Tech Diplomacy Now: Issue 3, 2023
The intersection of technology, policy, and the news you need to know
Welcome to Tech Diplomacy Now, a publication of the Krach Institute for Tech Diplomacy at Purdue, providing you with critical information and global news on the intersection of emerging technologies, foreign policy, and national security.
Top News of the Week – Beijing initiates cybersecurity probe against U.S. chip manufacturer, Micron… and Europe, Japan and the United States reach a consensus
The long-anticipated retaliation against U.S. export controls on advanced semiconductors may have arrived last week with a notice posted on an obscure PRC Government website.
The Cyberspace Administration of China (CAC) posted an announcement that the agency would begin a security review of “products sold by Micron in China.” The Boise-based Micron Technology is a leading manufacturer of memory chips that go into countless electronic devices.
Some argue that this action against Micron is in retaliation for the restrictions Washington placed on advanced semiconductors on October 7, 2022. According to this view, Beijing was caught off guard in early October as officials focused on the 20th Party Congress. Now that the “two sessions” are complete and the PRC’s rubber-stamp parliament has approved Xi’s agenda, the PRC is ready to counterpunch.
Micron is a lucrative target for Beijing: it is an American firm that occupies the #3 position in terms of market share for DRAM chips. It sells about a quarter of all DRAM chips in the world, just behind the two South Korean firms: Samsung (40%) and SK Hynix (30%).
Another plausible argument is that Beijing’s actions are just the next step in its multi-year effort to build its own Chinese ‘national champions’ and remove foreign suppliers as PRC companies move up the value-chain of manufacturing.
This “security review” should not be a surprise for Micron – Contrary to the piece in the Wall Street Journal, Micron is no stranger to coercion and intimidation by the PRC. In 2015 and 2016, the State-owned Enterprise, Tsinghua Unigroup tried to acquire Micron for $23 billion, a figure that would have made it the largest American acquisition by a Chinese company. Micron refused to pursue the deal given that CFIUS (Committee on Foreign Investment in the United States) would have rejected it on national security grounds. Over the next three years, Tsinghua Unigroup undertook an effort to poach Micron’s top engineers and managers.
Then five years ago, Micron became the target of an elaborate intellectual property theft campaign by another Chinese state-owned enterprise, Fujian Jinhua Integrated Circuit Company (JHICC).
JHICC sought to use Micron’s stolen IP to produce memory chips in the PRC, fulfilling a ‘Made in China 2025’ goal to substitute foreign semiconductors with locally produced chips. During that debacle, PRC courts participated in the criminal conspiracy by banning Micron’s chips for a short period in an effort to coerce Micron into silence about the theft.
Given this latest development, one has to hope that Micron’s management has been preparing for this contingency.
On the same day that CAC issued its notice against Micron, the Japanese Government released its plan to restrict 23 types of advanced semiconductor manufacturing tools. This aligns Tokyo’s export restrictions with Washington’s October 7th restrictions, as well as controls announced by the Dutch Government earlier in the month.
It appears that the PRC failed to deter Japan and the Netherlands from joining the United States in imposing a comprehensive advanced semiconductor technology ban.
Nearly simultaneous to these actions, the European Commission’s President, Ursula von der Leyen gave one of the most important policy speeches by a European leader in years. She describes an increasingly hostile and repressive PRC that “has now turned the page on the era of ‘reform and opening' and is moving into a new era of security and control.”
Her assessment concludes that “[T]he Chinese Communist Party's clear goal is a systemic change of the international order with China at its centre.”
For von der Leyen, the only plausible path for Europe is to adopt a “de-risking strategy” with regards to China and pursue coordination with Europe’s allies. This is marks an important departure from the policy favored by her mentor, the former German Chancellor, Angela Merkel. For observers of German foreign policy spanning the last two decades, it was clear that President von der Leyen was rebuking Merkel’s policy of ‘Wandel durch Handel’ (Change through Trade).
