The raging policy debate in Washington over the export of advanced AI chips to China found a recent proof point laying bare the wisdom of imposing tech bans, courtesy of a much more primitive chip.
In October 2022, the Biden Administration, as part of a broader restriction on the export of advanced U.S. technology, imposed export restrictions on what is called the 14-nanometer chip, which is commonly used in cell phones. Reflecting current thinking at the time, the White House believed banning the humble chip, which was developed by Intel Corp. in 2014, would set back the fortunes of SMIC, the Chinese tech giant, by degrading the company’s ability to produce even basic electronics.
Though the move was viewed as bold, and some critics warned that banning such U.S. exports could actually help companies like SMIC by forcing them to develop their own technology, the general view in Washington was that Biden exercised sound judgment. As Greg Allen of CSIS put it in at the time, it was “going beyond the traditional U.S. policy of seeking to keep the United States’ two semiconductor technology nodes ahead of China and is now trying to actively degrade China’s technological maturity below its current level.”
In essence, Washington was taking on Chinese tech companies, not just China’s government. And in 2022, just as in 2026, nearly everyone in town favors degrading the technological prowess of our biggest economic rival.
Alas, the White House move turned out to be futile. TechInsights, a respected provider of technology intelligence, recently reported that SMIC, supposedly crippled by Biden’s near complete export ban, has developed a 5-nanometer chip rivaling what Korean tech manufacturer Samsung currently produces. Embedded in Chinese phone maker Huawei’s Kirin 9030 phone, the chip is only slightly less advanced on a performance level than what US manufacturers currently produce, a TechInsights teardown revealed.
Here we are: In response to one of the most all-encompassing tech export bans to China Washington has ever witnessed, SMIC roars back with a much better chip than the embargoed item a mere three years later.
For now, the United States designs and produces the world's most advanced computer chips, technology serving as building blocks for the digital age. American companies control around ninety percent of the global AI hardware and accelerator market. Researchers, CEO's, investors and policymakers worry this economic and technological dominance rests on shaky ground, with potentially catastrophic implications.
Where Biden took the hard line, the Trump administration has tried to thread the needle by permitting the sale of all but the most advanced chips to adversaries such as China. And while he drew praise from U.S. chip manufacturers for the move, it’s a short term play. In the slightly longer term, as SMIC and Huawei so ably illustrate, it may not make a difference. No matter who is at fault or not at fault for China’s surge in technological progress,be they adept at smuggling banned Western technology or buy it through the front door, the days of fretting about crippling China’s national champions are likely over. China is too far advanced, the globe is too interconnected and capital flows where it pleases. Cold War thinking about embargos and export restrictions is as dead as a fish in a freezer.
Indeed, as the tale of two administrations show, supporters and detractors of restrictive U.S. export trade policies are both correct – and both wrong. China’s technology is still inferior to ours. Yet restrictions on the export of our technology have almost certainly bolstered China’s determination to achieve self-sufficiency through accelerated research and development programs. As one recent study by CSIS concluded, hard U.S. export restrictions have pushed China to “innovate new technologies that bypass U.S. technologies altogether, ultimately facilitating a shift of global semiconductor supply chains away from the United States."
Just as flagship SMIC chips have evolved from 16 nanometers to five, Washington export policy needs to keep up with the times. AI technology has any number of applications but at its heart is a consumer-driven industry for which the world hungers. Though the U.S. maintains a lead in producing the most advanced, most energy-efficient and most desirable AI products in the world, that lead will surely vanish if U.S. companies are barred from competing against their Chinese counterparts in global markets. Isolationism is awesome until it starts costing countries jobs and talent and influence.
The trendline is clear: China has withstood everything we have to throw at it. Yet it steadily chips away at America's lead in the development of semiconductor technology. The Chinese always find alternate suppliers and gifted engineers, narrowing gaps, and developing home-grown capabilities. Slowing Beijing down and maintaining the largest possible qualitative edge for the longest possible time will require new thinking and surely an eye toward preserving global markets for U.S. goods.
We can no longer live in our forefathers' world of atom bombs and embargoes. We simply cannot risk becoming a 16-nanometer chip in a five-nanometer world.
