Robert Atkinson, President of the Information Technology & Innovation Foundation, has expressed concerns about the Biden administration's proposal to tighten export controls on semiconductors to China. Atkinson suggests that while the intention may be to limit China's progress, such actions could actually risk reducing allied semiconductor competitiveness and harm U.S. capabilities.

Atkinson states, "Many in Washington have landed on export controls of semiconductors and advanced chip-making equipment as a critical weapon to limit China’s advancement. Last October, the administration released sweeping export controls to limit China’s capabilities in producing advanced semiconductors. Today, the administration doubled down on these controls, in part on an attempt to 'close loopholes' in the earlier controls. Limiting sales of semiconductors to China risks significantly reducing allied semiconductor competitiveness, partly by spurring even more 'indigenous innovation' efforts in China and by reducing allied firm sales."

The concern lies in the potential consequences of cutting off U.S. sales to China. Atkinson explains, "Semiconductors have high fixed costs relative to marginal costs, costing billions to design and make the first chip but far less to make the millionth. This is at the heart of the issue of export controls to China. By cutting off U.S. sales, U.S. firms will lose the most profitable part of their market, significantly reducing profits that otherwise would be invested in research and development for the next generation of chips. The issue here is not whether the United States works to restrict Chinese innovation advancement; it’s how to do that in a way that is effective without hurting U.S. capabilities."

The Biden administration's proposed regulations aim to cease the export of advanced artificial intelligence chips, such as those created by Nvidia, to China. These measures are part of a broader strategy to prevent Beijing from accessing sophisticated U.S. technologies that could enhance its military capabilities. The new rules will also expand limitations to include additional countries like Iran and Russia, while placing Chinese chip designers Moore Threads and Biren on a blacklist. Furthermore, the scope of licensing requirements for the export of advanced chips will be broadened to over 40 additional countries, particularly those with a potential risk of diversion to China and those under U.S. arms embargoes.

The concerns raised by Atkinson highlight the delicate balance the Biden administration must strike in limiting China's progress without negatively impacting allied semiconductor competitiveness and U.S. capabilities. Finding effective measures that achieve the desired outcome while minimizing potential harm is crucial in this complex geopolitical landscape.