While the European Commission President does not hold significant formal power, the fact that von der Leyen gave this speech (shortly before she is to accompany French President Macron to Beijing) suggests that the political calculus across Europe is one that leans towards consensus with Washington and Tokyo about how to deal with China.
For more background:
Inside a Heist of American Chip Designs, as China Bids for Tech Power – New York Times, June 22, 2018
US Accuses Chinese Company of Stealing Micron Trade Secrets – Wired, November 1, 2018
Taiwan Company Pleads Guilty to Trade Secret Theft In Criminal Case Involving PRC State-Owned Company – U.S. Attorney’s Office, Northern District of California, October 28, 2020
China to examine US chipmaker Micron's products for cybersecurity risks – Reuters, March 31, 2023
Japan restricts chipmaking equipment exports as it aligns with US China curbs – Tim Kelly, Reuters, March 31, 2023
China presses Japan to change course on chip export curbs – Thomas Hale, Financial Times, April 2, 2023
Micron Gets Caught in U.S.-China Crossfire – Jacky Wong, Wall Street Journal, April 3, 2023
China dissatisfied with Japan's chip export restrictions – Reuters, April 3, 2023
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Latest News
China’s Economic Coercion Needs Congressional Response, Ambassador Says – Wall Street Journal, March 27, 2023
U.S. Ambassador Rahm Emanuel called for congressional legislation to protect countries whose economies are targeted by China over political disputes and a global coalition to soften the blow for those countries.
“This is not stopping until it’s confronted,” said Mr. Emanuel, the U.S. ambassador to Japan, in an interview Monday. “The economic coercion is part of China’s overall strategy, and if you don’t have a play for that playbook, you’re leaving yourself vulnerable.”
U.S. calls for joint G-7 action to prevent China's economic bullying – Rintaro Tobita, Nikkei Asia, April 2, 2023
The U.S. is pushing Group of Seven countries to take joint action against China if Beijing engages in economic coercion against the group's partners, Nikkei has learned.
By disclosing retaliatory measures in advance -- the U.S. government and Congress are discussing bills to raise tariffs, for example -- Washington seeks to discourage China from economically bullying other countries.
The U.S. has already called for a joint response to Chinese economic coercion in working-level talks with G-7 nations. It has asked for the matter to be on the agenda at this year's G-7 meetings. Washington is poised to hammer out specifics with Japan, this year's G-7 chair, ahead of the G-7 leaders summit scheduled for May.
US adds Hikvision subsidiaries from Xinjiang to its trade blacklist – South China Morning Post, March 29, 2023
China grants billions in bailouts as Belt and Road Initiative falters – Financial Times, March 28, 2023
China has significantly expanded its bailout lending as its Belt and Road Initiative blows up following a series of debt write-offs, scandal-ridden projects and allegations of corruption.
A study published on Tuesday shows China granted $104bn worth of rescue loans to developing countries between 2019 and the end of 2021. The figure for these years is almost as large as the country’s bailout lending over the previous two decades.
China’s richest county suffers export slump as US tension hits factories – Financial Times, March 25, 2023
Workers in one of China’s busiest export hubs are struggling to get jobs as the global economic outlook weakens and tensions with the US push manufacturers to relocate factories outside China.
The county of Kunshan, 50km from Shanghai in China’s Jiangsu province, used to boast wages up to 30 per cent higher than in less-developed interior provinces, thanks to the thousands of contract manufacturers that assembled critical components there.
With almost 1mn people, Kunshan has 1,529 export-focused manufacturers from Taiwan alone and is known as China’s richest county.
But its companies are cutting back, factory owners and logistics groups said, in response to falling exports, which had driven China’s economic growth through the pandemic. Chinese exports have declined in dollar terms for five straight months since last October as western buyers reduce orders amid high inflation and a gloomy economic outlook.
Kunshan’s malaise reflects the challenges faced by China’s export-led economy as the country emerges from three years of pandemic restrictions, and as policymakers struggle to find another growth engine to offset a decline in foreign trade.
