If elected, Joe Biden will try to climb down from the ledge where the Trump Administration finds itself after three years of tech war with China, a senior Democratic Party leader says.
Barney Frank, a former 16-term congressman and ex-chair of the House Finance Committee, told an Asia Times webinar Oct. 22 that nothing will change in America’s rhetoric towards China, but that a Biden Administration would ease some of the Trump Administration’s tech war restrictions in return for Chinese concessions. The US has slapped restrictions on the sale of computer chips to Huawei, ZTE, and other Chinese companies on the Commerce Department’s “entity list,” including chips fabricated by foreign companies with American equipment or software.
Rep. Frank’s estimate is consistent with public statements by former top officials of the Obama Administration who are likely to return to office if Biden wins the Nov. 3 election.
The Trump tech war has failed to slow Huawei’s rollout of 5G mobile broadband, although it has damaged the company’s handset business. Huawei launched its Kirin chipset in 2018 designed by its subsidiary, HiSilicon, to power its high-end smartphones. That ended China’s dependence on Qualcomm chips for mobile phones. China doesn’t have the technology to fabricate the chips, which were outsourced to Taiwan Semiconductor Manufacturing Corporation. In July, the Commerce Department restricted Taiwan from making chips for Huawei because it employs US manufacturing equipment.
On Sept. 9 I broke the story that China could power its 5G base stations with older, less efficient chips that it can make at home or source from a wide variety of suppliers. Huawei and other Chinese companies will fulfill all their orders for 5G equipment, including six million base stations in China alone.
High-end smartphones with computation-intensive features like slow-motion video need the most recent designs with a transistor gate width of just 7 nanometers. The newest chips use energy more efficiently. Only Taiwan and South Korea can produce them; the US chip giant Intel tried but failed, and announced last July that it might abandon the chip fabrication business entirely. Huawei’s 5G base stations, though, run off the power grid rather than batteries, and weigh 25 kilograms, so that the additional size and weight of less-advanced chips do not pose a disadvantage.
TSMC meanwhile has obtained licenses from the Commerce Department to sell Huawei less advanced, or “mature process” chips with a transistor gate width of 28 nanometers and above, according to trade publications. The Commerce Department hasn’t offered an explanation for its flexibility
The rest of the media has started to catch up. A Bloomberg headline Oct. 22 declared, “China outhustles Trump by stockpiling chips needed for China 5G.” The Bloomberg story added, “Huawei Technologies Co quietly spent months racing to stockpile critical radio chips ahead of Trump administration sanctions, ensuring it can keep supplying Chinese carriers in their $170 billion rollout of 5G technology through at least 2021.” Semiconductor industry insiders have known this for months.
Huawei’s handset business will suffer as the supply of Kirin chips runs out, and Chinese competitors like Xiaomi and Oppo will win some of Huawei’s consumer business. But the handset business is a high-volume, low-margin affair. Huawei’s most profitable divisions are the carrier business (which makes mobile broadband equipment) and the cloud business, which integrates broadband with enterprise software.
China meanwhile has committed massive resources to reach self-sufficiency in semiconductors, hiring up to a fifth of Taiwan’s fabrication engineers to jumpstart domestic production. I quoted a Chinese industry executive in my Sept. 9 report: “The best-case scenario for the Americans is an agreement on market share [in China], in which case the US companies survive. The scenario at the moment is that it’s just a matter of time before they don’t. China doesn’t have to export – they just have to produce for their own consumption and that wipes out the US companies.” How long that might take is not clear. The myriad of sophisticated technologies required for high-end semiconductor fabrication are not easy to master, but they are well known, and Chinese materials engineers predominate in the industry.
The US national security establishment has made denying semiconductor fabrication technology an article of faith. Congressman Frank told the Asia Times webinar that if Biden wins, “American policy towards China is one of the areas where you will see the least change from the Trump policies.” Biden “here more than in any other area will be constrained by the outrage that most Americans feel about how the way the economy has grown and fewer and fewer people have shared it,” he added.
Nonetheless, Frank continued, a Biden Administration would be willing to ease restrictions on technology exports to China in return for certain concessions from Beijing, most of all to American technology companies. Here is an excerpt from his exchange with AT journalists:
Q: Will Huawei continue Trump’s policy of crushing Huawei’s 5G efforts? That of course has been one of China’s big complaints, that America policy has been “bullying,” and unfair to single out Huawei, their national champion in telecommunications equipment
A: In the first place it’s not easy to do a 180 reversal. And to the extent that this has become a political symbol, Biden will not be able to say, “China’s off the hook, and we can work with them.” I think what you will probably see is an approach that says, Biden will be willing to make some changes if there were something in return. But a largely unilateral rescission of the anti-Huawei policy is politically impossible in America, even if he wanted to do it.
Q: You talked about mutually beneficial relations between the US and China, I’m sure lights went on among many of our listeners, because that’s how the Chinese argue against American protectionism. If you could advise the Chinese government to do three things upon the presumed ascension of the Biden Administration, what would they be?
A: First, stop the restrictions and the theft of American technology. Allow American companies to operate freely in China without having to give up their technology. Treat foreign investors fairly. Second, there is a human rights component, and the two outstanding issues are Hong Kong and the Uyghurs. Moderate that. And third, diminish the military belligerence and the excessive claims in the South China Sea.
It’s much too early to guess at the details of a Sino-American negotiation to de-escalate the tech war. But there is a fundamental difference between the attitudes of Biden and Trump. Trump and his team want to destroy Huawei by whatever means necessary. But as Benjamin Franklin said, “Neither a fortress nor a maidenhead will hold out long after they begin to parley.”
The Obama foreign policy team that probably would return to office in the event of a Biden victory believes in some degree of cooperation with China. Kurt Campbell, assistant secretary of state for East Asian and Pacific affairs in Obama’s State Department, and then VP Biden’s national security adviser Jake Sullivan, wrote last year in Foreign Affairs:
China has embraced globalization to become the top trading partner for more than two-thirds of the world’s nations…As a global economic actor, China is central to the prosperity of American allies and partners; its students and tourists flow through global universities and cities; its factories are the forge for much of the world’s advanced technology. This thick web of ties makes it difficult to even start to determine which countries are aligned with the United States and which are aligned with China…Even as China emerges as a more formidable competitor than the Soviet Union, it has also become an essential US partner.