What is the US-China rivalry about? How do the US and China compete with each other?
The US-China rivalry is driven by many economic factors, and the development of semiconductor chip technology has been at the center of the conflict. Understanding the basis for this competition offers great insight into the world economy and the evolution of technology.
Learn more about the rivalry between the US and China through the lens of technological development and economic history.
Chinese Investment in Technology
China’s economic, military, and national security future depended on developing a homegrown, high-value semiconductor industry. They needed to move beyond assembling devices for global tech giants like Apple and Samsung and begin leading in chip design and manufacture. Beyond the economic benefits, there were also national security and geopolitical strategic concerns behind building a domestic chip industry—key technologies underpinning China’s massive surveillance state heavily relied on inputs of foreign-made chips. If those supplies were suddenly cut off, China would be at risk. Much of the US-China rivalry that exists today has to do with the advancement of these technologies.
In the 2010s, China began pouring tens of billions into its information technology sector, pushing both private investors and state-owned enterprises to invest and shift the center of technological innovation eastward.
(Shortform note: China’s efforts have faced resistance from various quarters, including the United States and its allies. The United States has imposed sanctions on Chinese semiconductor companies and restricted their access to advanced technology, particularly American-made equipment and software. These sanctions aim to curb China’s rapid advancement in semiconductor manufacturing. In addition, the US is working to strengthen alliances with like-minded countries to collectively counter China’s semiconductor ambitions. This includes efforts to coordinate export controls and technology restrictions.)
China Targets Western Firms
On the heels of China’s infusion of state investment into its domestic chip industry, Western firms, eager to get a foothold in the massive and lucrative emerging Chinese market, began doing more and more business with China. Companies like AMD, IBM, Qualcomm, SoftBank, and Arm began licensing core technology to Chinese companies or entering joint ventures with Chinese government-backed enterprises. While this arrangement has been profitable for these companies, critics raised the alarm that these companies’ eagerness to tap into China gave the Chinese authorities leverage over them. The concern is that the Chinese could exploit this leverage to gain access to important technology with national security implications for the US and its allies.
Meanwhile, Chinese interests also sought to buy stakes in US semiconductor companies, further complicating the landscape. Chinese mega-firms like Huawei rose to prominence, grabbing significant global market shares through replication and, at times, alleged technology theft, while also leveraging their position as major customers of massive suppliers like TSMC.
| TikTok and the Global Concern About Chinese Espionage Concern about Chinese technology intrusion extends beyond the semiconductor industry. The White House, Congress, US armed forces, and more than half of US states have banned the Chinese-owned social media app, TikTok, from government-issued devices. There’s broad concern that TikTok’s parent company, ByteDance, could share Americans’ personal data with the Chinese government, or push Chinese propaganda and misinformation. TikTok has strenuously denied sharing user data with the authoritarian government, and in fact, studies from 2023 and 2021 found TikTok’s data collection practices to be comparable to—and no more of a threat than—those of US social media apps. Many experts argue that a total TikTok ban is problematic. Civil liberties groups say a nationwide ban likely could create a dangerous precedent for the US government to dictate how Americans communicate—negatively impacting millions of influencers and other US citizens whose identity, self-expression, communications, and financial health are tied to the app. |
The Global Chip Competition
These developments showcase the complex interplay of economics, technology, and geopolitics in the semiconductor industry. Computing power, the ability to produce chips and complex systems, and the capacity to transmit data faster and more accurately are the modern keys to geopolitical influence and military prowess.
The semiconductor industry had become a focal point in the US-China rivalry, and the stakes were higher than ever. The world was beginning to understand that the struggle for dominance in this industry was not merely an economic or industrial issue—but a matter of national security and global power.
| Is the US Winning the Chip War? Some experts argue that in the global semiconductor competition between the United States and China, the US is currently leading. Several key factors contribute to the US’s advantage in this race: Technological innovation: The US remains a hub for cutting-edge semiconductor design and development. Companies like Intel, NVIDIA, and Qualcomm continue to drive innovation in chip technology, ensuring the US maintains a significant lead in creating advanced semiconductor solutions. Export controls: The US government has implemented stringent export controls that limit China’s access to advanced semiconductor technology. These controls restrict the sale of chips, chip-making equipment, and software containing US tech to China, significantly hampering China’s semiconductor progress. Domestic investment: The US has initiated programs like the CHIPS Act, offering substantial grants and subsidies to companies involved in semiconductor manufacturing within the US. Meanwhile, major players like TSMC and Micron are investing billions in new facilities in the US, leveling the playing field against Asian competition. |
Exercise: Understand the Global Chip Competition
In Chip War, Chris Miller writes that control of the semiconductor industry is a linchpin of global geopolitical strategy. Use these questions to test your understanding of this issue and think about what it might mean for the future economy and international relations.
- Why do you think semiconductors have become such a vital resource and source of competition and rivalry between nations?
- Do you think governments like the US should use economic incentives and pressures to draw the semiconductor industry within their borders, or should they let the free market decide? Explain your answer.
- Do you think that China becoming a major player in the global semiconductor industry represents a threat, an opportunity, or something in between? Explain your answer.
