[U.S.-China New Cold War Era ②] U.S. Tightens Grip on Domestic Firms to Curb China's 'AI Rise'

Intensified U.S.-China Tech Supremacy Battle
Stricter AI Chip Regulations Against China... Nvidia Faces Export Blockade
Narrowing the AI Gap, China Takes Lead in EVs and Shipbuilding

Editor's NoteThe world has entered a new era of the "New Cold War." The United States and China, who have maintained a relationship as both rivals and partners for decades, are now threatening each other's security and economies, bringing their confrontation to a critical point. This comes just three months after the launch of the Trump administration. Amid what is effectively a trade embargo, the economic war is entering a new phase. Economic decoupling between the two countries, which together account for about 43% of global GDP, is already underway. Furthermore, the conflict is escalating into a full-scale confrontation encompassing supply chains, platforms, technology, and diplomacy. The Wall Street Journal (WSJ) reported, "A new Cold War shadow has been cast by the breakdown in U.S.-China relations," warning that as economic ties unravel, overall global security and economic stability could be at risk for years to come. In response, our publication is running a three-part series examining the reality and impact of the power struggle between these two superpowers in the military, technology, and economic spheres.

As China seeks to secure technological capabilities in strategic fields by breaking through the United States' ironclad blockade, the U.S.-China technology supremacy competition is becoming even fiercer. The United States, beginning with the previous Joe Biden administration, tried to maintain its lead by blocking China's access to advanced technologies. However, DeepSeek, an artificial intelligence (AI) developed independently in China, sent shockwaves around the globe in January. The Donald Trump administration, which even declared a global trade war to weaken China's dominance, launched a full-scale offensive to halt China's "technological rise."

Reuters Yonhap News

Willing to Sacrifice Domestic Firms... U.S. Imposes Ironclad AI Blockade on China After 'DeepSeek Shock'

The most intense battleground in the U.S.-China tech war is AI. The Trump administration has further tightened export controls on AI chips to China, affecting domestic firms such as Nvidia, AMD, and Intel, which dominate the AI semiconductor market. Even lower-spec chips like Nvidia's H20, which were previously permitted for sale, are now restricted. Since many of the chips used for AI development in DeepSeek fall under export restrictions, U.S. authorities are thoroughly investigating Nvidia's Asian sales network. This is a notable shift from the first Trump administration, which, despite imposing heavy tariffs to check China, retreated in response to protests from domestic firms like Apple. Due to the tightened regulations, Nvidia is estimated to incur losses of about $5.5 billion (approximately 7.8579 trillion won) in the first quarter alone, but the U.S. government is determined to accept damage to domestic firms if necessary.

Meanwhile, China is securing AI chips through alternative channels while also strengthening its own capabilities. According to the U.S. Semiconductor Industry Association, China accounts for 24% of global semiconductor production capacity in legacy chips.

Before DeepSeek, Huawei was the symbol of China's technological ascent. Although it was once brought to its knees by U.S. restrictions on high-spec chips, the company made a comeback by commercializing its own smartphone chips, shocking the world. On April 21 (local time), Reuters reported that Huawei plans to begin mass production of its Ascend 910C AI chip, which rivals Nvidia's H100 in performance, as early as next month. The Nvidia H20 chip, developed to circumvent U.S. export controls on semiconductors to China, has about 75% lower performance compared to the H100. If Huawei's plans proceed, its chip will outperform Nvidia's China-specific chips.

Paul Triolo, partner at Albright Stonebridge Group, stated that with the U.S. government imposing export controls on Nvidia's H20, Huawei's 910C is emerging as the main hardware for China's AI developers. This marks a move away from dependence on Nvidia, which effectively monopolizes the global AI chip market, as China seeks self-reliance.

Narrowing U.S.-China Technology Gap... China Leads in EVs and Shipbuilding

The technology gap between the U.S. and China is narrowing. According to the "AI Index Report" published by Stanford University, as of this year, the U.S. and China have 40 and 15 AI models, respectively, still a significant difference. However, the performance gap has closed considerably. In 2023, the AI performance index gap between the U.S. and China was 17-30 percentage points, but in 2024, it is only 0.3-8.1%. While the U.S. still leads in top-tier research papers, China (22.6%) has surpassed the U.S. (13%) in the proportion of AI-related paper citations.

According to a report released last month by the Georgetown University Center for Security and Emerging Technology, nine out of the top ten institutions publishing the most English-language semiconductor research from 2018 to 2023 are located in China. Among the top 10 institutions with the most papers in the top 10% by citation count, eight are Chinese universities.

The "Made in China 2025" initiative, now in its tenth year under the leadership of Xi Jinping, has also produced significant results. According to Nikkei, China has achieved overwhelming dominance in electric vehicles and shipbuilding, and has made remarkable technological progress in space development and solar energy.

In particular, Nikkei highlighted electric vehicles. China has overtaken traditional powerhouses in the U.S. and Europe to become the global leader in the EV industry. It has also strengthened its supply chains. According to SNE Research, in the EV battery sector, CATL (37.9%) and BYD (17.2%) hold the top two global market shares, with CALB (4.4%) ranking fourth. Combined, these three companies account for about 60% of the global market.

Nikkei reported, "While the U.S. imposes tariffs on imported cars to protect its domestic auto industry, China has a proliferation of EV brands, and companies are increasing their competitiveness in price and quality to survive. In the future, China could surpass the U.S. in both scale and competitiveness."

From 'Cutting the Technology Ladder' to All-Out War Over Resources and Talent

During the first Trump administration and under former President Joe Biden, the U.S.-China technology competition was characterized by the U.S., as the frontrunner, unilaterally "cutting the ladder" for China, the latecomer. However, the nature of the conflict in Trump's second term is different. Now, with increased confidence, China is launching counterattacks.

On April 4, the Chinese government announced export controls on seven types of domestically produced rare earths and rare earth magnets. Rare earths are used in a wide range of fields, from semiconductors and electric vehicles to defense and healthcare. China, which is fostering rare earths and related technologies as strategic industries, controls 70% of global rare earth production and 90% of refining processes. This move is seen as weaponizing resources for retaliation. As a result of these export restrictions, even Elon Musk, CEO of Tesla and a close associate of President Trump, is facing difficulties.

China is also actively seeking to secure talent. Last month, U.S. tech media outlet The Information reported that the Chinese government, concerned about technology leaks, has confiscated the passports of DeepSeek employees and banned overseas travel. According to the Wall Street Journal (WSJ), Chinese authorities have effectively prohibited key personnel from domestic AI firms from visiting the U.S. and its allies, citing national security concerns.

There is also a noticeable trend of Chinese talent returning from the West. According to the South China Morning Post (SCMP) on April 12, mathematician Chen Min and her husband Shen Jie, both professors at the prestigious Purdue University in the U.S., recently moved to Ningbo Dongfang Institute of Technology. Experts in electric vehicles, robotics, physics, and AI are also choosing to relocate to China.

Whereas in the past, this trend was mostly limited to university professors, recently even former employees of U.S. big tech firms are moving to China. Last month, Kong Long, a former senior engineer at Apple, joined Fudan University in Shanghai as a research fellow and doctoral advisor. In February, ByteDance, the parent company of TikTok, hired Wu Yonghui, former vice president of Google DeepMind.