Russia launched a war on Ukraine on Thursday, Feb. 24, by sea, land and air, triggering comprehensive sanctions from European and American countries. China announced that China-Russia trade would be as usual on the same day, raising concerns that China helped Russia evade sanctions. However, experts say that Russia requires some types of chips that China cannot produce.
The Bureau of Industry and Security of the U.S. Department of Commerce stated on Thursday that it is restricting Russia’s access to technology and other products. Semiconductors, computers, telephones, information security technology, lasers, and sensors will be unavailable to Russia. The restrictions are aimed primarily at Russia’s defense, aerospace, and maritime industries. The United States is taking this step in collaboration with the European Union, Japan, Australia, the United Kingdom, Canada and New Zealand.
In addition to the Commerce Department’s export restrictions on high-tech products, the U.S., U.K., and E.U. have announced other sanctions against Russia to isolate Moscow from the global economy.
White House spokeswoman Jen Psaki said China and Russia’s share of the global economy are far lower than that of the G7, including the United States and Germany. This means that Sino-Russian trade cannot make up for the impact of sanctions imposed by the United States and Europe.
Beijing has never criticized Putin’s incursions, and China’s foreign ministry spokesman, Wang Wenbin, said on Thursday that trade with Russia would remain “normal” while it approved the import of wheat from Russia. The White House responded that Sino-Russian business was not enough to offset the impact of U.S. and European sanctions on Moscow.
The United States and the European Union hope that sanctions will force Russia to reconsider its policies. However, Wang Wenbin said at a briefing on Friday that China opposed the use of sanctions.
A Chinese chip consultant said that Russia’s industry is failing and depends on global semiconductor supplies. Sanctions are never an effective way to solve problems, he said, “I hope relevant parties will still try to solve the problem through dialogue and consultation.”
Reuters pointed out in an article on February 25 that Russia cannot fully seek help from Beijing in terms of chip supply. In 2019, the United States imposed sanctions on Chinese telecom giant Huawei, cutting off its most committed chip supplies and effectively preventing it from building its chip supply. Extended sanctions in 2020 to China’s largest chipmaker, Semiconductor Manufacturing International Corporation (SMIC), further hampering China’s plans for tech hegemony.
According to the Semiconductor Industry Association, China’s share of global chip exports remains negligible; its fabless chip makers account for about 16% of the global market share. These chipmakers only make circuit designs for hardware chips, which are then handed over to foundries to manufacture, and companies in charge of sales. Reuters said it also limits the extent to which Bhowsia has been severely sanctioned.
“China alone cannot meet all of Russia’s critical military needs,” said a senior U.S. government official.
The official also said China does not have the most advanced semiconductor production technology. “As a result, both Russia and China are dependent on other suppliers, and, of course, on U.S. technology to meet their needs.”
As depicted in the updated chart on tradingeconomics.com, China’s exports of electrical and electronic equipment to Russia totaled 10.75 billion dollars in 2020, according to the United Nations COMTRADE database on international trade.
Doug Fuller, who studies China’s technology policy at the City University of Hong Kong, said that while a complete cut-off of Russian chip imports from other countries by the West might increase Chinese chip exports, “some of the chips that Russia needs, China can’t make anyway.”
China does not have access to advanced equipment and high-end technology, making it challenging to produce high-end chips.
High-end chips are used in everything from advanced smartphones and 5G cellular devices to computers for artificial intelligence.
Over the past decade, China, the world’s largest importer of chips, has invested heavily in semiconductor projects as part of its “Made in China 2025” plan. In Merics Paper on China, it is mentioned that China calls for a 70% self-sufficiency rate for core components of critical technologies by mid-decade.
However, Chinese manufacturers such as SMIC cannot produce high-end chips due to U.S. technology export restrictions. Reuters said that so far, China has mainly made low-end chips.
The Semiconductor Industry Association said in a 2021 report that China is “significantly behind” in tools, materials, and production technologies.
According to the AP, Washington, and Europe, citing security concerns, are preventing Chinese chip makers from gaining access to the most advanced tools and preventing them from competing with global leaders in precision and efficiency.
According to Peter Hanbury of Bain & Company, who works in the semiconductor sector, China will slip further behind without these modern capabilities.
The Wall Street Journal reported in a July 2021 report that the Chinese had difficulty obtaining advanced chip machines. The report said that China wants to supply domestic chipmakers with 150 million dollars worth of machinery, allowing smartphone giant Huawei and other Chinese tech companies to reduce their reliance on foreign suppliers. But Dutch lithography machine maker ASML Holding did not provide even a single machine because it did not obtain a license from the Dutch government.
In January, Peter Wennink, chief executive of ASML, said the company still had not obtained a license to ship its state-of-the-art lithography machines necessary to make advanced computer chips to China.
Huaray said that analysts believe that without ASML’s most advanced machines, Chinese chip makers will not be able to make leading chips until domestic tools catch up. It is estimated that it will take at least ten years for the Chinese to reach the technical level of ASML.
According to U.S. officials, the U.S. government has asked the Dutch government to limit sales out of national security concerns. The United States has the right to do so because ASML’s machines also use American technology.
Reuters reported in a June 2021 Biden administration review of U.S. supply chain vulnerabilities that the Chinese regime is providing 100 billion dollars in subsidies to its chip industry, including the development of 60 new factories, despite the Chinese regime’s having invested heavily in recent years to achieve China’s chip autonomy. However, a spate of bankruptcies, debt defaults, and abandoned projects has ensued from some of those payouts, resulting in massive losses.