U.S. policymakers are increasingly leveraging export controls on advanced semiconductors and related technologies to constrain China’s development of military and dual-use capabilities. But notably, expanding U.S. trade restrictions have heightened political and commercial pressure on Chinese semiconductor companies to wean off U.S. technology wherever possible, with potential negative impacts for U.S. technological leadership. This report, the first in a series of four, explains how export controls have accelerated and scaled Chinese efforts to design out (i.e., adopt alternative sources for U.S. technologies) and design around (i.e., innovate new technologies that bypass U.S. technologies altogether), ultimately facilitating a shift of global semiconductor supply chains away from the United States. This report describes how the design-out and design-around strategies jeopardize U.S. economic and national security due to the diversion of sales and innovation to China and other nations’ technology champions. The report then describes Chinese efforts to develop advanced packaging capabilities to “leapfrog” U.S. and allies’ leadership in leading-edge chip design and manufacturing. It is argued that advanced packaging provides a key example of the design-around trend and threatens to shift the balance of U.S.-China competition in critical technologies. The report concludes with emphasizing the importance and challenges of greater multilateralization as well as potential avenues to mitigate the negative impacts of controls on U.S. companies.
This report is made possible through generous support from Applied Materials and ONTO Innovation.