US-China chip rivalry opens new chapter

By Emirhan Yilmaz

ISTANBUL (AA) – The US and China chip rivalry took a new turn when Beijing banned chips manufactured by American companies Intel and AMD from all state institutions.

The two major economic powers' struggle for technological dominance is intensifying as they compete for an advantage in a variety of fields, such as cybersecurity, artificial intelligence (AI), semiconductors, and digital infrastructure.

The US considers China's significant expansion in global chip production as a threat, and the Biden administration has announced that it is preparing to blacklist chip manufacturers linked to the Chinese tech conglomerate Huawei as part of its ongoing assessment of national security measures.

China is reportedly preparing a $27 billion chip fund, the largest to date, to counter US chip regulations.

Furthermore, the Chinese government has begun to ban Intel and AMD chips from being used in state institutions and has begun to nationalize all of its systems.

The Chinese government also intends to ban Microsoft, the US-based Windows manufacturer, and some foreign database products to replace them with 18 domestic companies, such as Huawei and Phytium.

Following China's move, Intel and AMD's global figures began to plummet, as the country is a significant market for both companies, accounting for 27% of total sales and 15% for AMD.

- Sanctions on chipmakers point to new era

Ersin Cahmutoglu, a cybersecurity specialist at Türkiye-based firm ADEO Cyber Security, told Anadolu that China’s ban on chips manufactured by Intel and AMD, both of which are state-owned enterprises, and the US sanctions on chipmakers linked to Huawei herald a new era in the industry.

“The ongoing technology war between the US and China is gaining momentum, as both countries are making great efforts in the struggle for semiconductor production, which means that new steps can be taken in this rivalry," said Cahmutoglu.

He emphasized that many experts believe these decisions could harm the global supply chain and the technology sector.

He recalled that there have been chip crises in recent years, saying: "The chip crisis persisted post-pandemic, and while the cost of production and raw material problems were the main reasons, the struggle for dominance between the US and China also contributed to the crisis. We can see similar crises today after the US announced that it will put pressure on its allies and other Western countries not to buy chips from China.
“China, in turn, is expected to do the same to its neighboring countries, and therefore, it is thought that the supply chain and the chip industry will be negatively affected,” he added.

- Both countries believe foreign chipmakers collect data

Cahmutoglu underlined that the US sees Chinese companies and their products in the country as a national security issue, as Huawei and related firms are accused of collecting data on foreign citizens and organizations on behalf of the Chinese government.

“The US and the UK intelligence services believe that there are backdoors to Chinese products, and they collect data through them in the US and its allied states, as well as in NATO countries. Similarly, China claims that Intel and AMD are working directly for the US,” he said.

“Therefore, China has attempted to completely ban such US products on grounds of security,” he added.

Cahmutoglu warned that these developments could pose a risk to countries and multinational corporations that rely on foreign chipmakers, as well as economic problems in the event of a major crisis and a supply chain halt.

He emphasized that some countries and firms are considering reducing their dependency to avoid being impacted by the current situation.

“Other countries and companies can step in as third party and cooperate, otherwise, as long as the chip rivalry continues, crises may arise,” he stressed.

“The whole world is closely monitoring where the chip rivalry between the US and China will go as governments and multinational firms are aware that someone has to step in to prevent a serious crisis in the technology sector, and currently, it is difficult to predict what will happen,” he added.

*Writing by Emir Yildirim