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US-China tech race is really a chip talent war

US President Joe Biden signed into law this month the Chips and Science Act that provides US$52.7 billion in subsidies aimed at outcompeting China in semiconductor production – part of a US$280 billion bipartisan industrial policy to boost semiconductor manufacturing. Days later, the US government placed four more critical technologies on an export control list, choking off Chinese access to them.

Moving at warp speed, however, China’s largest chip manufacturer, Semiconductor Manufacturing International Corp (SMIC), has secretly mastered how to produce chips using “7 nanometre” technology.

SMIC’s advance in production technology now puts it on a par with the US’ Intel, and only one generation behind the world’s most advanced chips in mass production, the 5nm generation produced by Taiwan Semiconductor Manufacturing Company (TSMC). Leaving aside the US’ robust economic alliance with Taiwan and South Korea, American and Chinese chip capabilities are roughly on an equal footing.

China’s stealth breakthrough has made a mockery of two US administrations’ efforts to restrict technology exports to China by the world’s leading manufacturers. The Biden administration’s whole-of-government approach is intended to stifle China’s ambition to move below 10nm technology. Clearly, it has failed.

However hard the Biden administration tries to counter Chinese chip manufacturing, there is a fatal flaw in its logic, and a critical factor it fails to take into account: talent flow.

The US can ban the sale of technology, equipment or other tangible products to China. But it cannot stem the free flow of global tech talent from the world to China.

In upholding the sanctity of human freedom, the West is also morally bound to support free-willed individuals who are fulfilling personal aspirations beyond national borders.

Huawei has been openly recruiting global talent, for example. In April, the Chinese tech group posted a recruitment notice for prodigies from all around the world, promising “limitless” salaries. In the past two years, Huawei has recruited 26,000 fresh graduates, including 300 prodigies. This year, the aim is to hire 10,000 fresh graduates.

Renowned French mathematician Laurent Lafforgue joined Huawei last September, a sign that its aggressive talent strategy is working. The world’s top scientists are also rational agents in the free market. With salaries, perks, grants and teams that are many times what Western tech companies can offer, the balance may gradually tilt in China’s favour.

Moreover, nearly two-thirds of graduate students in electrical engineering and computer science in the US are foreign nationals. Many are from emerging economies that have no emotional stake in the outcome of China-US strategic competition.

One of the US’ most promising space ventures, SpaceX, is run by Elon Musk, a South African immigrant whose other venture – Tesla – already relies heavily on both production and the market in China. Axiom Space, founded by Iranian immigrant Kam Ghaffarian, aims to launch the world’s first private international space station. These individuals are more passionate about advancing human civilisation and pushing back the frontiers of tech than having any role in US-China tech decoupling.

Without human capital, there can be no industrial revolution. If China manages to attract the talent, it will only be a matter of time before it has the world’s most advanced technology, including chips.

The US can ban Chinese from elite American science institutions, but can it also ban students from Saudi Arabia, Iran, Vietnam or elsewhere? Such bans would mean a huge loss of talent for the US. What measures could the Biden administration take to prevent global talent flowing to China after these young people have gained knowledge and training in semiconductor technology in the United States?
When the Trump administration choked off Huawei’s access to chips made with US software and technology, the company was badly affected. Several senior executives from Huawei’s chip subsidiary, HiSilicon, have joined Unisoc, a chip manufacturer under state-backed Tsinghua Unigroup, while others may have gone to Taiwanese chip design house MediaTek.

Thus, executives continue to work in advanced chip technology, some for companies not featured on US blacklists.

What is the point of imposing export controls on a few Chinese companies when global human capital is so mobile?

Does the Biden administration have the political will and moral authority to ban global tech talent from Chinese companies? Is Washington simply kicking the can down the road for future administrations to deal with?

The free flow of talent – into and around China – is a winning card in this era of technological competition. The Biden administration’s response is too weak and too narrow, and fails to address the fact that people are the ultimate diffuser of global technology, not machines.

The talent supply chain is the defining component of the global tech value chain. Washington’s strategy of “luring and banning” – luring chip manufacturing to America while banning critical products and technology from China – will ultimately be defeated by time and the free market.

No country can ban another from the threshold of industrial and civilisational advancement. What will happen will happen; the only variable is time.

In the absence of extensive curbs on talent flows, some or perhaps all the US funding for industry and innovation may end up supporting the rise of next-generation technology globally, including in China. The US knows this. China knows this. So does the rest of East Asia. South China Morning Post

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