How effective are U.S. sanctions against China’s semiconductor industry?
In the United States, the Chinese government’s «Made in China» program is seen as a threat to U.S. global dominance and, indeed, as one of the main threats to the U.S. high-tech industry. Instead of competing, Washington has resorted to tried-and-true non-market protectionist measures. At the end of December last year, the U.S. launched a new phase of its sanctions campaign against China’s microchip sector. On December 23, 2024, the Office of the U.S. Trade Representative (USTR) announced an investigation into China, focusing on the production of basic chips made using older technologies. According to U.S. officials, Chinese competitors are undermining the security of key U.S. manufacturing supply chains and posing a potential threat to the American economy.
Earlier, the United States demanded that TSMC (Taiwan Semiconductor Manufacturing Company), the world’s leading chipmaker, limit exports of 7-nanometer technology and below to mainland China. Washington also added 136 Chinese companies to its sanctions list.
All of this, in Washington’s view, is designed to halt the development of China’s semiconductor industry and help the United States maintain its leadership. In the same vein, the demand that Taiwan’s TSMC share its technology after the Taiwanese were swayed by Washington’s promises and began building factories in the U.S. The Biden administration’s allocation of $52 billion to subsidize chip production and R&D in the U.S. also serves this goal. Meanwhile, Washington denounces similar moves by the Chinese government as unfair competition. Political maneuvers are also being used: the U.S. continues to pressure its allies to stop cooperating with China.
Things have gotten to the point where U.S. actions are hurting both the global semiconductor market (where China accounts for about a third of the total) and American companies themselves. For example, U.S. tech giant NVIDIA earned $5.416 billion from the Chinese market in the second quarter of 2024 — its second-largest source of revenue after domestic U.S. sales. However, this figure is 40 percent lower than what NVIDIA earned from sales in China during the same period in 2023. On January 9, 2025, the frustrated American giant openly stated that the U.S. government’s export restrictions on chips to China, introduced under the banner of «anti-China measures», would primarily harm the United States itself. The Biden administration’s actions have drawn criticism from both American industry and the international community.
In China itself, the sanctions have been called pointless and likened to shooting oneself in the foot. In reality, the U.S. has been imposing technology blockades and export restrictions on China’s semiconductor sector for five years, but the Chinese industry continues to grow and develop rapidly. In the first 11 months of 2024, China’s chip exports in monetary terms exceeded one trillion yuan for the first time, up 20.3 percent from the same period last year. In March 2024, China’s Semiconductor Manufacturing International Corporation (SMIC) became the world’s third-largest chipmaker, behind TSMC and Samsung.
In assessing the growth of China’s semiconductor sector, even U.S. Secretary of Commerce Gina Raimondo admitted that sanctions aimed at restricting China’s chip industry have proven ineffective. In her view, the Chinese are even beginning to establish production of key equipment without which the industry cannot move forward — namely, photolithography and etching machines. Their success has been driven by massive investments in research and development and the recruitment of specialists from around the world.
In 2023, an American company that bought equipment in China discovered a chip inside the machine that was made using the most advanced 5-nanometer technology available at the time. After investigating, the Americans concluded that China had cutting-edge capabilities in microchip manufacturing.
Late last year, China unveiled a new AI model that outperforms all existing systems, including American ones. Given that AI is impossible without advanced semiconductors, this achievement is remarkable. Known as DeepSeek, the Chinese version of GPT is superior to OpenAI’s latest «o1» version by several metrics, yet was developed at a third of the cost of its American counterpart. Moreover, unlike advanced Western models, DeepSeek is freely available to anyone who wants to use it. Russians, for example, can access the Chinese AI simply by visiting deepseek.com. The application is also free to download from the App Store or Google Play. There are no paid subscriptions, no need to circumvent restrictions on the Russian Internet, and no language barrier — DeepSeek works in many world languages, including Russian. In other words, having surpassed the Americans, the Chinese have not followed their example by placing restrictions on the use of their model.
Even the Americans acknowledge the superiority of this comparatively unknown AI. In a recent laudatory article, the prestigious journal Science quoted DeepSeek CEO Liang Wenfeng, who elaborated on the developers’ ambitions: «Research and technological innovation — not business opportunities — are the company’s priorities. Its ultimate goal is to achieve a level of artificial intelligence that matches human cognitive abilities. This lofty goal has helped the company attract ambitious researchers». The glowing terms Science uses to describe DeepSeek reflect the admiration of the Western tech community. DeepSeek is doing what OpenAI originally promised — truly open, cutting-edge AI, available to the world without restrictions.
Experts believe that the Chinese model could have a decisive impact on the development of science and technology worldwide. With DeepSeek, independent developers can make significant progress in their own research, including in AI. The Chinese model will accelerate research in various scientific fields, enable automated scientific search, and help researchers make breakthrough discoveries — not to mention that DeepSeek could drive its American competitors out of the market.
If that’s not further proof of the futility of U.S. sanctions, what is? Restrictions simply force China to do everything on its own, outpacing the Americans in the process. Examples abound. For example, China became the absolute world leader in supercomputers and computing power just after the U.S. banned their export to China. Last year, the Chinese also developed the world’s largest data storage drive. Similar processes have driven China’s success in space, where it has surpassed the U.S. in the lunar race and planetary exploration. It is still pushing ahead with its ultra-high-speed magnetic levitation train project, which the U.S. has abandoned. And the Chinese auto giant BYD has become a world leader in electric vehicle production using cutting-edge technology, putting pressure on Tesla — so on and so forth.
China has adopted a strategy of self-sufficiency and is striving for independence, especially in high-tech sectors. In 2024, Chinese R&D spending exceeded 3.6 trillion yuan, or about $500 billion, an increase of 8.6 percent from 2023.
Clearly, this investment is paying off. China has gone from being the world’s factory to the world’s high-tech laboratory. And it is highly unlikely that U.S. sanctions will succeed in slowing China’s growth.