China's Government Re-orgs Sci-Tech Ministry To Advance Self-reliance Push

The Chinese government will take direct responsibility for technology development, as part of its push to end the nation's reliance on western technology and promote innovation at home.

The shakeup will see the Chinese government form a Central Science and Technology Commission, which will allow for greater oversight of scientific development efforts by party leaders. Speaking with state media this week, State Councilor Xiao Jie, who holds a position that ranks above ministers, said that the changes would position the ministry as a working body under a newly formed commission. 

According to state media, restructuring the Ministry of Science and Technology — considered by many to be the Chinese equivalent to the US Defense Advanced Research Projects Agency (DARPA) — is also on the cards to overcome key challenges around core technologies.

Details of the changes have not been explained, but it appears they are intended to streamline the responsibilities of the ministry to focus its efforts on research and development and other technological endeavors.

Responsibilities such as establishing industrial development zones and boosting rural infrastructure will be redistributed to other ministries, according to a Reuters report.

While the specific challenges the shakeup is intended to address weren't named, it's clear they're in reference to the slew of trade restrictions and export bans that have been levied against Chinese government agencies and state-backed companies by the Biden administration over the past year.

Xiao characterized the restructuring as a necessary step to combat international competition and stave off efforts to contain and suppress the nation's technological advancement.

Chinese Foreign Minister Qin Gang addressed US-China relations addressed US sanctions directly at a press conference.

"I'm convinced that the China-US relationship should be determined by common interests and shared responsibilities of the two countries, and by friendship between the Chinese and American people, rather than by US domestic policies or hysterical neo-McCarthyism," state media quoted him as saying.

"We hope the US government will listen to the calls of the two peoples, get rid of its strategic anxiety of threat inflation, abandon the zero-sum cold-war mentality, and refuse to be hijacked by political correctness."

The US blockage

The Chinese Foreign Minister's remarks underscore the severity of US sanctions on the Middle Kingdom. In recent years the US government has worked to systematically sever key technological supply chains necessary to advance China's emerging semiconductor industry.

While China may be a manufacturing and economic powerhouse, long-standing policies among leading chipmakers has prevented many advanced chips from being built there. Most semiconductor manufacturing in China has involved commodity hardware, like DRAM or NAND flash memory, and other microcontrollers and circuits that don't require leading-edge manufacturing capabilities.

Over the past few years, the Chinese government has poured billions of dollars into domestic semiconductor manufacturers like SMIC and YMTC in the hope they can produce processors and other technologies comparable to those made by overseas firms. Those efforts have been met by sanctions from the the US, and stymied by corruption and/or incompetence that has seen China's own chipmaking investments largely fail.

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The situation has only grown more contentious in recent months as the Biden Administration has begun courting allied leaders to enact a joint blockade on the sale of chipmaking equipment and materials to Chinese companies. Most recently, the Dutch government joined the US in agreeing to stop the export of deep ultraviolet lithography machines to China.

At the same time, the Chinese government, led by Xi Jinping, has spent the better part of a year rooting out corrupt executives tied to its so-called Big Fund, which provides capital funding for companies working to advance the nation's semiconductor business.

The Chinese parliament's plan to restructure the Ministry of Science and Technology, appears to be entwined with these dynamics and embody a realization that tensions with the West are unlikely to ease anytime soon.

Hurdles to overcome

Despite this, Chinese chipmakers, like SMIC remain years behind that of TSMC, Samsung, and Intel. Now that Chinese chipmakers are forbidden from acquiring the complex manufacturing equipment necessary to build advanced chips, catching up is even harder.

And despite the nation's increased emphasis on accelerated homegrown technological advancement — a sentiment that mirrors that of the US just a few years ago — it appears the Chinese aren't above corporate espionage if it means leveling the playing field.

Last week, it was revealed that an ASML worker accused of stealing trade secrets for advanced chip-making equipment was likely acting on behalf of the Chinese government.

ASML is the sole producer of extreme-ultraviolet lithography machines used by the likes of TSMC and Samsung to produce some of the most advanced chips in the world, including process nodes smaller than 3nm.

According to Bloomberg, an internal ASML probe into the data theft had uncovered "potential" ties to a Beijing-backed spy ring.

And this isn't the first time an ASML employee has been accused of exfiltrating chip secrets at the behest of the CCP. Last year, the company accused the founder of China's Dongfang Jingyuan Electron, a former ASML employee, of stealing trade secrets. ®