Unwillingness to spend money is a disadvantage for the U.S. in its tech race with China, expert says

SINGAPORE — The United States’ unwillingness to spend money is its biggest disadvantage in a tech race with China, according to a cybersecurity and technology expert. 

From imposing restrictions on telecommunications giant Huawei to issuing executive orders banning transactions with ByteDance, and forcing the company to sell the U.S. operations of the popular app TikTok, Washington has stepped up efforts to put pressure on China’s technology firms in recent years. 

This month, the U.S. Department of Defense said it is in discussions over whether Semiconductor Manufacturing International Corporation, China’s largest chip manufacturer, should be subjected to export restrictions.

“The U.S.’ biggest disadvantage in this tech race is its unwillingness to spend money,” James Andrew Lewis, senior vice president and director of the Technology Policy Program at CSIS, said on CNBC’s “Squawk Box Asia” on Thursday. 

“China might outspend us a 1,000-to-1 when it comes to investing in semiconductors and a 1,000-to-1 is no way to win the race,” said Lewis, who previously worked for the U.S. Departments of State and Commerce. He explained that while there is bipartisan support for a bill to increase federal incentives to boost American leadership in semiconductor manufacturing, so far “it hasn’t translated into money.”

Semiconductors make up an important part of the tech race that also includes the U.S. and China competing for dominance in areas such as artificial intelligence and quantum computing. 

“I think they are realizing that if you want to play in this game with China, you are going to have to spend more than a few million bucks,” Lewis added. 

SMIC is one of the major players in China’s plans for a home-grown semiconductor industry. Most of the chips used in China today are imported, making the world’s second-largest economy reliant on foreign suppliers for advanced semiconductors. Imposing export controls would cut off SMIC’s access to U.S. firms that sell chip-making technology. 

A lot of the funding in the Chinese semiconductor sector comes from the government. Reuters reported that the National Integrated Circuit Industry Investment Fund put up 139 billion yuan ($20 billion) for chip projects in 2014 and added another 204 billion yuan (about $29.8 billion) in 2019. There is also growing interest among private investors. 

Still, it would take at least a decade for China to catch up to the U.S. in its ability to produce high-end chips that require a high degree of precision as well as scientific skills, Lewis said, adding that recent U.S. measures could slow down its progress.

“China has advantages – a willingness to spend, a strong investment in technology, a very determined government but it also has disadvantages. I think where this will get played out is they have learned from the U.S. experience that technological leadership gives you power, influence in the world and they will pursue it,” Lewis said.

“So, we are just at the start of a larger conflict where technology, economic forces and probably your kitchen appliances will play a bigger role,” he added.