The Chip War: Assessing US Policy Against China Moving Forward

Former President Donald Trump and President Xi Jinping Face Off at G20 in 2017. Official White House Photo by Shealah Craighead.

As Chinese technological capabilities surged in the late 2010s, a series of contentious issues including intellectual property theft, cybersecurity, and overall technological competition began to strain relations between the US and China. In response, beginning in 2019, the US government took decisive regulatory measures to limit China’s access to advanced semiconductors, initiating what has been widely termed the “chip war.” This conflict marks a critical juncture in the trade-related conflicts that underscore much of the international tension between these two global powers.

Although the United States officially frames the chip war as an effort to protect national security, many experts agree that the US’s primary objective is to maintain technological dominance and to secure supply chain resilience in the zero-sum game that defines this conflict. In order to chart the best path forward for US-China policy, it is crucial to compare the approaches of Trump and Biden administrations in managing this standoff. While the Biden administration has secured more tangible successes in the short term, the measured approach demonstrated by the Trump administration will be essential to developing a successful long-term strategy. 

Semiconductors, often referred to as chips, are important components in modern technology with unique capabilities to manage electronic, thermal, and optical signals. These properties are fundamental across a vast array of electronic devices, with applications ranging from everyday technology like cell phones and computers to sophisticated military systems.

From an economic standpoint, the semiconductor industry alone contributed roughly 0.5% to global GDP in 2020. This sector not only generates substantial direct revenue but also drives trillions of dollars in additional economic activity through its integration into various secondary products. Despite its importance, the global supply chain for semiconductors remains fragile, dominated by key players such as Taiwan, the US, and China. 

With semiconductor shortages and the absence of continuous improvement, there is a major risk of technological stagnation and disruption amid competitor progress. Industry leaders in artificial intelligence have consistently pointed to chip shortages and stagnation in semiconductor development as the primary barriers to progress in AI. Similar issues plagued the rollout of Sony’s Playstation 5, leading to months-long waits for many customers to purchase the console. 

Many experts identify 2019 as the year when the chip war kicked into high gear, as the Trump administration began its effort to disrupt China’s technological progress through targeted sanctions and diplomatic leveraging. This initiative began with an executive order banning the sale of information and communication technology—particularly semiconductors—by US companies to Huawei, China’s largest telecommunications firm. In May 2020, these measures were expanded with the application of the Foreign Direct Product Rule, which prevented sales to Huawei from foreign companies substantially reliant upon U.S. inputs. Companies that violated these restrictions risked facing significant legal and financial consequences, including penalties, loss of export privileges, and damage to their business relationships with the US government. Collectively, these actions aimed to curtail Huawei’s access to critical technologies, with limited exceptions permitted through federal licenses.

The administration took a further substantial step by placing the Semiconductor Manufacturing International Corporation (SMIC) of China, along with several other Chinese companies, on the Entity List. This designation prohibited the sale of key products to these companies by American companies and citizens, unless granted a federal license. 

The outcomes of these restrictive measures have been mixed, reflecting the complex nature of these first-in-kind sanctions. While Huawei’s expansion in the international market has significantly declined, the company has instead pivoted to focus on domestic growth and self-reliance in innovation, achieving notable success. By August 2023, Huawei—with no further direct sanctions by the Biden administration—reported a third consecutive quarter of revenue growth, signaling stabilization in its operations and, vitally, technological success despite independence from foreign technology and components. On the other hand, SMIC has encountered difficulties in sustaining its advanced semiconductor sales, suggesting that the Entity List restrictions have achieved their desired effect thus far.

In addition to imposing sanctions on Chinese companies like Huawei and SMIC, the Trump administration’s strategy included a leveraged-based approach, using these measures as broader US-China negotiations. A key instance of this tactic was the 2019 Phase One Trade Deal, where the US sought to curb intellectual property theft and increase Chinese purchases of American goods in exchange for expanded access to US financial services. Throughout these negotiations, the administration reportedly considered the use of the Foreign Direct Product Rule as a bargaining chip, aiming to extract further concessions from China. While such terms ultimately failed to materialize, and a potential Phase Two deal was halted by the COVID-19 pandemic, this strategy underscored much the administration’s approach towards diplomacy in the chip war.

The Biden administration has since intensified the chip war, driven by a goal to keep China one step behind through employing an overwhelming number of sanctions. These efforts began in August 2022, as stringent export controls were placed on electronic design automation (EDA) tools necessary for advanced chip design. These controls barred China and 150 other countries from acquiring EDA tools from US companies, citizens, or 41 partner countries without a license.