Factory headcounts have shrunk and companies have cut hourly wages by up to a third, according to multiple recruiters, while lucrative sign-on bonuses have been scrapped. Many factories have begun turning down older applicants, as declining orders created a labour oversupply, reversing a pandemic-era trend when factories increased hiring to meet strong demand.
Technology Strategy and Policy
China’s fake science industry: how ‘paper mills’ threaten progress – Financial Times, March 28, 2023
Estimates of the extent of fake scientific output vary enormously, from 2 per cent to 20 per cent or more of published papers. Extrapolating from his own research, Sabel puts paper mills’ global revenues at a minimum of €1bn a year and probably much more. There is general agreement that China is one of the world’s worst offenders, Sabel says, though Cope points out the paper mills are “by no means confined to China”.
Online brokers selling written-to-order papers proliferate on Chinese ecommerce sites such as Taobao. One broker advertising recently on Taobao charged clients $800 for a submission to a middle-tier domestic medical publication.
“Scientific misconduct is an organised practice and has been run as a business almost always half openly,” says a Chinese medical researcher based in the US. She explains that fraudulent papers from low-tier universities, which use cheaper paper mills, are easier to spot. They tend to recycle the same fraudulent data sets multiple times, while academics at more prestigious universities may purchase “leftover” experimental data from other researchers.
A portal to China is closing, at least temporarily, and researchers are nervous – South China Morning Post, March 25, 2023
Precision Targets: Accelerating the U.S.-India Defense Industrial Partnership – ORF America, March 27, 2023
This report details the opportunities for U.S.-India collaboration across their defense industrial enterprises, building on years of closer cooperation.
Europe’s Cloud Security Regime Should Focus on Technology, Not Nationality – ITIF, March 27, 2023
The EU’s new cloud cybersecurity regime should focus on good security practices, as the U.S. FedRAMP regime does. Emulating China’s protectionist focus on firm nationality is a bad security practice that weakens transatlantic influence over cybersecurity issues globally.
U.S. Diplomat to Washington: You’re Becoming Obsolete in One Big Area of Tech Policy – Brandon Possin, Politico, April 3, 2023
Silicon Valley Is Beating Washington to China Decoupling – Rishi Iyengar, Foreign Policy, April 3, 2023
Tech investors in the United States and China were dialing back bilateral links years before Biden decided to.
The Sanctions Sieve: The U.S. government is trying to stop China from selling chips to Russia that aid its war effort. It’s failing. – Ella Apostoaie, The Wire China, April 2, 2023
In June 2022, the U.S. Commerce Department placed Shenzhen-based Winninc Electronics on the Entity List. Seven months later, it sanctioned another Shenzhen-based firm, AOOK Technology, as well. As exporters of semiconductors and electronic components, the companies were accused of supporting Russia’s military and defense industrial base. By sanctioning them, the U.S. hoped to stem the flow of components made by American companies from enabling Russia’s invasion of Ukraine.
The flow, however, continued. An investigation by The Wire has found that there are at least four companies directly linked to Winninc and AOOK that are not sanctioned, with many of them continuing to ship chips to Russia. The discovery highlights how critical components, including those made by prominent U.S. firms, may still be ending up on the Ukrainian battlefield, despite one of the most expansive sanctions regimes ever attempted by the U.S. government.
Artificial Intelligence
Ernie Bot, China’s answer to ChatGPT, is delayed — again – Washington Post, March 28, 2023
Ernie Bot, China’s answer to ChatGPT, doesn’t want to talk about Chinese politics or protests against covid-19 controls. Ask a question even approaching something the Communist Party considers sensitive — such as famous actors or world-class tennis players who’ve run afoul of the system — and it will simply terminate the conversation. A button will appear: “Start a new conversation.”
How a tiny company with few rules is making fake images go mainstream – Washington Post, March 30, 2023
But the year-old company, run out of San Francisco with only a small collection of advisers and engineers, also has unchecked authority to determine how those powers are used. It allows, for example, users to generate images of President Biden, Vladimir Putin of Russia and other world leaders — but not China’s president, Xi Jinping.
