Dual-Use: How China, Russia, and Iran Harness American Technologies to Counter U.S. Dominance

Threats from America's geopolitical rivals that could threaten its strategic dominance in key regions. These threats are mostly powered by American technologies.

The Russian military relies heavily on U.S. chips for its advanced hardware. These chips have dual military and civilian applications, making them relatively easy to purchase. Source.

On January 18, U.S. authorities arrested 66-year-old Ilya Khan in Los Angeles. A citizen of the United States, Israel, and Russia, Khan allegedly spent years illegally sending sensitive technologies, including advanced microchips (chips), to the Russian military. This latest arrest is one of multiple alleged chip smuggling operations to make headlines in recent years as U.S. lawmakers crack down on illegal technology transfers.

This article explores how the U.S. maintains dominance in the advanced chip market and how its geopolitical rivals – namely China, Russia, and Iran – evade export controls to harness these technologies for their military-strategic benefit. It also examines recent U.S. attempts to harness artificial intelligence (AI) powered technologies to ensure its strategic advantage. 

Understanding what chips are and why they’re so important

Many articles do not simply explain what a chip is and why it matters – here is my best attempt to correct the issue.

Modern electronics require precise amounts of electricity to function: too little and nothing happens; too much and the system is overloaded. By regulating electricity flows, integrated circuits (chips) enable the complex systems we know today, such as smartphones, computers, and advanced military hardware, to function. In essence, they define modern life.

On each chip exists several transistors, also known as semiconductors, and these units regulate the flow of electrical signals. According to Moore's Law, the number of transistors on a chip approximately doubles every two years. In 1961, the world's first commercially produced chip contained just four transistors; by 2030, Intel projects it will build a chip with one trillion. This ever-expanding complexity has defined our technological evolution over the past seven decades. It continues to enhance our forays into emerging areas such as quantum computing and artificial intelligence (AI).

The U.S. Airforce used some of the first chips in its computers and intercontinental ballistic missiles (ICBMs) such as the Minuteman. Today, practically every advanced military technology, such as radar and communications systems, drones and precision-guided missiles, uses the descendants of these chips. For this reason, the design and fabrication of the world's most advanced chips remain in the exclusive domain of the United States and its allies. This production monopoly is mainly due to the highly secretive and complex supply chain that designs and produces chips between the United States and its allies in the Netherlands, Japan, South Korea, Malaysia, and Taiwan. It purposefully excludes geopolitical rivals such as China and Russia.

Although China assembles lower-end chips and has a domestic production capacity, it remains far behind the United States in producing advanced units. This lag is primarily due to export restrictions that force China to rely on older equipment, limiting its ability to deliver cutting-edge units. However, China and other countries, such as Russia and Iran, can still access various chips needed to power their advanced military hardware. This access poses a significant threat to the United States and its allies worldwide.

Mapping the global chip supply chain. Source

How China, Russia, and Iran obtain and use U.S. chip technology

Last year, U.S. officials began investigating Chinese national Zongchang Yu's alleged theft of critical intellectual property needed to produce advanced chips and ties to the Chinese government. Yu left his job at the Dutch firm ASML in 2012 to found two companies – one in China and one in the U.S. – allegedly transferring vast amounts of intellectual property from ASML to China. ASML is essential to chip production as it controls 90% of the world's lithography tools – giant machines that can weigh as much as 200 tonnes and are crucial for producing all kinds of chips, including advanced ones. Yu's story is among likely many others on how China has advanced its domestic chip production.

Despite recent gains, China remains far behind the U.S. in chip production. Moreover, Washington's attempts to stymy China's technological advancement by re-shoring a substantial portion of chip manufacturing as part of the CHIPS and Science ACT have been successful, at least regarding technology transfers. However, the technology China has already sourced has allowed it to make substantial leaps militarily. The most prominent example is China's advances in hypersonic missiles, which require advanced supercomputers for testing purposes – supercomputers powered by chips produced in China and adapted from American civilian technologies. Chinese hypersonic missiles could be a game-changer in a conflict scenario as these can travel five times the speed of sound, are virtually undetectable, can strike critical U.S. assets such as aircraft carriers, and can even hit far-off military installations such as Guam. 

