What If China Made Good Chips?
Hey, probably not. But what if?
At a Bay Area Party,™ someone who seemed to know what they were talking about claimed, “China can make good chips.”
Their story went like this: SMIC, the Chinese fab, is developing a large central x-ray source that ASML abandoned two decades ago, but which is supposedly much more cost-effective. Not only that, but China can source the required materials domestically. And this new setup is coming online next year.
Thinking about it more, reading SemiAnalysis, and talking to other Bay Area party attendees, I don’t think China can make good chips on their own.
Let:
“good chips” = competitive with the American frontier, and
“on their own” = under properly enforced export controls.
Still, I want to play out the implications for AI policy anyway—partly because I have a nagging sense that certain chipmakers’ lobbyists may use this story to get what they want.
If China really can make good chips…
1. Export controls have failed
If China can already make good chips (or will very soon), then export controls haven’t slowed them down in any meaningful way. In that world, we should ship Nvidia chips over as fast as we can fab them.
Even better if we can quietly embed location trackers or other telemetry—without China noticing. Not via some loudly debated Congressional bill that mandates “location tracking” (which they would obviously react to), but quietly, through the intelligence community. And ideally, we just… don’t talk about it.
On this view, a particularly bad offender might actually be the Biden-era export controls, because they would have been the forcing function that pushed China to full supply-chain independence.
2. We lose leverage for AI Dealmaking
If China has a truly parallel advanced semiconductor ecosystem, they don’t need U.S. or allied chips. That collapses a big part of the “compute governance” paradigm.
No more, “You want frontier compute? Here are the conditions.” (Both to China, and to other countries). Instead, for China, we’d have to lean much more heavily on deterrence and escalatory dynamics to get any kind of US–China deal on superintelligence, rather than on good ol’ trade negotiations. And for other countries, we’ll have to compete.
3. Taiwan gets scarier
If these hypothetical new fabs come online (say, ~12 months), China can invade or blockade Taiwan without worrying about losing TSMC.
Long term, the CCP clearly wants to set a precedent that a “breakaway province” doesn’t get to permanently chart its own path. But if they already have a domestic source of advanced chips, there may now also be a commercial incentive to blockade Taiwan: make the rest of the world dependent on Chinese fabs instead.
I haven’t deeply read all the public wargames, but my bet is something like:
Not a full-scale amphibious invasion (too risky).
Instead, a long, grinding naval and air blockade, deployed once China reaches rough naval parity with the U.S.
That’s not great.
4. The U.S. should actually reindustrialize
If we’re in a world where China can make frontier chips, then the U.S. answer cannot just be “subsidize ASML adjacent stuff and hope the Dutch and the German lensmakers stay onside forever.”
We should sink serious capital into a domestic semiconductor supply chain. Let the great American reindustrialization project begin.
So, can China actually make good chips?
Again, I find this scenario unlikely.
The national security people who designed and fought for these export controls know much more than I do. For them to have still pushed this policy suggests at least one of:
China really can’t yet make good chips.
They genuinely didn’t understand the full extent of China’s latent capabilities.
They were ideologically committed to keeping China down at all costs. (Those hawks, I tell you.)
Which of these is true really matters. It feeds directly into how we should evaluate export controls, and how we should think about grand strategy for AI and China.
Of course the Chinese government is trying very hard to build this capability. I just assumed that, given the specialized German lens engineers and ASML’s dust-allergic EUV machines, it would be very hard and very slow.
Right now, my background assumption is it’ll take ~5 years for China to reach rough parity under maximally effective export controls.
If the real answer is more like 1 year, that radically changes how I’d act (perhaps including how much of my portfolio I’d keep in Nvidia)
So: this is my little starting shot for a project someone should pursue more seriously, or a paper someone can write:
Can China make good chips?
If you have ideas, pointers, or people I should talk to, reach out.