In January, the Netherlands and Japan—the leading suppliers of semiconductor production equipment—agreed in principle to implement the United States’ October 2022 semiconductor export controls on China, stonewalling China’s development of advanced semiconductors. While the details of the trilateral agreement remain murky, restrictions on the sale of AI chips and advanced machine tools to China will significantly impede China’s drive for high-tech self-sufficiency.
But these restrictions are just the opening salvos in a series of unprecedented export controls on China planned by the Biden administration. After controls on semiconductors, the Commerce Department is moving on to the next emerging technology it worries China could weaponize: quantum computing. Export controls on quantum computing hardware, error correction software, and the provision of cloud services to Chinese entities are poised to become the next front in the U.S.-China tech war.
Quantum computing is a relatively new technology that uses the unique properties of quantum physics to build extremely powerful computers whose processing power comes from subatomic particles. Quantum computers could theoretically have much more computational power than today’s “classical” computers, allowing them to tackle problems that are currently impossible, such as breaking advanced encryption. However, the field is still in its infancy and current quantum computers are error prone and lack any real applications.
Undersecretary of Commerce for Industry and Security Alan Estevez said last year that he would “put down money” on the United States enacting additional export controls related to quantum computing, artificial intelligence (AI), and biotechnology. Commerce Secretary Gina Raimondo doubled down on Estevez’s bet in a speech at the Massachusetts Institute of Technology, saying that the United States would “bolster [its] system of export controls” and “take action to protect [its] advantage” over China with respect to quantum information science, semiconductors, AI, biotechnology, and clean energy technologies.
U.S. National Security Advisor Jake Sullivan laid out this policy in September 2022, arguing “computing-related technologies, biotech, and clean tech are truly force multipliers” and stating that United States would impose export controls in order to “maintain as large of a lead as possible” ahead of rivals such as China. In other words, because technologies like quantum computing have the capacity to provide China with military and economic advantages, whether through new cyberweapons or faster drug discovery, the United States plans to enact sweeping unilateral export controls on China.
Policymakers in Washington are determined to maintain the United States’ lead in quantum computing because of its potential military applications. Researchers have warned that a potent quantum computer could thwart existing encryption schemes, leading U.S. President Joe Biden to issue a national security memorandum requiring federal agencies to shift to post-quantum cryptography by 2035.
In 2021, three Chinese quantum computing organizations were placed on the Commerce Department’s Entity List, preventing U.S. firms from selling products to them without a license. The Commerce Department claimed that these Chinese quantum computing groups “support the military modernization of the People’s Liberation Army” and use U.S. technologies to develop “counter-stealth and counter-submarine applications, and the ability to break encryption.” But stronger measures are likely to come.
The United States and China are the two most advanced countries in quantum computing, but the United States is the clear global leader. It is ahead in three of the four most promising technical approaches to quantum computing, while China leads in just one approach. From 2011 to 2020, the United States produced the most quantum computing publications as well as twice as many highly-cited quantum computing publications as China. Additionally, U.S. quantum computing firms have 30 times more funding than private Chinese competitors – although plenty of money is going into government-backed research in China too
While China leads the world in quantum communications, a subfield of quantum information science with the potential to enable ultra-secure data transfers, Chinese scientists acknowledge America’s edge in quantum computing. Top Chinese quantum computing researcher Lu Chao-Yang recently concluded “Google’s in the lead,” adding that he had “no idea” how the rumor began that China had spent $15 billion on quantum computing since “the actual money is maybe 25 percent of that.”
The Commerce Department has been holding consultations with the private sector on quantum computing export controls since at least 2019. While little information about these restrictions is publicly available, recent reporting indicates they could target China’s access to quantum computing hardware, error correction software, and cloud services using the same regulatory tools as semiconductor export controls.
For example, quantum computing export controls may ban the sale of critical components to Chinese entities, just as export controls on semiconductors did. One important technology that the United States could restrict is the dilution refrigerator, which creates extremely low temperatures that allow for individual atoms to be manipulated. There is little evidence that any Chinese company can produce dilution refrigerators at scale—the leading companies are Bluefors Oy in Finland, Oxford Instruments NanoScience in Britain, and JanisULT in the United States, which have 70 percent market share between them.
The Commerce Department could create export controls via a Foreign Direct Product Rule that bans the sale to Chinese entities of any dilution refrigerator that relies on U.S. technology, as it did with advanced lithography tools for producing semiconductors. Alternatively, the Commerce Department could block the sale of whole quantum computers and their essential components to China.