Russia also makes extensive use of U.S. civilian chips to power its military arsenal, acquiring these through intermediary countries such as China to avoid sanctions restrictions. Iran also uses vast quantities of U.S.-origin chips, which they purchase through smuggling rings and shell corporations. In 2022, Ukrainian intelligence found no less than 12 U.S.-made chips inside a single Iranian-made Shahed-136 kamikaze drone flown by the Russians. Russia is now manufacturing the Shahed-136 domestically and plans to produce 6,000 units by the summer of 2025: leaked Russian documents indicate that more than 90% of the chips and electrical components are manufactured in the West, mainly the U.S.

These military technological advancements have been primarily due to global access to so-called dual-use chips – chips countries can use for both military and civilian purposes. Although most countries have export control laws, regulations surrounding dual-use technologies, including advanced chips, are less clear. For example, Russia uses various chips commonly found in smartphones, tablets, and cars to power its GLONASS geolocation system – an alternative to GPS. Ukrainian authorities claim that at least six U.S. companies produce GLONASS-compatible chips and suggest Russia obtains these through intermediaries on the global market. Because these chips are sold frequently to many countries for consumer or commercial use, reselling them to countries such as China, Russia, or Iran, which can harness their military capabilities, is relatively easy.

The Iranian-Russian Shahed 136 kamikaze drone relies on no less than 12 U.S. components. Source

How chips enable A2AD

The U.S. and its allies hold a monopoly on the production of the world's most advanced chips, with China being a distant second in this regard. However, because some of the world's most advanced chips are dual-use and with over one trillion chips produced yearly, they have been readily obtained by the U.S.'s chief geopolitical rivals – namely China, Russia, and Iran.

With the notable exception of Chinese hypersonic missiles, most technologies produced using these dual-use chips are not as advanced as those of the U.S. and its allies. Nonetheless, these weapons pose a significant threat to the U.S. and its allies on both current and potential battlefields. In Ukraine, Shahed-136 drones devastate military and civilian targets and, when used in conjunction with missile attacks, can effectively overwhelm Ukraine's air defence systems. In the Middle East, these same drones help the Iran-backed Houthis to shut down much of the traffic on the Red Sea and various Iranian proxies in Iraq and Syria to target U.S. forces stationed in the region.

Similarly, China – using internationally sourced chips and domestically produced clones – has created a vast arsenal of advanced military technologies, including various missiles, drones, communications disruptors, and much more. Given the growing militarization of the South China Sea, these technologies seriously threaten the interests of the U.S. and its allies in the region.

The development of these technologies has given rise to what experts call anti-access area denial (A2AD) strategies – something we've covered a lot lately. This strategy allows less technologically advanced militaries to deny movement to a more advanced enemy by critically striking them at any time across vast spaces that include key geostrategic chokepoints such as the Gulf of Aden. For this reason, in 2012, the U.S. military described A2AD as what "may well be the most difficult operational challenge U.S. forces will face in the coming decades." Perhaps most interesting is that the success of an A2AD strategy against U.S. forces heavily relies on U.S. chip technology.

An Iranian A2AD scenario could paralyze shipping traffic on the Persian Gulf by shutting down the Strait of Hormuz. Source

A2AD versus AI

One of the most dangerous aspects of weapons such as Iranian and Russian kamikaze drones or Chinese hypersonic missiles is their ability to evade detection systems. For this reason, the Pentagon is accelerating initiatives in artificial intelligence (AI) to detect enemy missile launches, among other things. Other areas of development include AI-enabled drones that will communicate with each other to attack enemy targets in swarms, potentially neutralizing ground and air threats associated with A2AD. Development is also underway for unmanned AI systems aimed explicitly at thwarting hostile attempts to interfere with international shipping, such as the Houthis in the Gulf of Aden. Because AI systems exclusively rely on advanced AI chips, the U.S. and its allies have a significant advantage over their rivals. Last October, the Biden administration announced new export controls specifically for AI chips, making them a much more tightly regulated market than regular chips and thus likely more challenging (if not impossible) to obtain internationally, at least for the time being. 

AI swarming drones - powered exclusively by AI chips - are one way the U.S. military seeks to counter an A2AD scenario. Source

Conclusion

The ability of countries such as China, Russia, and Iran to source and replicate U.S. chip technology is essential to their militaries' technological advancement and geostrategic interests. Although current and possible future legislation could curb technology transfers to some degree, the sheer volume of chips produced annually, their dual-use capabilities, and China's ability to replicate some U.S. designs will likely ensure that these countries continue to acquire advanced chips. This proliferation of chips on the global market has broad geopolitical implications. For this reason, the U.S. will likely rely heavily on AI technological advances to counter these strategies, which will likely also produce sweeping and unforeseen geopolitical implications.