huawei and ZTE from parts of its 5G Network. The move is a part of the German government’s plan to revive and reshuffle its telecommunication network to address national security concerns. 

A spokesperson for German Interior Ministry said that the government was carrying out a general review of telecom’s tech suppliers and preparing a draft list of potential threats. However, he said that the ministry was not targeting any specific manufacturers or companies. 

The ban if levied will stop telecommunication operators across Germany from using components from specific Chinese companies like Huawei and ZTE in their 5G network. 

The potential ban will create an additional burden for telecom operators as they may have to remove and replace parts already built into the network without any compensation from the government.

The US-China tech war has intensified over the years with many allies like Japan, Netherlands, and South Korea joining the US to curb the technological advancement of China. The Biden administration is nervous about the technological advancement of China, especially in the field of Artificial Intelligence and futuristic tech, and is slapping sanctions on technology export to China in order to slow down its progress.

Recently the European Commission also joined this group by banning its employees from using the Chinese-owned social media app TikTok on their work-related devices, citing cybersecurity concerns. Though the European Union has not explicitly banned Huawei or other 5G equipment vendors, the UK has banned Huawei from making new contracts in the country. 

Now Germany plans to join this group to ban Chinese companies. Noah Barkin, MD of Rhodium Group’s China practice said that the plan to ban Chinese firms is a sign that the German government may finally be taking China-related risks to national security seriously. 

According to Reuters, an interior ministry paper stated that a specific supplier could be banned from providing critical components if it were deemed to be directly or indirectly controlled by the government of another state. 

Huawei, ZTE, and the Chinese government have repeatedly rejected the claims of espionage and national security threats. The Chinese government has said that ongoing sanctions are motivated by a protectionist desire to support non-Chinese rivals and hinder China’s technological advancement. 

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American technology company Nvidia may face new challenges as the US plans to add more sanctions on trade with the Chinese tech giant Huawei. China is Nvidia’s second-largest trade partner with an annual revenue of $7111 million in 2022 alone and the Chinese company Huawei is an important customer of Nvidia.

According to Reuters, a draft report by the US government proposes to add more restrictions and sanctions on trade with Huawei. As per the draft report, the proposed 2023 amendment of (the Commerce Department’s) licensing will likely have a high economic impact on Nvidia.

Nvidia declined to comment on the matter and said that the company is in no position to comment on pending licenses. However, the company said that China was a very important market for the US semiconductor industry and the company would work globally with customers and partners to comply with all applicable export controls and meet market demand.

The US Department of Commerce did not provide an official comment on the report. A senior officer from the State Department said that the document was a preliminary draft prepared by an outside contractor and the government had still not reviewed or approved the contents of the report. He further added that the government had written and contracted multiple reports on this subject, based on different contingencies, which arrive at very different conclusions. 

Though the draft is not approved by the government, it sheds light on the US government’s plan to impose additional sanctions on the Chinese technology conglomerate Huawei. Apart from Nvidia, it also mentioned the tech giant Qualcomm and its business with Huawei. However, the draft concluded that in the case of Qualcomm and Huawei, Huawei stood a chance to lose more than Qualcomm as it heavily relied on Qualcomm’s chips to power its smartphones. 

In 2019, the Trump administration added Huawei to the infamous entity list. The current Biden administration has continued with the restrictions and is increasing the curbs on Huawei and other Chinese tech companies. Under the US sanctions, exports, re-exports, and transfers to Huawei and its listed affiliates of any items subject to the EAR (including EAR99 items) without a license are restricted. 

Trump administration imposed the trade ban on Huawei, citing national security concerns, which barred the company from using Android OS for its new smartphones, among other critical U.S.-origin technologies. The sanctions caused its smartphone sales to plummet. However, Huawei continues to generate revenue via its networking equipment and cloud divisions and is now exploring the lucrative electric vehicle (EV) sector.

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(Source)

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US Commerce Department and other regulatory authorities approved around 70% of licenses for export to China in 2022. This is despite the ongoing US-China tech war and the extreme sanctions on semiconductor export to China. 

Alan Estevez, the Under Secretary of Commerce for Industry and Security said that in 2022 the US government approved around 69.9% of export applications involving China. This means only 30.1% of applications were rejected or returned without action. 