“We just want to minimize drama,” the company’s founder and CEO, David Holz, said last year in a post on the chat service Discord. “Political satire in china is pretty not-okay,” he added, and “the ability for people in China to use this tech is more important than your ability to generate satire.”
The inconsistency shows how a powerful early leader in AI art and synthetic media is designing rules for its product on the fly. Without uniform standards, individual companies are deciding what’s permissible — and, in this case, when to bow to authoritarian governments.
The Amateurs Jailbreaking GPT Say They're Preventing a Closed-Source AI Dystopia – Vice, March 22, 2023
Artificial Intelligence Is Teaching Us New, Surprising Things About the Human Mind – Christopher Mims, Wall Street Journal, April 1, 2023
Telecommunications Networks and Infrastructure
Android app from China executed 0-day exploit on millions of devices – Dan Goodin, Arstechnica, March 27, 2023
‘I’ve never seen anything like this:’ One of China’s most popular apps has the ability to spy on its users, say experts – Nectar Gan, Yong Xiong and Juliana Liu, CNN, April 3, 2023
It is one of China’s most popular shopping apps, selling clothing, groceries and just about everything else under the sun to more than 750 million users a month.
But according to cybersecurity researchers, it can also bypass users’ cell phone security to monitor activities on other apps, check notifications, read private messages and change settings.
And once installed, it’s tough to remove.
While many apps collect vast troves of user data, sometimes without explicit consent, experts say e-commerce giant Pinduoduo has taken violations of privacy and data security to the next level.
In a detailed investigation, CNN spoke to half a dozen cybersecurity teams from Asia, Europe and the United States — as well as multiple former and current Pinduoduo employees — after receiving a tipoff.
Multiple experts identified the presence of malware on the Pinduoduo app that exploited vulnerabilities in Android operating systems. Company insiders said the exploits were utilized to spy on users and competitors, allegedly to boost sales.
The campaign to save TikTok has been years in the making – Politico, March 30, 2023
TikTok began working to win over the U.S. and European governments long before the latest concerns about its Chinese ownership.
TikTok’s battle for survival has become a vivid study in how a wealthy, foreign-owned corporation can use its financial might to build an impressive-looking network of influence — and also in the limitations of what lobbying can do to protect a company at the center of a geopolitical firestorm.
Belgian intelligence puts Huawei on its watchlist – Politico, March 28, 2023
Belgium's intelligence service is scrutinizing the operations of technology giant Huawei as fears of Chinese espionage grow around the EU and NATO headquarters in Brussels, according to confidential documents seen by POLITICO and three people familiar with the matter.
Huawei, Pummeled by U.S. Sanctions, Reports Plunge in Profit – Chang Che, New York Times, March 31, 2023
Germany's top cyber security authority uses Huawei technology – Dietmar Neuerer, Handelsblatt, April 3, 2023
Critical Minerals
How China is winning the race for Africa’s lithium – Harry Dempsey, Financial Times, April 3, 2023
The country already dominates processing of the metal for use in electric vehicle batteries and is now investing heavily in mines, leaving western operators scrambling to keep up.
Deep-sea mining is key to making transition to clean energy, says Loke – Kenza Bryan, Financial Times, April 1, 2023
Europe must be prepared to support deep-sea mining if it is to secure metals crucial to making the transition to clean energy, the new Norwegian owner of British industry hopeful UK Seabed Resources has warned.
Hans Olav Hide, chair of Norway’s Loke Marine Minerals, said the controversial practice could help the UK and EU compete in the face of China’s dominance of battery metal supply chains.
China's rare earths industry has a raw materials problem – Mary Hui, Quartz, April 3, 2023
Synthetic Biology
There’s a new US national security obsession — biotech – Chris Miller, Financial Times, March 6, 2023
Antibody-patent row could have far-reaching impact on biotech – Heidi Ledford, Nature, March 28, 2023
An unusual patent case before the US Supreme Court could have wide-ranging impacts on drug prices and technology.
