American technology firms will increasingly be forced to decide whether their interests are in line with U.S. national security or with maximizing their profits in Chinese markets, according to homeland and cybersecurity analyst Paul Rosenzweig.
In an interview with NTD’s “Capitol Report” on Monday, Mr. Rosenzweig said U.S. policy is increasingly forcing a “decoupling” between the United States and the People’s Republic of China (PRC) in an effort to reduce security risks. Mr. Rosenzweig, who served as the deputy assistant secretary for policy in the Department of Homeland Security and who continues to consult and lecture on cybersecurity and technology, said U.S. firms will have to increasingly reassess their business models to match evolving U.S.-China relations.
“Increasingly, I think American companies are going to see that they have to pick a flag, so to speak, choose a side, not because of principle, but because the law is going to increasingly require them to decouple and most American tech companies have yet to really come to grips with that. They haven’t yet done a risk assessment of what they should be doing,” he said. “They don’t understand yet how deeply embedded they are in China and how much it’s going to hurt when some event compels them to decouple.”
Mr. Rosenzweig said continued U.S. economic sanctions could drive a wedge between U.S. firms and their Chinese partners, as could growing concerns about China’s human rights record or a military conflict between China and Taiwan.
Taiwan governs itself as an independent nation, but the Chinese Communist Party (CCP) regards the island as a part of its territory and has increasingly called for “reunification” with Taiwan, including through military force. The United States maintains a relatively ambiguous policy on relations between China and Taiwan, but has regularly approved arms transfers to Taiwan and could intervene on Taiwan’s behalf if it is attacked.
The homeland security analyst said he doesn’t blame U.S. firms for wanting to maximize their profits in China, but warned that pursuing business interests in China will eventually prove to be not only “a bad thing on principle, but it’s going to be bad economics as well.”
Biden Ratchets Down AI Chip Regulations
Last year, the U.S. Commerce Department introduced a rule intended to limit U.S. individuals and firms from exporting to China certain high-end chips that may be used in military applications or in the development of artificial intelligence (AI) models. The 2022 rule specifically regulated exports of computer components with a data transfer rate of 600 gigabytes per second or higher.
As the new regulation went into effect, the U.S. technology company NVIDIA began marketing its A800 computer chip as an alternative for Chinese buyers that offered powerful computing abilities while staying below the 600GBps data transfer rate threshold.
“The Nvidia A800 GPU, which went into production in Q3, is another alternative product to the Nvidia A100 GPU for customers in China. The A800 meets the U.S. Government’s clear test for reduced export control and cannot be programmed to exceed it,” an NVIDIA spokesperson told Reuters last year.
Last week, the Commerce Department announced revised rules regarding high-end computer chips, which Commerce Secretary Gina Raimondo said will “shut off pathways to evade our restrictions.” Ms. Raimondo said the export controls will likely have to be updated annually to reflect the workarounds and changes in technology.
Mr. Rosenzweig welcomed the tightened export restrictions but raised concerns about other ways China can continue to expand its AI technology even without U.S. technology exports.
“We’re at the start of a process right now. I think that the Biden administration’s decision to further restrict exports is a good thing,” Mr. Rosenzweig told NTD News. “One of the as yet unexamined questions is the nature of American technology companies’ interactions in China already, which doesn’t involve the export of technology, but involves cooperative ventures with them.”
Mr. Rosenzweig said the value of the Biden administration’s policies will come down to how well they are implemented and enforced.
“It will require, frankly, a concerted effort by the administration and Congress to talk to the American tech companies—the Microsofts, [Amazon Web Services], Oracles, and Metas who are still deeply embedded [in China]—and tell them that they need to get kind of their act together,” he said. “But I actually am moderately optimistic at the possibility of effective action on this issue.”