The Bad News Continues for China's Superconductor Industry - Zeihan on Geopolitics

The Bad News Continues for China's Superconductor Industry - Zeihan on Geopolitics

China's superconductor industry is facing a series of setbacks, and the consequences are starting to unfold. The Biden administration's actions against China's semiconductor industry have led to a mass resignation of American citizens working in the Chinese chip industry. This exodus of skilled workers is leaving China with critical gaps in terms of expertise, design work, and technological inputs. As a result, China is finding itself unable to fill these gaps adequately. The question now is, what options does Beijing have?

Unfortunately for China, Europe and Japan are largely on board with the US actions, leaving Beijing with limited options for support. While South Korea and Taiwan could potentially address some of China's needs, they cannot fulfill all of them. This leaves China in a precarious situation where it will have to resort to sourcing inputs from the grey market. This means buying components or pulling chips from third-party devices and attempting to insert them into products and industries they were not originally designed for.

This process of sourcing inputs from the grey market is not only time-consuming but also imperfect. It will undoubtedly have serious implications for high-level computing, China's emerging defense platforms, telecommunications, and more. The use of components not specifically designed for certain applications can lead to inefficiencies, compatibility issues, and potential vulnerabilities in critical systems. China's reliance on the grey market will pose significant challenges for the country's technological advancement.

In light of these challenges, it is crucial for China to explore alternative strategies to mitigate the impact of the Biden administration's actions. Here are three actionable pieces of advice for China's superconductor industry:

1. Invest in domestic talent development: With the resignation of American citizens working in the Chinese chip industry, China needs to focus on nurturing and developing its own pool of skilled workers. By investing in education and training programs, China can build a strong domestic workforce that can fill the gaps left by the departing American workers.

2. Strengthen partnerships with other Asian countries: While South Korea and Taiwan may not be able to fulfill all of China's needs, they can still provide valuable support. China should work on strengthening its partnerships with these countries, fostering collaborations in research and development, and sharing technological expertise. By leveraging the strengths of its neighboring countries, China can mitigate the impact of the US actions to some extent.

3. Accelerate indigenous research and development: To reduce its dependence on foreign inputs, China should ramp up its efforts in indigenous research and development. By investing in cutting-edge technologies and innovation, China can develop its own superconductor industry that is less reliant on external sources. This will not only enhance China's technological capabilities but also reduce its vulnerability to geopolitical disruptions.

In conclusion, the bad news continues for China's superconductor industry as the consequences of the Biden administration's actions unfold. With limited options for support, China will have to rely on the grey market to fill critical gaps in expertise and technological inputs. However, this process will come with serious implications for various sectors. To mitigate these challenges, China should invest in domestic talent development, strengthen partnerships with other Asian countries, and accelerate indigenous research and development. Only by taking proactive measures can China navigate through this difficult period and ensure the long-term stability and growth of its superconductor industry.