tl;dr
China and Taiwan's diplomatic relations are strained over advanced semiconductor chip exports, with Taiwan banning exports to Chinese firms Huawei and SMIC due to national security concerns. China condemned the ban, accusing U.S. influence and threatening retaliation. The U.S. has long warned Taiwan...
China and Taiwan’s already fragile diplomatic relations face renewed tension over advanced semiconductor chips. Recently, Taiwan’s International Trade Administration (ITA) added Huawei and SMIC to its Strategic High-Tech Commodities Entity List, banning exports to two of China’s major firms. This list includes entities involved in national security concerns or arms proliferation, with members ranging from Iran to terror groups like al-Qaeda. In response, China vowed retaliation, with officials condemning the ban as influenced by the U.S. and harmful to both economic and trade exchanges across the Taiwan Strait.
The U.S. government has historically warned Taiwan against exporting cutting-edge chips to China, fearing that such technology could facilitate Chinese advances in artificial intelligence (AI) and compete with American innovations. U.S. sanctions have already excluded Chinese companies from accessing the latest chip technologies, costing industry giants like Nvidia billions in the Chinese market. Amid the new restrictions, U.S. lawmakers are urging international collaboration to prevent China from illegally acquiring advanced technologies.
China reports resilience despite these U.S. sanctions. When Huawei faced setbacks such as losing access to Google’s Android system, it swiftly developed its own operating system and regained ground. Similarly, SMIC, China’s largest chipmaker, has managed to increase production even under American sanctions, outperforming competitors from South Korea and Taiwan. Huawei, while not a chip foundry itself, designs chips and collaborates with SMIC to produce them, cutting into Nvidia’s market dominance significantly and positioning itself for further growth as U.S. restrictions deepen.
Some American executives, including Nvidia CEO Jensen Huang, acknowledge that these restrictions have inadvertently accelerated Chinese innovation, potentially making Chinese firms stronger competitors in the long run. This dynamic underscores the complexity of leveraging trade controls to curb technological progress in a globalized economy.
In parallel to these geopolitical tensions, American tech giant IBM is pushing the frontier of quantum computing with its new project, Quantum Starling, aiming to develop the world’s first large-scale fault-tolerant quantum computer. Quantum computing has become a hotbed of competition and research, with Google, Microsoft, and Amazon all announcing significant advancements recently. Despite heavy investment—$2 billion raised last year alone—quantum computing remains largely experimental and confined to labs, with experts divided on when it might become mainstream. Nvidia’s Huang estimates it could be over 20 years before widespread adoption occurs.