It's a common error to conflate the CHIPS Act and the October 2022 chip controls. The CHIPS Act was a legislative effort for domestic manufacturing resilience. The executive export controls were a separate national security policy focused on denying China access to high-end compute for military applications.
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Evaluating export controls by asking if China is still advancing is the wrong metric. The true test is the counterfactual: where would China be *without* the restrictions? The controls act as a significant handicap in a competitive race, not a complete stop, and it's highly likely China would be ahead of the U.S. in AI without them.
The decision to allow NVIDIA to sell powerful AI chips to China has a counterintuitive goal. The administration believes that by supplying China, it can "take the air out" of the country's own efforts to build a self-sufficient AI chip ecosystem, thereby hindering domestic firms like Huawei.
The current trade friction is part of a larger, long-term bipartisan U.S. strategy of "competitive confrontation." This involves not just tariffs but also significant domestic investment, like the CHIPS Act, to build resilient supply chains and reduce reliance on China for critical industries, a trend expected to persist across administrations.
The most dangerous policy mistake would be reverting to a 'sliding scale' that allows China to buy chips that are a few generations behind the cutting edge. In the current era of AI, performance is aggregatable. China could simply purchase massive quantities of these slightly older chips to achieve compute power equivalent to frontier systems.
A small team in the Biden White House successfully implemented crucial export controls on semiconductor technology before ChatGPT's release made AI a mainstream obsession, allowing them to act proactively rather than reactively.
Contrary to their intent, U.S. export controls on AI chips have backfired. Instead of crippling China's AI development, the restrictions provided the necessary incentive for China to aggressively invest in and accelerate its own semiconductor industry, potentially eroding the U.S.'s long-term competitive advantage.
China's superior ability to rapidly build energy infrastructure and data centers means it could have outpaced US firms in building massive AI training facilities. Export controls are the primary reason Chinese hyperscalers haven't matched the massive capital spending of their US counterparts.
The argument that U.S. export controls accelerate China's domestic tech efforts is a fiction. China's "indigenization pedal has been on the floor" since 2014, long before recent controls were implemented. It is a core national priority, meaning U.S. policy has little marginal effect on an already maxed-out effort.
Major US technology policies, such as the October 2022 semiconductor export controls, are not sudden shocks. They are often telegraphed years in advance through influential government commission reports, like the one from the National Security Commission on Artificial Intelligence (NSCAI), which provided the blueprint for these actions.
U.S. export controls on advanced semiconductors, intended to slow China, have instead galvanized its domestic industry. The restrictions accelerated China's existing push for self-sufficiency, forcing local companies to innovate with less advanced chips and develop their own GPU and manufacturing capabilities, diminishing the policy's long-term effectiveness.
