SinoTech

Taiwan’s Chips Remain Core of Technopolitics

By Abby Lemert, Eleanor Runde
Tuesday, February 2, 2021, 10:22 AM

Jiang Jinquan, a top Chinese policy official, wrote in a state media outlet on Jan. 25 that China’s choice to seek technological independence from the United States was “inevitable.” Jiang’s article is the latest Chinese publication to emphasize the role of semiconductors, which have taken center stage in the technological competition between the United States and China. Semiconductors are a key element in China’s plan for technological independence.

The field of cutting-edge chip manufacturing is narrowing, now occupied by just a handful of companies: U.S.-based Intel, Samsung of South Korea, Taiwan’s TSMC and China’s SMIC. SMIC lags TSMC in production, and Intel is falling behind too; on Jan. 21, Intel announced that it would outsource some chip production to Samsung and TSMC. While the industry of chip design is exploding and diversifying, chip production has been concentrated into the hands of just two companies.

Commentators note that chip production implicates long-term geopolitics. Even if TSMC moves some fabrication plants overseas (such as its recent pledge to build a factory in Arizona), those plants will lag behind the cutting-edge capacities of Taiwan factories for years to come.

One-fifth of the world’s chip manufacturing is now in Taiwan, and TSMC holds 55 percent of the market share. Taiwan is now a “critical single point of failure” in chip manufacturing. Taiwan’s role was on display recently when chip shortages hit the auto sector and resulted in diplomatic pleas from Germany and, reportedly, the United States for Taiwan to accelerate production. The authors of a recent series in The Diplomat argue that although TSMC seems to provide an additional incentive for China to invade Taiwan, semiconductors are unlikely to be the decisive factor in that calculus, because TSMC would not support China’s push for technological self-sufficiency.

Other analysts have pointed out that the location of TSMC’s foundries could change the United States’s military calculations, if not China’s, as those production facilities (and Samsung’s) are within easy reach of Chinese missiles.

Recent developments have reminded all parties of China’s proximity to Taiwan. On Jan. 23 and 24, Chinese warplanes simulated an attack on a U.S. aircraft carrier near the island. The Taiwanese government reported the warplanes’ presence as “incursions” into Taiwan’s Air Defense Identification Zone. In 2020, People’s Liberation Army airplanes committed 380 alleged incursions into Taiwan’s airspace—a new record.

On Jan. 23, State Department spokesperson Ned Price stated

The United States notes with concern the pattern of ongoing [People's Republic of China] attempts to intimidate its neighbors, including Taiwan. We urge Beijing to cease its military, diplomatic, and economic pressure against Taiwan and instead engage in meaningful dialogue with Taiwan’s democratically elected representatives. 

The United States recently demonstrated its support for Taiwan by inviting its de facto representative to President Biden’s down-sized inauguration.

On Jan. 28, Chinese Defense Ministry spokesperson Wu Qian stated: “Taiwan independence means war.” 

Group Headed by Former Google CEO Releases Recommendations on China

A collective of leaders in tech and diplomacy known as the “China Strategy Group” has circulated its final report within the Biden administration in a memo that was obtained by Axios on Jan. 27. The group, led by former Google CEO Eric Schmidt and Jigsaw CEO Jared Cohen, calls for an assessment of sustainable U.S. advantages in critical technologies; a revitalization of technological expertise within the U.S. government; and a new diplomatic alliance of “techno-democracies” focused on forecasting scientific developments, attracting talent and building resilient “ally-centric” supply chains. Several of Biden’s top national security and diplomatic officials have worked with Schmidt and Cohen in some capacity.

Commentary has focused on the report’s argument that the U.S. should accept “some degree of bifurcation” from Chinese technologies. But the report is directed primarily at encouraging U.S. policymakers to focus on domestic technological advancement. Of the policy options laid out in the report with regard to a Chinese tech security threat, a “ban” of Chinese tech is described as a “last resort.” In general, the report urges the United States and its tech community to run the race against Chinese technologies, rather than disqualify them from competition.

