The UK’s policy strives to shield its industry from adverse effects in the quest for technological supremacy
The UK plans to allocate a billion-pound subsidy to its emerging microchip industry, spearheaded by Rishi Sunak. While the amount may appear substantial, the government’s move is primarily a response to the economic tensions between the US and China. The concept of “friendshoring” and the resurgence of industrial policy are efforts to mitigate unintended consequences in the ongoing struggle for technological supremacy between China and the US.
Both the EU and India are committing substantial funds to chip subsidies, making Rishi Sunak’s proposed £1 billion investment seem relatively modest. Nevertheless, the UK’s goal is not to establish a complete chip supply chain but to align with the US’s approach. The US leverages its influence through critical tools provided by American companies to nearly all chip factories. This influence is wielded through export control powers, isolating China by prohibiting foreign transactions with the country. Initially directed at Huawei, these legislative measures have also been extended to the UK’s ban on Huawei products.
The significance of microchips in a developed economy cannot be overstated. The surge in demand for computers during the pandemic coincided with a decline in chip supply, leading to shortages. This situation was exacerbated by escalating tensions between Beijing and Washington, resulting in a “zero-sum” battle over Chinese chipmakers. President Joe Biden perceives China’s ascent as a threat to the US, prompting other nations to take notice. In a move to safeguard national security, Rishi Sunak’s government blocked the Chinese acquisition of the UK’s largest chip plant in November. Washington’s prohibitions have significantly reduced China’s chip imports.
Last year, US national security adviser Jake Sullivan stated that the US would hinder China’s access to “foundational technologies” like artificial intelligence by restricting access to high-speed processing power. While the US asserts it doesn’t aim to obstruct China’s modernization, the foreign policy establishment seems inclined to do so across various domains. Some observers cynically label this approach as “Trumpism with a human face.
China is dedicating $220 billion to attain self-sufficiency in microchips, making some headway. Germany encountered criticism following reports of its potential ban on crucial chemical exports to China. The UK’s foreign secretary, James Cleverly, suggested that China’s satisfaction with its economic achievements might be short-lived. If the US decides to ban TikTok, the social media platform owned by Beijing-based ByteDance, Britain is likely to do the same. The openness of the internet hinges on the maintenance of market dominance by US or allied companies.
In the previous month, Janet Yellen, the US Treasury Secretary, mentioned that China’s economic expansion doesn’t necessarily need to conflict with US economic supremacy. The idea is that Beijing should focus on supporting strategic industries that don’t challenge the US’s dominant position. This competition revolves around technological expertise rather than divergent governance models. However, predicting innovative developments poses challenges. Geopoliticizing technology carries the risk of jeopardizing international collaboration in critical areas such as clean energy and pharmaceutical development, resulting in a global setback.