‘Oppenheimer’ Has Lessons for the U.S.-China Tech Cold War

The film is full of secrets, and we won’t spoil any of the big ones here, beyond the well-known beats that turned history. Christopher Nolan’s biopic follows the life of J. Robert Oppenheimer, the physicist who became known as the father of the atomic bomb for his role directing the Manhattan Project. The U.S. government worked obsessively to keep the science Oppenheimer oversaw secret, initially from fascist Germany but also increasingly from the Soviets, then U.S. allies. It’s no spoiler to say that the Soviets nonetheless developed nuclear weapons and became a dangerous adversary. 

Today, the U.S. is grappling with how to win a race for advanced technologies against China. That effort broadly has two parts. There’s the positive economic agenda, short-handed as “industrial policy,” that seeks to focus public and private cash on promoting industries such as clean technology and semiconductors, where China has made advances. The other side is a set of negative restrictions on how capital and technology can flow between the U.S. and China, through export controls, investment screening mechanisms such as the Committee on Foreign Investment in the U.S., and—soon—new limitations on outbound U.S. investment. 

That second, restrictive effort at national-security regulation is less-well understood by investors and economists, but it’s no less important than the first. Oppenheimer helps shed light on that murkiness. It shows just how difficult it is for the government to keep the lid on technology, and how costly it can be to try. 

An important issue is the location of sensitive knowledge. Early scenes in the film follow Oppenheimer and his collaborator, Army officer Leslie Groves, as they bring physicists and their families to Los Alamos, N.M., away from prying eyes. 

Today’s challenge is different. The sensitive technologies U.S. officials want to keep from China—advanced artificial intelligence, new forms of biotechnology, and others—aren’t controlled by the government in a few discrete locations. They’re being developed in countless private firms and academic departments across the U.S. It requires a major effort to keep track of all that work, and in a free market outside of wartime, it isn’t so easy for government to barge in and demand to know about a company’s or university’s research. The result is a messy, complex set of institutions in the government that have to balance incentives and punishments to keep companies working toward centralized goals. 

Similarly, it’s one thing to say the Soviets shouldn’t have hydrogen bombs. But what exactly are the technologies that should stay out of Chinese hands today? That question has bedeviled the U.S. government. In 2018, Congress charged the executive branch with coming up with definitions of “emerging” and “foundational” technologies that each needed special security. Last year, the Commerce Department essentially gave up making the distinction. “Technologies cannot always be readily categorized as either ‘emerging’ or ‘foundational’ technologies,” the department wrote. If you missed that decision, it was published as part of a new rule in the Federal Register on “certain marine toxins.” Good luck recruiting Hollywood’s A-list for that film.

Still, influential economic voices are raising the alarm. Former Treasury Secretary Larry Summers said at an event this week at the Peterson Institute for International Economics that economic nationalism could harm the middle class. Robert Zoellick, a former U.S. trade representative and president of the World Bank, warned of “Pentagon-style economics” in the government’s investment reviews. A Treasury Department that used to believe in supporting open investment is now just another part of a new government bureaucracy, he said. “This, of course, for anybody in the investment world adds time and adds uncertainty,” he said.

Treasury didn’t respond to a request for comment, but it’s clear that working within this new national-security regime is costing businesses. The armies of lawyers and lobbyists employed by the biggest U.S. tech companies will likely find ways to muddle through. More concerning may be what’s happening at smaller firms, like
Onto Innovation,
the fourth-largest U.S. manufacturer of semiconductor equipment. 

Onto’s manufacturing is overwhelmingly U.S.-based, so it’s exactly the kind of company you’d think U.S. policy would want to defend and grow. And yet it got walloped last year when the U.S. surprised the industry with new export controls and put Chinese companies on the restrictive Entity List. That cost Onto $80 million in 2022, on the order of 10% of the company’s annual revenue. Its share price fell 17% in the immediate aftermath of the new export-control rules, though it has since more than recovered amid the broader tech rally.

“We’re relatively new to the whole government affairs,” Benjamin Brown, a lawyer at Onto, said in an interview earlier this summer. The company got no warning from the government that new export restrictions were coming, and no explanation of why a key Chinese customer was blacklisted. But the message from the government is clear: Firms in potentially sensitive industries need to spend more of their time thinking about what the government wants. 

To be sure, companies’ compliance burdens might seem like small potatoes compared with the Oppenheimer era’s high drama. The U.S. tangle with China is intense, but not nearly so dangerous—for now—as the Cold War, let alone the terrifying race with Nazi Germany to detonate the world’s first atomic bomb. The approach the U.S. government is taking to new technologies reflects changed circumstances. 

But Oppenheimer also shows just how far efforts at government control can go, and how fruitless they can be. Oppenheimer warned that Soviet scientists would likely make nuclear breakthroughs regardless of their efforts to spy on the Manhattan Project. That’s the nature of science. The Soviets spied then, just as China spies now. History is ambivalent on how critical that spying was to the outcomes of the Soviet nuclear program. But the costs of fighting it were real. Just how much we should pay depends on how dangerous you believe China is to the U.S. today.

The real data behind those judgments, unfortunately, is clouded with secrets.

Write to Matt Peterson at [email protected]