Ant to Become Financial Holding Company

On Jan. 27, reports surfaced that Jack Ma’s Ant Group will transform itself into a financial holding company. Commentators had speculated previously that Ant Group would splinter into multiple entities—one for its core payments business and the other for more highly regulated activity like online lending—in order to satisfy Chinese regulators. Now, due to enhanced regulatory pressure, all of Ant Group will be subject to the stringent requirements that apply to banks and other financial entities in China. 

The restructuring plan is expected before the Chinese New Year in mid-February. It will have to pass muster with the Financial Stability and Development Committee, China’s highest economic and financial regulatory body, chaired by Vice Premier Liu He.

Governor of the People’s Bank of China Yi Gang indicated on Jan. 26 that Ant could be allowed to restart its initial public offering, which was scuttled in November, if the company complies with “legal procedure.” Ant Group affiliate Alibaba saw its stock price gain in Hong Kong following Yi’s comments. But new capital requirements, which were heightened last fall, are likely to hamper Ant’s ability to grow and negatively affect its valuation. 

On Jan. 25, China’s banking regulator set financial technology regulation as a “core goal” for 2021.

Thomas-Greenfield Faces Questions on China

President Biden’s nominee for U.S. representative to the United Nations, Ambassador Linda Thomas-Greenfield, is facing questions on China during her confirmation hearings.

A 35-year veteran of the Foreign Service, former U.S. ambassador to Liberia and assistant secretary of state for the Bureau of African Affairs, Thomas-Greenfield is a prominent career diplomat. Her career has focused on sub-Saharan Africa, not East Asia.

Perhaps because of her thin record on China, skeptics on the Senate Foreign Relations Committee have seized upon a 2019 speech she gave at a Confucius Institute on the campus of Savannah State University, a historically Black college. Confucius Institutes are funded by the Chinese government. Thomas-Greenfield was paid for her speech by Savannah State, not the Confucius Institute.

The speech at issue called for “win-win-win” cooperation between the United States, China and African nations. Critics have called it soft. But, in the context of Thomas-Greenfield’s other remarks, the nominee seems to believe that China should be a more responsible lender, and the United States a more competitive investor, on the African continent.

Pressed on her views, Thomas-Greenfield said she considered China to be a “strategic adversary” and indicated that she would use her position at the U.N. to push back on growing Chinese influence over the institution. Chinese diplomats now hold four of the U.N.’s top posts, and China is the institution’s second-largest monetary contributor.

Thomas-Greenfield is not the Biden administration’s first pick to be interrogated on China. Secretary of State Antony Blinken was asked about a range of China-related topics during his confirmation hearing, among them whether or not he agreed with former Secretary of State Mike Pompeo’s assessment that China is committing genocide against the Uighur population in Xinjiang. Blinken said he did.

Other News

MIT Professor Gang Chen Accused of Undisclosed China Ties

Federal prosecutors have filed criminal charges against an MIT professor for failing to disclose ties to China. Gang Chen, a professor of mechanical engineering, was born in China and is a naturalized citizen of the United States. On Jan. 13, he was charged with three federal criminal offenses: wire fraud, failure to report a foreign bank account and making false statements to U.S. investigators. The complaint alleges that Chen hid his affiliations with Chinese government institutions in order to secure $19 million in U.S. federal research grants.

The prosecution comes as part of the Justice Department’s “China Initiative,” a program launched two years ago by the Trump administration with the goal of identifying research scientists passing sensitive technology to China. Scores of investigations into Chinese intellectual property theft are ongoing, and the FBI has reported that it opens a new China-related counterintelligence investigation once every 10 hours. Justice Department officials have indicated that they will continue to maintain a tough stance against Chinese intellectual property theft and economic espionage.

More than 160 members of MIT’s faculty have signed a letter opposing the allegations against Chen, claiming that the Chinese affiliations Chen is accused of hiding were simply routine academic activities not clearly requiring disclosure. The academics concluded: “We are all Gang Chen.” Some commentators have argued that the anti-China bias implicit in the charges against Chen provide good cause for ending the Justice Department’s China Initiative.