These restrictions could be somewhat effective in the short term, but they would not be nearly as impactful as semiconductor export controls. Unlike with semiconductors, foreign firms have few if any critical dependencies on U.S. quantum technologies and components, meaning they could circumvent export controls on dilution refrigerators by using alternatives to U.S. materials and parts.
Quantum computing export controls might also block the sale of ion traps, which are used to isolate individual atoms in quantum computers. Export controls on the sale of ion traps to China may appeal to policymakers because the United States has enormous advantages in this domain: No Chinese group has succeeded in developing a trapped-ion quantum computer, while U.S. firms Honeywell and IonQ are both global leaders in this technical approach.
Aside from hardware, the Commerce Department is reportedly considering placing export controls on software that corrects errors made by quantum computers due to mechanical vibrations or temperature fluctuations. While much of this software is currently open source—and therefore difficult to restrict—it may become more privatized or otherwise restricted as quantum computing matures as a field and as governments make quantum computing a national security priority.
Unlike the semiconductor industry, quantum computing is a fledgling sector with no current practical applications. Edward Parker, a physical scientist at the RAND Corporation and the lead author of a 2022 report on quantum in the United States and China, said, “It’s very hard to isolate national security applications in quantum computing because, frankly, there are not any applications yet.” As a result, export controls are much less likely to be effective, as the industry has yet to consolidate around a single approach to building a quantum computer and supply chains are not well developed.
The most immediate use of quantum computing is as a cloud service for companies hoping to rent quantum computers to perform large computations. Washington is reportedly considering banning firms from providing organizations in China with cloud access to quantum computers, hamstringing U.S. startups such as IonQ and Rigetti that derive most of their revenue from cloud services. In a recent analysis, Parker found that quantum startups consider “the prospect of export controls as an existential threat.”
In September 2022, the Commerce and Treasury departments enacted export controls on the supply of dilution refrigerators, quantum software, and cloud services to Russia and Belarus, providing an example of what quantum computing restrictions on China might look like. Although similar measures targeting China would be far from foolproof, they would create significant roadblocks in the near term.
But forceful measures from Washington will likely prompt a response from Beijing. China has not retaliated directly in response to the Commerce Department’s semiconductor export controls—but it has already developed a suite of policy tools that it can use to leverage its market power and prevent foreign firms from extending their technology advantage.
For example, Chinese regulators have blocked the British semiconductor firm Arm from exiting its Chinese joint venture with SoftBank, preventing it from fundraising through an initial public offering (IPO). An anonymous Chinese official said, “China does not want to lose Arm at this juncture. … The chip war between the U.S. and China continues to escalate and Arm is a must-have ally for China’s chip industry.”
China’s newly expanded Anti-Monopoly Law also gives it ample opportunity to block mergers and joint ventures led by U.S. firms. The most recent U.S. target of the Anti-Monopoly Law is DuPont, which scrapped its deal to acquire advanced materials manufacturer Rogers Corporation last November after China’s State Administration for Market Regulation (SAMR) delayed approval of the acquisition.
Another merger in SAMR’s crosshairs is Intel’s acquisition of Israeli chipmaker Tower Semiconductor. The $5 billion deal is the crux of Intel’s strategy to compete with Samsung and Taiwan Semiconductor Manufacturing Company Limited (TSMC) as a foundry that produces chips designed by its clients. Intel’s revitalization is the cornerstone of Washington’s semiconductor strategy, but its acquisition of Tower requires Beijing’s seal of approval. SAMR has stalled the deal for a year, and is likely to delay it further as Tower is an important player in China’s semiconductor industry and would be subject to stricter U.S. controls if it became part of Intel.
In addition, China might retaliate against quantum computing export controls by restricting technology transfers to U.S. firms in areas where China dominates the global market, such as batteries for electric vehicles. As a stark illustration, in the wake of Ford’s announcement that it would license electric vehicle battery technology from Chinese giant CATL, which controls 37 percent of global supply, Beijing is planning to subject the licensing agreement to additional scrutiny.
At China’s recent National People’s Congress, Chinese President Xi Jinping said he was both happy about and worried by CATL’s market leadership, remarking that “nascent industries should … figure out where the risks are and avoid penetrating deep into enemy territory alone, only to be caught by others and get wiped out.”
U.S. policymakers have upped the ante in the technology competition with China by committing to an unprecedented program of export controls in industries that China sees as driving its economic future. The risks of this strategy are substantial—and it is unclear whether restrictions on nascent technologies such as quantum computing are worth potentially provoking a retaliatory response from Beijing.
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