He further added that even though the approval rate is high, there are no loopholes when it comes to approvals for China.  The average processing time for approvals was 40 days but for applications related to China, the average time for approval was 77 days or more. 

According to Reuters, Eztevez who is going to attend the US Foreign Affairs Committee hearing on “Combating the Generational Challenge of CCP Aggression”, is going to present his case and reassure the government that China remains the main focus of the enforcement bureau and he and his team will continue to work towards this goal in 2023. The Combating the Generational Challenge of CCP Aggression hearing is happening today before the House of Representatives at the US Capitol Building. 

US-China Trade War:

The US-China trade war started in 2018 when then-president Donald Trump imposed sanctions and tariffs on exports to China in order to stop alleged unfair trade practices and intellectual property thefts. China plans to become the global leader in artificial intelligence, military weapons system, and quantum computing and the US wants to limit this progress in order to safeguard its economic and military interests. The current Biden administration also continues to impose sanctions and restrictions on exports to China, to control and crush the Asian economy. 

The US has already added Chinese tech giants Huawei and ZTE to the infamous entity list.  The list has more than 639 Chinese or China-related businesses and individuals on the trade blacklist. Companies on the entity list are banned from receiving  US-origin goods, services, and technology. 

The US has mainly banned the export of semiconductor machinery, technology, personnel, and technical know-how to China, which is the largest consumer of semiconductors in the world. The Biden administration also successfully roped in allies like the Netherlands, Japan, and South Korea to impose restrictions on their semiconductor exports to China. 

Eztevez justified these restrictions by saying that the sanctions were imposed to address concerns related to the production of advanced semiconductors. He further added that these controls are not intended to stop the production of legacy semiconductors, and are neither tools of economic protectionism instead they are national security and foreign policy tools. 

US-China Record Trade Despite Ongoing Sanctions:

Despite the ongoing trade war, US and China set a record high trade figure in 2022.  The total import and export increased by 2.5% YoY reaching a whopping $690 billion. The previous record was set in 2018 for $658.8 billion. 

The US trade deficit with China also increased to $382.9 billion reaching 8.3% YoY. In 2022, China was the third largest trading partner of the US after Canada and Mexico and the largest source of imports for the country. On the other hand for China, the US was the largest single-country trade partner and the third largest trading partner after ASEAN and EU. 

The record trade figures show that the US and Chinese economies, heavily rely on each other and despite the ongoing tech war and diplomatic stand-offs decoupling both economies does not seem viable.

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The US-China Tech war is getting intense, as the Biden administration is now planning to add more sanctions on Huawei. 

In a bid to curb the technological advancement of China, the US has already added various sanctions on semiconductor exports and also pressured allies like Japan and Netherlands to stop their companies from exporting semiconductor tech to China.

Now Washington is going to add more export restrictions on the Chinese tech giant Huawei. The US is planning to cut off Huawei completely by boycotting the company. 

China has reacted strongly against the latest news of sanctions against Huawei. The Chinese foreign ministry official, Mao Ning, stated that China is deeply concerned by this news. 

She further added that the government is closely following the relevant developments and firmly opposes the United States’ generalization of the concept of national security, abuse of state power, and unreasonable suppression of Chinese companies. 

China has clearly stated that additional sanctions on Huawei are a blatant violation of international economic and trade rules. The Chinese government has promised that it will firmly safeguard the legitimate rights and interests of Chinese companies. 

Huawei Has Faced US Sanctions Since 2018

This is not the first time that Huawei has faced such sanctions. In 2018, the US government banned the use of Huawei and ZTE-made devices, citing national security concerns. 

In 2019, the government restricted all US companies from conducting business with Huawei, saying that the Asian Tech giant supplied important and sensitive data of US nationals, back to Beijing and Iran.

In 2020, the US further placed a blanket ban on selling semiconductors, related equipment, technological know-how, and personnel to Huawei.  

Huawei was on its way to become the greatest tech company in the world and had already taken over Samsung and Apple to become the biggest smartphone seller in the globe, in 2020. However, the US sanctions affected the technological advancement and financial projections of the company, forcing it to take a back seat. 

Already, US-China relations are tense with the ongoing semiconductor ban and technological sanctions that the US has placed on China. The Biden administration is nervous about the technological advancement of the Asian giant, especially in the field of Artificial Intelligence and futuristic tech, and is slapping sanctions on technology export to China in order to slow down its progress.

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