On 27 March, the court heard arguments in a dispute over rights to therapeutic antibodies that are used to treat high cholesterol in people at risk of cardiovascular disease. Although the court’s justices spent much of their time wrestling with the details of how these antibodies are isolated, their decision — expected by the end of June — could affect how specific patents of any ilk must be when they describe an invention, and how broad they can be.
“It could spill over into all types of biotechnology cases,” says Sean Tu, a legal scholar at West Virginia University in Morgantown. “Today we’re talking about antibodies, tomorrow we might be talking about CRISPR or CAR-T-cell therapies.”
Enabling the synthetic biology revolution to reach across sectors – Liron Nesiel, CTech, March 30, 2023
Synthetic biology could disrupt some of the world’s biggest industries. Here are four steps to building a ‘syn-bio’ strategy – Fortune, March 3, 2023
What’s Your Synthetic Biology Strategy? – BCG, February 15, 2023
Quantum
The U.S. Wants to Make Sure China Can’t Catch Up on Quantum Computing – Kevin Klyman, Foreign Policy, March 31, 2023
In January, the Netherlands and Japan—the leading suppliers of semiconductor production equipment—agreed in principle to implement the United States’ October 2022 semiconductor export controls on China, stonewalling China’s development of advanced semiconductors. While the details of the trilateral agreement remain murky, restrictions on the sale of AI chips and advanced machine tools to China will significantly impede China’s drive for high-tech self-sufficiency.
But these restrictions are just the opening salvos in a series of unprecedented export controls on China planned by the Biden administration. After controls on semiconductors, the Commerce Department is moving on to the next emerging technology it worries China could weaponize: quantum computing. Export controls on quantum computing hardware, error correction software, and the provision of cloud services to Chinese entities are poised to become the next front in the U.S.-China tech war.
Quantum computing is a relatively new technology that uses the unique properties of quantum physics to build extremely powerful computers whose processing power comes from subatomic particles. Quantum computers could theoretically have much more computational power than today’s “classical” computers, allowing them to tackle problems that are currently impossible, such as breaking advanced encryption. However, the field is still in its infancy and current quantum computers are error prone and lack any real applications.
Advanced Aerospace Technology
Pentagon Prepares for Space Warfare as Potential Threats from China, Russia Grow – Wall Street Journal, March 28, 2023
White House’s spending request includes plans for simulators, equipment to train Space Force members for battle.
The Pentagon is gearing up for a future conflict in space as China and Russia deploy missiles and lasers that can take out satellites and disrupt military and civilian communications.
The U.S. military long ago dropped the notion of crewed, orbiting space weapons in favor of satellites because the logistics of supporting people outside of Earth’s atmosphere were formidable.
Semiconductors and Microelectronics
China's chip industry will be 'reborn' under U.S. sanctions, Huawei says, confirming breakthrough – CNBC, March 31, 2023
Micron Gets Caught in U.S.-China Crossfire – Jacky Wong, Wall Street Journal, April 3, 2023
Japan said on Friday it will restrict exports of 23 types of semiconductor manufacturing equipment, aligning its technology trade controls with a U.S. push to curb China's ability to make advanced chips.
Japan, home to major chip equipment makers such as Nikon Corp and Tokyo Electron Ltd, did not specify China as the target of the restrictions, saying manufacturers would need to seek export permission for all regions.
"We are fulfilling our responsibility as a technological nation to contribute to international peace and stability," Minister for Economy, Trade and Industry Yasutoshi Nishimura told a news conference.
China escalates tech battle with review of US chipmaker Micron – Thomas Hale, Financial Times, April 1, 2023
Energy and Climate
Why US-China Rivalry Can Actually Help Fight Climate Change – Internationale Politik Quarterly, March 24, 2023
China leads global battery patent race for post-lithium-ion era – Nikkei Asia, April 3, 2023
China is increasing its presence in the race to develop replacements for the lithium-ion battery, a Nikkei analysis shows. A country-by-country tally of patents related to post-lithium-ion batteries over the past 10 years shows China in the lead, accounting for more than half of all patents.
