Pranay Kotasthane quoted in the CNBC on U.S. export control measures on China’s semiconductor industry

Pranay Kotashtane, Deputy Director of the Takshashila Institution, was quoted in the CNBC on the export control regime imposed by the U.S. on China’s semiconductor industry. He was quoted as saying,

“Semiconductor production is a hyper globalised supply chain. Being cut off from this engine will mean that Chinese companies must ‘reinvent the wheel’ domestically. China’s semiconductor industry will need much higher capital and talent infusion to absorb this shock,” Kotasthane said.

But this will be an uphill climb.

Kotasthane said that China will be able to make advanced chips even without ASML’s machinery “but the yield will be far lower, meaning higher costs and lower reliability.”

Meanwhile, Chinese firms will have to rely on “lower-end” domestic alternatives for design tools, Kotasthane said, which they would typically have gotten from American and Japanese firms.

Washington’s latest rules also require any “U.S. persons” to obtain a license if they want to support the development or production of semiconductors at certain China-based manufacturing facilities. This effectively cuts off a key pipeline of American talent to China.

“Reinventing the wheel will be far more costly now,” Kotasthane said.

Read the full report here.