the Netherlands and Japan reportedly agreed to codify some of the US export control regulations in their own country. But the devil is in the fine print. “There are certainly voices that support the Americans in this,” says Lee, who lives in Germany. “But there are also some pretty strong voices saying it would be bad for European interests to just follow the Americans and lock down.” Peter Wennink, CEO of Dutch lithography equipment company ASML, said that his company “sacrificed” for the export controls while American companies benefited.
Gaps between countries can widen over time. “The history of these technology mitigation coalitions shows that they are complex to manage over time and require active management to keep them functional,” says Miller.
Taiwan is in a particularly difficult position. Due to their geographic proximity and historical relationship, the economy is closely intertwined with that of China. Many Taiwanese chip companies, such as TSMC, sell to Chinese companies and build factories there. In October, the US granted TSMC a one-year exemption from the export restrictions, but the exemption may not be renewed when it expires in 2023. There is also the possibility that a military conflict between Beijing and Taipei could derail all chip manufacturing activities, but most experts don’t see that happening any time soon.
“So Taiwanese companies have to hedge against the uncertainties,” says Hsu. This doesn’t mean they’ll pull out of all of their operations in China, but they might consider investing more in overseas facilities, such as the two chip factories TSMC plans to build in Arizona.
As Taiwan’s chip industry drifts closer to the US and an alliance solidifies around the US export control regime, the once globalized semiconductor industry moves one step closer to being separated by ideological lines. “Basically, we will be entering the world of two chips,” says Hsu, with the US and its allies representing one of those worlds and the other being China and the various countries in Southeast Asia, the Middle East, Eurasia and Africa where China insists that its technologies be adopted. Countries that have traditionally relied on China’s financial aid and trade agreements with that country are more likely to accept Chinese standards when building their digital infrastructure, Hsu says.
While it would unfold very slowly, Hsu says this disconnect is beginning to seem inevitable. Governments will have to start making contingency plans for when it happens, he says: “The plan B should be: What is our China strategy?”
This story is part of MIT Technology Review’s What’s Next series, where we look at industries, trends and technologies to give you a first look at the future.