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blowback, China, exports, Following Up, free trade, Intel, Jobs, Middle East, national security, Obama, pivot, recovery, state capitalism, technology
Critics of President Obama’s decision to escalate America’s military involvement in the Middle East often bring up the danger of “blowback”: the repeated instances of advanced U.S. weapons transferred to allied forces winding up with enemy forces, from the Taliban in Afghanistan to ISIS in Iraq. I wish they’d train some of their fire on an even bigger, more worrisome example of at least potential blowback: the continuing transfer of militarily-relevant technology to a Chinese government whose growing aggressiveness in East Asia the president has resolved to counter with his decision to “pivot” more U.S. military forces to the region.
I’ve already detailed numerous cases of American high tech companies sharing with Chinese partners – including the Chinese government – the knowhow to develop hardware and software that can easily be used to develop better capabilities on both physical and cyber battlefields. But this rope-selling (to use Lenin’s vivid metaphor) continues apace – most recently with Intel’s decision to invest in and help Chinese companies produce better semiconductors.
At first glance, Intel’s move seems to pose no threat to U.S. national security, and to be vital for Intel’s own success going forward. The company has been lagging in producing semiconductors for smartphones and equally mobile tablets. China is the world’s largest smartphone market and leading manufacturing site. And Intel’s cooperation with Tsinghua Group will focus on developing chips for the cheapo but technologically advanced phones selling so well in low-income countries like China. The Tsinghua investment, moreover, builds on Intel’s establishment earlier this year of a Smart Device Innovation Center and $100 million venture fund in the same field, and tie-up with a Chinese fabless chip-maker. What not to like?
Certainly, however, Intel’s China strategy, raises important economic issues. Apparently, the company sees no prospect of supplying huge third world markets for mobile devices with equally impressive growth credentials from the United States. That would sure be a nice new source of American export growth – as well as GDP growth and hiring. But because so much of U.S and world production (including assembly) of electronics and infotech products has been offshored to China, China is now the natural choice for producing new components for these devices.
Intel’s new investments are also problematic from a free trade standpoint. After all, its newest China partner is an arm of the Chinese government. And in its own announcement of the Intel deal, that government issued a reminder that “It has become a national priority of China to grow its semiconductor industry” and predicted that the team-up “will accelerate the technology development and further strengthen the competitiveness and market position of Chinese semiconductor companies.”
In other words, from China’s standpoint, it’s not just about semiconductors for consumer products. It’s about China’s officially supported and subsidized drive to become an even bigger player in global technology markets. How does enabling such Chinese government industrial policy increase the global economic efficiency that’s a fundamental stated rationale for freer global trade and investment? And how does strengthening China’s tech sector help the U.S. economy?
But China’s ambitions also threaten the Obama pivot. And because the pivot increases U.S. exposure to conflict in East Asia, they threaten American security as well. Technological capability is a foundation of national military strength, and even if the new Intel China operations simply improved Chinese prowess in telecommunications, sending and processing massive amounts of information accurately and quickly is a major component of the military edge America holds over China and other rivals. By further strengthening China’s technology base, Intel (and all the other American companies that have bolstered China’s capabilities) is helping to reduce that margin of U.S. superiority.
As a result, the President’s pivot and his apparent “What, me worry?” approach to U.S. corporate moves that strengthen the Chinese military keep raising the odds of the United States fighting an enemy it keeps helping to arm. It’s hard to imagine a worse and more unnecessary lose-lose proposition for America’s military and the nation’s overall security.
RealityChek 
This collaboration will bring marginal gains for both parties. This deal won’t allow Intel to dislodge Arm CPU architecture from mobile space. And China won’t be able to overcome the first mover advantage in semiconductor manufacturing enjoyed by US, Germany, Taiwan, and Japan.