In the scheme of the larger technology war, the Micron affair is a skirmish.

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While the broader friction between China and the US – and, increasingly the US allies in Europe, Japan and, perhaps, South Korea – is being described by the US and Europe as “delinking” rather than “decoupling,” there is a very clear effort being made to decouple in the semiconductor space.

Last year’s US restrictions on exports of advanced chips, chip-making equipment, components and designs included an extraterritorial dimension and were backed up with a planned $US53 billion ($80.3 billion) of subsidies for domestic chip plants and research and development as the US seeks to reshore a critical input for its industries and military.

The US is also engaged in discussions with the European Union to develop a common approach to screening and restricting investments in strategic technologies in China and, with other like-minded G7 members, citing state subsidies and other non-market policies to consider extending their current efforts to limit China’s access to advanced chips to less-strategic technologies like legacy chips.

The Dutch giant, ASML, which is the dominant manufacturer of the ultra-expensive machines that make the most advanced semiconductors, has stopped selling those machines to China (but not those making less sophisticated chips), pending the finalisation of a Dutch government policy expected mid-year.

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Another key US ally, Japan, has already announced its own restrictions on exports of critical chip-making equipment that goes well beyond the technologies and intellectual property involved in manufacturing advanced chips to legacy chips and the inputs to their manufacture, like silicon. Japan is a major force in some segments of the semiconductor supply chain, including the raw materials used to make them.

China is particularly concerned by Japan’s actions, which could be more broadly disruptive for Chinese industries than the more targeted efforts to limit its access to advanced chips and the technologies for manufacturing them. It has labelled them an abuse of export controls and against free trade and international trade rules.

China Ministry of Commerce said this week that the restrictions would “severely undermine the interest and right of Chinese and Japanese companies and China-Japan trade and economic co-operation, damage the landscape of the global semiconductor industry and impact industrial and supply chain security and stability”.

Japan, which was a dominant player in semiconductors in the 1980s, is trying to make a comeback with, like the US, a state-directed and funded program to take advantage of the fallout from the effort to suppress China’s capabilities and production.

It is subsidising a new semiconductor business created by some of its leading companies, including Sony and Toyota, which will design and build next-generation chips. It is also contributing a reported $US1.5 billion to a $US3.6 billion investment by Micron in Japan. Samsung and Taiwan Semiconductor Manufacturing Co (which is building a new $US40 billion plant in the US) are also planning chip-making plants in Japan.

China’s targeting of Micron is a symptom of its angst, anger and even alarm as the US and its allies intensify their attack on a key pillar of its economic and military ambitions rather than a response to a genuine threat to its national security.

While South Korea is part of the fledgling semiconductor alliance with the US, Japan and Taiwan, its companies have a major manufacturing presence within China.

China is a major market for their products and South Korea’s major trading partner by far. That puts the country in a delicate position, although its relationship with the Biden administration has been strengthening.

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If the Biden administration can convince South Korea not to fill in the gaps created by the sanctions on Micron and the larger attempt to slow China’s technological progress, the noose will tighten further and the decoupling of China’s semiconductor industry from the developed world’s would gain further momentum.

In context, therefore, China’s targeting of Micron is a symptom of its angst, anger and even alarm as the US and its allies intensify their attack on a key pillar of its economic and military ambitions, rather than a response to a genuine threat to its national security.

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