MIT is paying for Chen’s legal defense, and a fundraiser started by Chen’s daughter raised more than$400,000 in four days. Chen has pleaded not guilty to the charges and was released on a $1 million bond.

Twitter Locks Chinese Embassy’s Account After Uighur Tweet 

On Jan. 21, Twitter temporarily froze the account of the Chinese Embassy in Washington, D.C., after the embassy defended Beijing’s policy toward Uighurs in a tweet. The takedown came two days after then-Secretary of State Pompeo declared that China’s treatment of the Uighurs constituted “genocide.”

The tweet from @ChineseEmbinUS claimed that Uighur women in Xinjiang “were emancipated” and “no longer baby-making machines” under China’s policies in Xinjiang. Twitter, through a spokesperson, stated that the post had violated its policies against “dehumanization … based on their religion ... or ethnicity.” When a post is flagged for violating Twitter policies, the account remains suspended until the account owner manually deletes the offending content. The Chinese Embassy has not posted any other tweets since Jan. 8.

In a briefing on Jan. 21, Chinese Foreign Ministry spokesperson Hua Chunying decried the takedown, saying that Chinese officials found it “baffling” and hoped Twitter would make “greater efforts” to distinguish “rumors and lies from facts and truth.” The Chinese government has repeatedly denied that its policies toward Uighurs in Xinjiang constitute genocide or violate international human rights.

Twitter is blocked in China, although it is used by Chinese state media and diplomats around the world.

Xi Exhorts Cooperation at Virtual Davos as Warplanes Fly Over Taiwan

On Jan. 26, at the virtual World Economic Forum usually held in Davos, Switzerland, Chinese President Xi Jinping highlighted areas of potential global cooperation, including climate change, public health, technology and economic recovery. He condemned “division and even confrontation,” particularly “trade wars [and] tech wars.”

German Chancellor Angela Merkel’s speech at the World Economic Forum echoed Xi’s calls to avoid a “new cold war,” but she said she would continue to press China on human rights and transparency.

White House Press Secretary Jen Psaki said on Jan. 26 that Xi’s remarks at Davos “don’t change anything” about the new administration’s approach to Beijing. 

Commentary

Ambassador Cui Tiankai delivered the first address by a major Chinese figure in the United States since President Biden’s inauguration. Among his messages was a critique of U.S. treatment of Chinese students, researchers, tourists and entrepreneurs in the United States.

Yi-Ling Liu writes for Rest of World on how Chinese feminist activists are managing to organize online despite crackdowns on free expression and civil society. 

Meaghan Tobin and Louise Matsakis report on Chinese e-commerce platforms’ cutthroat competition to dominate the new “community group buying” industry for grocery delivery in China.

Yun Jiang questions the reliability and underlying assumptions of reporting on the supposed “divided loyalties” of many researchers with Chinese heritage working in Western countries. In an op-ed for SupChina, Tianyu M. Fang echoes these concerns, arguing that many of the current litmus tests for Chinese academics’ loyalty are a return to the McCarthyism of the U.S. in the 1950s.

John Pomfret writes in The Atlantic about Xi Jinping targeting not just private industry generally as a threat to Chinese Communist Party stability but also individual entrepreneurs like Jack Ma. 

Lindsey W. Ford and James Goldgeier publish a new report for the Brookings Blueprints for American Renewal & Prosperity project on retooling the United States’s alliances to manage the “China Challenge.”

Elsa B. Kania and Lorand Laskai separate fact from fiction on China’s military-civil fusion strategy in a new report for the Center for a New American Security (CNAS).

Also for CNAS, Yaya J. Fanusie and Emily Jin explore China’s aggressive push toward a digital currency, showing how stronger Chinese government control over financial data can help enforce party discipline and increase digital authoritarianism domestically.
The Economist anticipates the Jan. 31 opening of applications for Hong Kongers seeking British visas that provide a path for citizenship—a move to which Beijing responded by stating that it will no longer recognize the British National Overseas passport as a valid travel document or form of identification.

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