Chips as a foreign policy cudgel

Hello, it’s Drake here from New York. The Biden administration shook up the computer chip world last week. But first...Today’s must-reads:• [View in browser]( [Bloomberg]( Hello, it’s Drake here from New York. The Biden administration shook up the computer chip world last week. But first... Today’s must-reads: • Netflix plans to introduce an ad-supported plan on Nov. 3 for $7 a month, bucking its long-held stance as a commercial-free [alternative to cable]( • Apple teamed up with Goldman Sachs to offer savings accounts to users of the tech company’s [credit card.]( • Taiwan Semiconductor slashed its capital spending target by 10% in a dramatic sign of trouble for the [tech industry]( A shock to the chip world Last Friday, the Biden administration issued a bombshell, in the dry bureaucratic language of export control regulation. In an interim final rule filed by the Commerce Department’s Bureau of Industry and Security, a set of rules called the Export Administration Regulations (EAR) were amended “to implement necessary controls on advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items.” In plain English, it was a [kneecapping]( of the Chinese tech industry, depriving it of the advanced chips—and the means of making them—vital for everything from smartphones to self-driving cars. American companies will not, for the most part, be able to export them to China, nor will the many non-American companies that rely on US technology to make their own advanced chips. US officials have talked about the move as a national security measure—the advanced graphics processing units at issue are vital for advanced weapons systems and for training artificial intelligence, which the Chinese government has used to broaden its mass surveillance program at home. Seen that way, the new restrictions are not unlike the sorts of technologies that the US has long kept a close eye on—things like lasers or nuclear energy whose military applications are clear. But the civilian uses of advanced GPUs far outnumber their military ones. The new regulations are the culmination of a shift in American thinking about technology and trade. “It obviously ramped up during the Trump administration,” says Emily Weinstein, a research fellow at Georgetown University’s Center for Security and Emerging Technology, “but even during the Obama administration we began to see a rethinking of how we use export controls as a tool in our arsenal.” It’s a tool that the Biden administration, perhaps even more than its predecessor, has decided to use bluntly. The Trump administration, for its part, targeted Huawei Technologies Co. and its fellow Chinese telecom ZTE Corp. with what were at the time unprecedented sanctions. The Biden administration has essentially expanded those measures to the entire Chinese tech sector, as the Carnegie Endowment for International Peace’s Jon Bateman points out in an Oct. 12 [piece]( in Foreign Policy. Scholars of Chinese-American relations talk a lot about “decoupling.” The term, with its echoes of Gwyneth Paltrow’s description of her divorce, is a euphemism for the process by which the two giant economies might try to mutually disentangle themselves, one freighted with the potential for political misunderstanding, economic destruction, and, in the worst case, war. As far as the Biden administration is concerned, decoupling has now occurred. A little less than a month ago, as the current restrictions were being discussed internally, [Jake Sullivan](bbg://people/profile/17161463), Biden’s national security adviser, gave a speech in which he evoked the sanctions the US and its allies levied on Russia after it invaded Ukraine. They were, in his words, “the most stringent technology restrictions ever imposed on a major economy. These measures have inflicted tremendous costs, forcing Russia to use chips from dishwashers in its military equipment.” He went on: “This has demonstrated that technology export controls can be more than just a preventative tool. If implemented in a way that is robust, durable, and comprehensive, they can be a new strategic asset in the US and allied toolkit to impose costs on adversaries, and even over time degrade their battlefield capabilities.” It’s not hard to see a connection to the new China chip restrictions. The message, it seems, has gotten through. Earlier this week a Chinese analyst told Bloomberg there is now “[no possibility of reconciliation](.” —[Drake Bennett](mailto:dbennett35@bloomberg.net) The big story Snowflake, the business software company, wants to make buying business software more like paying a water bill: [Pay only for what you use](. It’s a strategy that’s catching on in the current market slowdown when money is tight and companies don’t want to be locked into a big contract. What else you need to know Take-Two shuttered its New York studio behind the popular mobile game Dots, resulting in the [elimination of 65 jobs]( Meta urged a judge to reject the FTC’s attempt to block its acquisition of the virtual reality app Within Unlimited Twitter is working on an official don’t @ me feature, letting [users control]( who can mention them, the Verge reported. Follow Us More from Bloomberg Dig gadgets or video games? [Sign up for Power On]( to get Apple scoops, consumer tech news and more in your inbox on Sundays. [Sign up for Game On]( to go deep inside the video game business, delivered on Fridays. Why not try both? Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights.​​​​​​​ You received this message because you are subscribed to Bloomberg's Fully Charged newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](