Strategic De-risking Beyond Chips
Through export controls and industrial policy packages, the global semiconductor industry has become an arena of technological competition in recent years. As states seek to “de-risk” critical supply chains further, they face difficult challenges in identifying national security risks from emerging dual-use technologies and making tradeoffs between economic and security considerations.
After its accession to the WTO in 2001, many Western governments were hopeful that China would continue to liberalize its economy and eventually its political system. Yet in the years following, China maintained a tight grip on its economy. Despite growing frustrations among Western governments, a process of deep economic integration had already taken place. This transformation of the global economy has profound consequences for the nature of today’s global economic and technological competition. As tensions between the US and China continued to rise after Xi Jinping came to power in 2012, economic interdependence across the world had already increased dramatically. In pursuit of economic efficiency, global supply chains had become ever more fragmented and complex, structured largely independently of the degree of political alignment between states.
The Covid-19 pandemic and Russia’s war on Ukraine eventually laid bare a long-overlooked or deliberately ignored side effect of economic efficiency: States had become dependent on foreign supply of necessary goods or materials, including in technologies perceived as critical. Alarmed by these events, and with the prospect of further supply chain disruptions due to renewed SinoAmerican great power competition looming large, many states began to acknowledge their vulnerabilities and undertake efforts to increase the resilience of their supply chains.