Once China achieves the capability to produce chips comparable to the latest cutting-edge designs domestically, it will be a watershed moment. As the world’s largest chip market, China’s self-sufficiency would immediately deprive Western firms of a large chunk of their revenue stream. Worse still, China would begin exporting competitively priced chips to global markets, as it did in sectors like electric vehicles, solar panels, and other technologies where it has leveraged scale and state-backed innovation to outpace rivals.
It will be an extinction level event for the Western chip industry, potentially eroding decades of technological leadership and market share in a matter of years. The chip industry operates on razor-thin margins, and companies rely on high-volume sales of new chips to justify the immense capital investments required for their development. A sharp decline in demand would inevitably stall innovation and R&D progress, as firms grappling with eroding profit margins will be under pressure to prioritize short-term survival over long-term technological investment.
This is a great article explaining how the industry works https://compactmag.com/article/fighting-a-chip-war-on-the-cheap
Once that happens I expect the west to go nuclear on this.
They’ve already said it’s national security concerns to sell latest AI chips to China and to buy Huawei, they will slap a total import embargo on these chips and I feel most likely ban western companies from developing software for them to attempt to choke their utility. Could lead to a hard forking of Linux at that point among other more interesting things. I also would expect the west to start enforcing their “clean network” initiative on allies a bit out of the anglo-verse, say leaning on counties in Latin America, Africa, Asia, etc as well as individual companies within them to not use Chinese chips, maybe even slapping on sanctions that western software cannot be used in the same institution or in contact with systems using these “dangerous CCP spy chips” to again attempt to lock in markets for themselves, crush Chinese exports, etc.
We’ll have to see how the current trade war pans out, it could leave the US in a position where it can’t do this, it could leave the US in a position where it can, it could leave it in a position where it’s very easy.
It will be an uphill battle, the west has the high-ground in terms of controlling all the major software, the operating systems, gaming, entertainment, productivity, specialized applications, etc and will likely try and leverage that to lock people into a western hardware/chips+software ecosystem. But it’s good because it will mean a reckoning and a real fight and real independence for China from the west though it will come at the price of some pain obviously.
Needless to say I don’t think westerners will be able to get anything nearing cutting edge or 10-years-recent in terms of these chips due to restrictions.
It’s not just about maintaining the edge on high technology, backdoors in chips like these and sitting atop the vulnerability disclosure process allows the west unprecedented hacking abilities and Chinese chips threaten their global hacking and intercept spying network and thus blinding them (as Huawei did by displacing Cisco/Juniper).
I’d argue we’re at the point where there’s nothing the west can do. Chinese domestic chips are still a couple of generations behind, but the fact of the matter is that it simply doesn’t matter. The only place where bleeding edge chips are really important is in stuff like mobile devices where battery life is a key factor. For applications like data centers, you can just use more older chips to boost performance. It’s less efficient, but it will work fine as a stopgap measure. On top of that, legacy chips are what’s used for vast majority of applications like cars, appliances, robotics, etc. If the US goes nuclear and cuts off chip supply to China entirely, then all that’s going to do is accelerate the process of western chip companies going under.
The other thing to note is that we’re hitting limits of silicon because there’s nowhere to go past 1nm or so. At this point you have to make massive investments to get meager improvements on this substrate. This is why China’s efforts into developing stuff like carbon based chips are so interesting to watch. A new substrate could make silicon look like vacuum tubes overnight, and then there will be decades of improvements down the road. We might get chips that are both orders of magnitude faster and more power efficient as these things go hand in hand. If that happens China will pull ahead in ways that are simply unimaginable. They’d be able to process data on a scale that’s simply impossible with current tech.
Meanwhile, we can already see from the tariff war that pretty much nobody will go along with the US on banning Chinese chips. Canada might, but at this point even Europe looks doubtful. The rest of the world will be a hard no. We can see that happening with solar panels and EVs already. The US is headed towards becoming a hermit kingdom, which will be cut out of global technology stack dominated by China.
This will have huge repercussions because the US will be cut out of standards like 10G internet, and GPMI which will become dominant across the world. It’s going to become harder for US firms to collaborate with others, establish supply chains for their legacy tech, and so on.
The west absolutely does not have any high ground controlling major software or operating systems. I work in the industry, and I can tell you for a fact that pretty much all critical software infrastructure is open source and Linux based. I’m sure there are niche applications for stuff like CNC milling and so on that might only be produced by one company in the west, but these will be few and far between. China has also been intentionally encouraging domestic platforms to develop instead of relying on US based tech. That was the whole point of the firewall. It’s why China has stuff like TikTok and XHS. If anything, China is now more advanced in terms of software with stuff like WeChat which is a comprehensive platform that has no equivalent in the west. It’s not like China just woke up yesterday and realized there was a threat of software dominance by the west. They knew this to be the case for a long time, and have been actively working to mitigate it.
Very much agree regarding the security risk of backdoors, and this is why I think China should’ve been far more aggressive in phasing out western tech, especially on the hardware front.
