Danger Zone: The Coming Conflict with China

by Hal Brands

Take semiconductors, which are arguably the linchpins of computers and therefore of the modern economy. China has spent tens of billions of dollars trying to become a leader in this area. Yet it still depends on imports of high-end semiconductors and semiconductor manufacturing equipment from America and its allies, a vulnerability that the U.S. government is now using to squeeze Chinese firms such as Huawei and ZTE.78 China’s national champion, Semiconductor Manufacturing International Corporation, still relies on subsidies for 40 percent of its revenue (versus 3 percent for U.S. firms) and produces chips that lag those of foreign competitors by half a decade, which might as well be a century in the battle for computer shoppers.