While Americans were firing up grills and welcoming the start of summer over Memorial Day weekend, a quiet bombshell dropped half a world away that has reshaped the global artificial intelligence (AI) race. Chinese tech giant Huawei has announced a massive breakthrough in its semiconductor capabilities. This should serve as a stark wake-up call.
This fall, Huawei will be releasing new smartphone chips to compete against US tech firms using a new engineering technique known as “LogicFolding.” This innovation redesigns the bottom layer of semiconductors to shorten the distance data must travel between components, translating into a reduction in latency by upward of 50 percent, while drastically slashing power consumption. Put simply, China’s chips just became a lot faster and more energy efficient.
America’s chips are certainly still the best in the world, for now. But what is deeply unsettling for those of us rooting for America to win the AI race is how Beijing’s new technology surmounts its largest obstacle, the ability to manufacture the smallest transistors. Even more disturbing, Huawei’s Chairman Xu Zhijun was quick to give the credit for his company's new tech to America. Specifically, due to our bad government policy.
The Biden administration imposed a ban on US tech companies exporting their chips to China. This ban was even applied to chips beneath the significantly improved or “latest and greatest” versions, which some are understandably more reticent to make available for sale because of potential military applications.
In a recent interview on Huawei’s breakthroughs, Zhijun stated, “If the United States hadn’t forced our country, our companies, and our industry, we wouldn’t have done something like this. But we are also grateful to the US for enabling our country’s semiconductor industry chain to truly grow. Now the momentum is very good, and everyone recognizes and supports it.”
Biden's export controls now amount to one of the more catastrophic failures of his administration. By refusing to sell prior-generation American chips to China, Biden forced China to make a massive investment in its own semiconductor industry, which is now proving more capable by the day.
Where the story gets really embarrassing is that this policy deprives American tech companies of tens of billions of dollars that could have otherwise fronted the research and development costs of ever more powerful chips, all while the export controls themselves failed miserably in their intended aim to keep the chips with military applications out of the hands of China. There’s an old economic lesson here in how one can’t account for the end buyer of goods in a marketplace – such as a barrel of oil. The only closed economy is the world economy.
Huawei is not alone as a Chinese company taking advantage of Biden-era export controls. Alibaba is now working to develop its own semiconductors as well.
President Trump recently moved to expand the U.S. export market for its chips and has lifted some of the most destructive export controls. Assuming China is willing to reduce its own import barriers (which were implemented as a retaliatory measure in our ongoing trade disputes), it would amount to potentially the most significant victory for free trade that President Trump has achieved in either term.
We can’t freeze the AI race or lock out competitors through heavy-handed government intervention with regulations and export bans. That Biden approach was always destined to fail because technology moved much faster than government. To win, we need policies that allow American companies to innovate and sell through the global supply chain. By growing the global market for prior generation chips, Trump can re-establish the playbook we need to reassert US leadership.
In the meantime, Huawei could at least send Joe Biden a nice thank-you note.
Jon Decker is the executive director of American Commitment and a senior fellow at the Parkview Institute