The administration’s campaign against China’s semiconductor progress escalated the following month with the announcement of expansive sanctions on technologies critical to Chinese semiconductor development. These restrictions imposed export controls on advanced chips; expanded the definition of advanced semiconductor manufacturing equipment to those capable of producing chips smaller than 16 nanometers; enlarged the Foreign Direct Product Rule from just Huawei to 28 additional companies; and banned US citizens from facilitating Chinese acquisition of advanced chip technologies.

In February 2023, attempting to further stifle China’s semiconductor capabilities, the Biden administration persuaded its allies like the Netherlands and Japan to align with its restrictive measures. Then, later that year, the administration revised the definition of advanced chips and lowered the threshold for the application of the Foreign Direct Product Rule—banning sales to Huawei from foreign companies substantially reliant on American inputs—to include companies reliant upon American inputs whatsoever. 

Many policy experts are in agreement that the Biden administration’s policies are slowing China’s chip progress. According to recent projections, China lags an estimated three years behind the US in terms of global semiconductor production and five years behind Taiwan. More importantly, Kevin Klyman, a technology policy researcher at Harvard University, argues that the administration’s measures have impacted China’s technological development as a whole.

However, the administration’s efforts in the chip war have not been without fault. For the first two years of Biden’s term, licenses for exceptions to the Foreign Direct Product Rule were granted at a near automatic rate, before being halted altogether. While this represents a carryover  from the final three months of the Trump administration, its continuation for an extended period under Biden raises concerns about the effectiveness of the administration’s approach to managing the conflict. Furthermore, numerous measures intended to boost America’s semiconductor capabilities were ultimately scrapped. In the months after the passage of the 2022 CHIPS and Science Act, the Biden administration quietly canceled plans for the construction, modernization, and expansion of semiconductor research and development facilities in the US—a key component of the CHIPS Act, vital to ensuring American supply chain dominance.

The broader strategic frameworks of the Trump and Biden administrations in the chip war suggest contrasting approaches. The Biden administration has demonstrated an assertive stance, leveraging a comprehensive range of controls in a full-intensity effort to impede China’s technological ascension. This approach has publicly hinged on the justification of safeguarding national security and maintaining a competitive edge in critical technologies. On the other hand, the Trump administration’s tactics were less intense and more selectively targeted, aiming for tangible policy victories that could be exchanged for Chinese concessions in the broader considerations of trade and technology disputes.

While sought-after semiconductor-related concessions failed to come to fruition under the Trump administration, the approach itself presented a potential avenue for strategic long-term wins in the chip war. Conversely, the Biden administration’s actions—while impactful in the short term—are likely to serve as only temporary inhibitions to China’s technological progression. Many critics, such as Scott Young, a geotechnology analyst at Eurasia Group, believe that Biden’s policies are a “case of diminishing returns,” predicting their effectiveness will decline as China finds new ways to bypass regulations. This perspective already materialized in the case of Huawei, having developed unexpectedly advanced indigenous semiconductors within just four years of the Trump administration’s Foreign Direct Product Rule’s application. This development also underscores the potential for such measures to inadvertently spur Chinese innovation rather than curb it, as Huawei noted significant technological success.

Instead, harsh restrictions may prove to be more strategically valuable as leverage in negotiations than as permanent solutions. This is predicated on the premise that China will be motivated to avoid these disruptions, despite long term resilience, due to the economic implications of such controls—particularly if many were to be executed simultaneously. Broadly, the threat of a hardline stance could open the door to concessions not just in the chip war, but across a spectrum of disputes ranging from trade to human rights issues. 

Therefore, although the Biden administration’s approach has garnered significant success in slowing China’s advanced semiconductor development and manufacturing capabilities, exercising such powers in an indefinite and offensive fashion harms America’s long-term interests in technological and supply chain dominance. Alternatively, the leverage possible through the Trump administration's approach potentially places America in a position of greater strategic advantage. Moving forward, maximizing America’s ability to restrict China’s advanced semiconductor production—and maintaining discipline to use these controls judiciously—must be a top priority. Such a framework will not only bolster US control over China’s technological ambitions but will also reaffirm America’s role as the hegemon of the global semiconductor stage.

Michael Amato-Montanaro (SEAS ’25) is a staff writer for CPR studying mechanical engineering. He is interested in technology policy, national security, and U.S.-China relations. In his free time, he enjoys fishing and coaching ice hockey.