The evaluation of patents for sodium-ion batteries, perhaps the biggest horse in the race, also shows China dominating Japan and the U.S., with Chinese companies expected to begin mass production of these batteries this year.
Opinion and Commentary
Xi Jinping Says He Is Preparing China for War: The World Should Take Him Seriously – John Pomfret and Matt Pottinger, Foreign Affairs, March 29, 2023
AUDIO – Greg Levesque and Varun Vira on publicly available information – NatSec Tech Podcast, March 29, 2023
Greg Levesque of Strider Technologies and Varun Vira of C4ADS join host Jeanne Meserve for a conversation on the private and nonprofit sector use of publicly available information.
U.S. Research Scientists Are Blind to China’s Threat – Paul Dabbar, Wall Street Journal, April 3, 2023
Counter Chinese Bullying With an ‘Economic Article 5’ – Anders Fogh Rasmussen, Foreign Policy, March 28, 2023
Democracies should act against Chinese economic coercion at their summit this week.
What do Lithuanian beer, Australian wine, and Taiwanese pineapple have in common? You will struggle to find any of them in a Chinese supermarket. They are among the thousands of foreign products Beijing has effectively banned in recent years in retaliation for decisions it viewed as hostile to its interests.
As China’s wealth has grown, so has its willingness to use economic bullying to achieve its foreign-policy goals. When Australian politicians called for an investigation into the origins of the COVID-19 outbreak in China, Beijing responded by slapping tariffs of more than 100 percent on Australian wines. Unsurprisingly, Australian wine exports to China collapsed, from $870 million in 2020 to just $8.3 million in 2022. The consequences for Lithuania were even starker when it allowed a Taiwanese representative office to be set up in Vilnius. In response, China launched an effective embargo on the entire Baltic state. This had significant knock-on effects on the European Union’s single market, with China also pressuring European companies to remove Lithuanian products from their supply chains.
Beijing is running a play from a well-worn autocrat’s playbook. Russia, too, has long used economic blackmail to keep its neighbors locked into its sphere of influence. Following the February 2022 invasion of Ukraine, Russian President Vladimir Putin believed such blackmail would work again. He thought that the threat of energy shortages would lead to a weak and divided response from Europe, but he was wrong. Europe and the wider democratic world instead responded with remarkable unity, both in their support for Ukraine and by quickly diversifying from Russian oil and gas.
The TikTok Debate Should Start With Reciprocity; Everything Else Is Secondary – David Moschella, ITIF, March 29, 2023
During the March 23 Energy and Commerce Committee hearing on TikTok, I kept waiting for someone to ask the most important and basic question: Why should the United States allow China to have open access to America’s vast social media market when U.S.-based firms can’t do the same within China?
This is where the hearing should have started, and possibly ended. China has at various times banned, limited, and censored Google search, YouTube, Facebook, Twitter, Netflix, and others. From a Chinese perspective, this has been a spectacularly successful strategy as it helped firms such as Baidu, Alibaba, and Tencent dominate today’s huge Chinese market and gain share around the world.1 But from a U.S. perspective, allowing a Chinese firm to become a U.S. social media giant, even as U.S. firms have no such opportunity in China has made America look more like chumps than champions of open markets.
China used to argue that it needed time to nurture its local firms, but most of its bans have remained in place even as Chinese firms have become more than strong enough to compete globally. Clearly, China’s social media policies are no longer about national development; they are about information censorship. Over the years, America hasn’t seriously responded because there hasn’t been an easy way to do so in kind. But that has changed. Although banning TikTok might hurt American content creators—at least until they find homes on new platforms—it would hurt China more, especially as there are now no U.S. social media companies in China to retaliate against. How should this newfound leverage be utilized?
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