Thread by @pstAsiatech

The most important aspect of the 7 October export control package released by the US Commerce Department is arguably its unilateral nature, and the struggle to get other key players onboard, primarily the Netherlands and Japan, continues. A thread. 🧵

We are clearly in a new era in US China Technology competition. #USChinaTechColdWar has never been a more accurate description of the situation. The “forcing third countries to take sides” element was always the most salient part of the meme I pioneered with @paulmozur

The stakes for semiconductor industry got bigger with the #7OctoberSurprise and comments from National Security Advisor Sullivan in September.

Sullivan: "..computing-related technologies, biotech, and clean tech are truly “force multipliers” throughout the tech ecosystem. And leadership in each of these is a national security imperative.” whitehouse.gov/briefing-room/…

The past week saw media stories culminating Friday indicating some type of agreement between the Netherlands, Japan and US on elements of the export controls, specifically the end use controls, new controls on equipment, and the US persons controls. See: ft.com/content/baa27f…

However, the apparent agreement comes with no details, in a situation where the devil is in fact in the details, given the complexity of the 7 October controls, and the fact that most elements were not agreed to beforehand by the most impacted parties.

Significantly, Dutch PM Mark Rutte suggested there will be no announcement: "Those talks have been going on for a long time and we're not saying anything about it..it's really in doubt that if something comes out of them, that it will be very visible." reuters.com/technology/dut…

Why the silence around the details of what is a major issue, with significant impact on global semiconductor supply chains, tool makers, market access, R&D budgets, and the future of China’s semiconductor industry?

Hinting at one element of the answer to this question, EU Internal Markets Commissioner Theirry Breton noted: “You will always find Europe by your side when it comes to ensuring our common security in technology.” scmp.com/news/china/dip…

Breton also noted, however: "But action should be limited to what is necessary from security point of view, and done in full, transparent and open partnership with Europe.”
This suggests major lingering concern about how unilateral the controls were, and feathers remain ruffled.

The issue is complex, as will be the full Dutch and European response. First, this is not really a "win" as some media outlets are portraying it, and the lack of announcement or details supports this.

The lack of a public announcement from the White House or Commerce also reflects sensitivity to the fact that these were unilateral controls--dropped after 18 months of negotiation--and four months after 7 October....

...and perceived, particularly in Europe, as the US basically saying, we are going to do this and you must sign on the dotted line under conditions dictated solely from Washington.

Today the Dutch press confirmed agreement, but Trade Minister Schrienemacher was still skeptical on messaging – “We tekenen niet bij het kruisje” (literally, “we do not sign on the cross” meaning just blindly sign on the dotted line.
nos.nl/artikel/246151…

The Dutch and ASML still do not understand the national security rationale for controlling DUV, and the rest of the semiconductor industry continues to grapple with the inclusion of memory in the end use controls, as memory is a commodity product....thechinaproject.com/2022/11/11/mem…

Also, so far, and going forward, the big losers are all US and western companies. Chinese companies will find workarounds, it will be hard, but this arrangement has just incentivized the entire industry, including Chinese and non-Chinese firms, to design out US technology.

Finally, the lack of announcement suggests that agreement on the details of key elements of the controls, such as the domestic persons controls, specific end use node thresholds, and additional equipment controls remain contentious, and will take time to work out, along with...

....how they will be implemented in legislation or regulations that do not yet exist in either the Netherlands or Japan. Commerce Secretary Raimondo last November suggested this could take at least 6-9 months...so the jury remains out on how big the "win" is, much more to come..