Washington’s consideration of imposing sanctions on Hikvision demonstrate the risks of decoupling U.S.-China technological interdependence without a clear strategy, recent semiconductor supply chain policies guard against Chinese disruption, and legal actions against crypto services have mixed effects.

Carnegie welcomes its newest senior fellow, Gavin Wilde, to the tech program. You can follow his work here.

A U.S.-China Tech Divorce?
Earlier this month, news outlets reported that Washington is weighing whether to sanction Chinese tech company Hikvision for human rights violations under the Global Magnitsky Act. The firm is already on several lists that prevent Hikvision from importing U.S.-origin goods without a license; receiving American investment; or selling products to U.S. telecoms, federal agencies, or federal contractors. Yet these restrictions pale in comparison to what Washington is now considering, which would mark a profound escalation of U.S.-China tech tensions.

The U.S. lacks a strategy to curb technological interdependence with China in a responsible way that avoids self-destructive decoupling; the Hikvision case is only the latest illustration of this deficiency. In the latest Carnegie report, fellow Jon Bateman argues that the best approach would combine bold domestic investments (in R&D, education, and much more) with narrow restrictions on U.S.-China ties in a few strategic technology areas. Without a clear strategy, Washington risks doing too little or—more likely—too much to curb technological interdependence.

Recent developments in semiconductor supply chain policy explicitly guard against advancements by rival states. The US and EU launched a joint “early warning system” for semiconductor supply chain disruptions, Japan and the US are developing a framework to prevent tech leaks in chip production, the Quad countries are cooperating with allies to secure semiconductor supply chains, and Taiwan is tightening rules to prevent theft of chip technology, all with an eye towards tech competition with China. In China’s neighborhood, Malaysia signed a Memorandum of Cooperation on Semiconductor Supply Chain Resilience with the US, setting the stage for increased collaboration between the two governments. The new Indo-Pacific Economic Framework for Prosperity, while setting out to make more resilient supply chains, appears to offer an alternative to Chinese leadership in the region.

Governments are increasingly pursuing sanctions and other enforcement actions against crypto services, to mixed effect. The EU and Japan extended regulations to prevent crypto services from providing a loophole for sanctions on Russia, while a U.S. federal court determined that cryptocurrencies can't be used to evade sanctions. The U.S. sanctioned Russian-language darknet marketplace Hydra and associated crypto exchange Garantex for facilitating ransomware attacks. And South Korean authorities are investigating local crypto exchanges after the collapse of the Terra coin. Following North Korea’s hack of the Ronin blockchain, the U.S. sanctioned a crypto mixer and ether address involved in laundering stolen funds.