DECOUPLING CUTS BOTH WAYS: The Goal for China’s Chip Giant: Cut Out the U.S.

It is a part of a broader campaign to eradicate American technology in China, dubbed “Delete A” or “Decouple From A,” which has accelerated in recent years as the world’s two biggest economies intensify their battle to dominate in next-generation technology.

The Biden administration, and some U.S. allies such as Japan and the Netherlands, have introduced targeted export curbs that have undercut China’s ability to make high-end chips. But those measures have also served as a rallying call for China’s homegrown industry to develop more quickly, leading to big spending, experimentation and even some breakthroughs.

China, defying the global drop in semiconductor-equipment purchases, went on a spending spree in 2023 and represented a third of worldwide sales, according to industry association SEMI. This year, the country will add more new semiconductor-production capacity than the rest of the world combined, all for mature-technology chips, according to an estimate by analytics firm Gavekal Research. In May, China established a third round of its national semiconductor fund worth roughly $48 billion—coming on top of the previous two iterations that totaled nearly $50 billion.

I doubt China’s massive intervention in the chipmaking business will perform much better than Biden’s has but we’ll see.