Julien Holtz, Emerging Market Strategist & Dong Chen, Head of Asia Macroeconomic Research Pictet Wealth Management.

On 7 October, the US Department of Commerce announced new controls on advanced computing and semiconductor exports to China.

The restrictions are wide-ranging and rest on three main pillars:

• Pillar I: export controls on advanced chips and semiconductor manufacturing equipment, particularly if used or installed in China;
• Pillar II: restrictions on US persons’ (individuals and firms) ability to support the development or production of certain integrated circuits in China;
• Pillar III: additions to the Unverified Users List and the Entity List, which aim to restrict specific entities’ access to dual-use items.

The measures also illustrate a change of tack by the US, which is no longer seeking a ‘relative’ advantage in key technologies, but rather an absolute one.

From consumers to manufacturers of advanced chips and manufacturing equipment, the whole semiconductor universe could feel the effects of these new export controls.

We do not expect any immediate response from China, but Beijing will most likely step up its own efforts to achieve technological autonomy.

The US government’s technology restrictions are part of a broader “strategic competition” with China. The partial de-coupling this represents between the US and China does not bode well for the world economy or world peace.