The UK’s policy aims to prevent its industry from being negatively impacted in the struggle for technological dominance
The UK is planning to provide a billion-pound subsidy to its emerging microchip industry, led by Rishi Sunak. While it may seem like a significant amount, the government’s action is simply a response to the US’s economic conflict with China. The talk of “friendshoring” and the resurgence of industrial policy is actually an attempt to prevent any unintended harm in the fight between China and the US for technological dominance.
The EU and India are committing billions to chip subsidies, while Rishi Sunak’s proposed £1bn investment seems small. However, the UK does not aim to have a complete chip supply chain and is instead following the US lead. The US’s power lies in the critical tools supplied by American companies to almost all chip factories. They have used export control powers to isolate China by banning foreign countries’ transactions with them. This legislative arsenal was first aimed at Huawei and has now been applied to Britain’s ban on Huawei products.
The importance of microchips in a developed economy cannot be overstated. During the pandemic, a surge in demand for computers coincided with a decline in chip supply, leading to shortages. The situation was made worse by the escalating tensions between Beijing and Washington, which resulted in a “zero-sum” battle over Chinese chipmakers. President Joe Biden views China’s rise as a danger to the US, and other nations have taken notice. To safeguard national security, Rishi Sunak’s government blocked the Chinese acquisition of the UK’s largest chip plant in November. China’s chip imports have plummeted as a result of Washington’s prohibitions.
Last year, US national security adviser Jake Sullivan said that the US would impede China’s efforts to obtain “foundational technologies” like artificial intelligence by limiting access to the high-speed processing power needed. The US has stated that it does not intend to impede China’s modernization, but the foreign policy establishment seems to believe that it should do so in every area. Some observers have cynically dubbed this approach “Trumpism with a human face.”
China is investing $220bn to achieve self-sufficiency in microchips, with some progress. Germany faced backlash in response to reports that it would ban key chemical exports to China. The UK’s foreign secretary, James Cleverly, recently hinted that China’s pride in its economic success may be short-lived. If the US bans the Beijing-based ByteDance’s social media platform TikTok, Britain is likely to follow suit. The internet will only remain “open” if US or allied companies continue to maintain market dominance.
Last month, Janet Yellen, the US treasury secretary, stated that China’s economic growth does not have to clash with US economic dominance. In essence, Beijing should support strategic industries that do not pose a challenge to the US’s superior position. This competition is about technological proficiency rather than contrasting models of governance. However, anticipating innovative advancements is difficult. Geopoliticizing technology entails the risk of undermining international cooperation in essential areas like clean energy and drug development, causing a global loss.
