International Silicon Don: US Industrial Tech, IP Theft & CCP's Post-COVID Punishment

[MVelsor]

TL;DR: Export Controls To Crush CCP High Tech Ambitions

I'm not sure how to make this more concise but there will be a lot of supplemental graphics, so you may as well skim the thread and gain some insight since you bothered to click on it. I personally feel this should've been done years ago regardless and advocated for at least as much. Given how the CCP's initial handling undoubtedly allowed the outbreak to spiral completely out of control, it would seem particularly justified in the aftermath.

The Chinese government implements a top-down, state-directed strategy of intransigent policies, acts and practices which both deliberately and indirectly undercut American output, competitiveness, investment, research, development, innovation and strategic domestically spawned industries which serve as invaluable sources of high wage employment, global exports, sustained economic growth and national security. As found by virtually every bipartisan commission and panel ever assembled.

http://www.ipcommission.org

2011 USITC Report (PDF) /2016 USTR Report (PDF) / 2017 USTR Report (PDF)

I've never been a fan of the Trump Administration's blunt use of tariffs but the instant blocks on FDI have been most welcome and these are not market based transactions anyway. The organic form of Foreign Direct Investment - such as with countries like Canada, UK, Germany - is ordinarily a great thing and means capital investment that results in a lot of stateside American job creation.

OTOH the CCP's idea of "foreign direct investment" is just code for buying up US tech assets, transferring intellectual property overseas and having American employees train their Chinese replacements. Even buying a minority stake gives you access to industrial trade secrets and every single one of the potential rejected Chinese buyers has been connected to the CCP government in one way or another. So yeah, hmm, fuck that.

This is at the core of America's global technological supremacy. To date, the US remains cutting edge in virtually all segments (µP, µC, SoC, GPU, AIC) and it's one of the few industries that never moved the bulk of its production offshore. Aerospace is another notable there, for many of the same reasons including higher IP protection, military applications and national security. Yeah, Broadcom has since re-relocated to the US.

Example: A glimpse into Intel's manufacturing operations.

Why Can't China Make Semiconductors?

Almost from the start, central planning proved to be a serious impediment. Early government ideas included importing secondhand Japanese semiconductor lines that were outdated before they were even shipped. Expensive efforts to build a domestic industry from scratch in the 1990s faltered due to bureaucracy, delays and a lack of customers for the kind of chips China was making.

Another weakness was a lack of capital. For decades, labor-intensive industries -- such as assembling mobile phones -- were the route to riches in China, attracting investment from entrepreneurs and bureaucrats alike. Making semiconductors, by contrast, requires billions in up-front capital and can take a decade or more to see a return. In 2016, Intel Corp. alone spent $12.7 billion on R&D. Few if any Chinese companies have that capacity or the experience to make such an investment rationally. And central planners typically resist that kind of risky and far-sighted spending.

China seems to recognize this problem. Since 2000, it has shifted away from subsidizing semiconductor research and production, and toward making equity investments, in the hope that market forces could play a larger role. Yet funds continue to be misallocated: Over the past 18 months, there's been a spate of government-juiced overinvestment in semiconductor plants, many of which lack sufficient technology. Those that eventually open will likely contribute to a glut in memory chips, spelling financial trouble for the domestic industry.

But perhaps the biggest long-term challenge for China is technology acquisition. Though the government would like to develop an industry from the ground up, its best efforts are still one or two generations behind the U.S. A logical solution would be to buy technology from American companies or form partnerships with them. That's the route taken by cutting-edge firms in Japan, South Korea and Taiwan.

Yet China can't do the same. Its efforts to purchase American semiconductor companies (often at huge premiums) are regularly blocked for security reasons. Japan, South Korea and Taiwan have put Chinese acquisitions under similar scrutiny. By one accounting, China has made $34 billion in bids for U.S. semiconductor companies alone since 2015, yet completed only $4.4 billion in deals globally in that span.

In other words, China is quite keenly aware of how condensed matter physics as explained by the laws of quantum and statistical mechanics 'work' at the fundamental level. Yet they've still not been able mount a domestic semiconductor industry - which was literally brought into existence by the United States - for the engineering and manufacturing of cutting edge integrated circuits. They've already been failing at it for decades now. Amusing, but have made (read: stole) notable strides in the last five years.

If you want to set China's ambitions back for at least another couple decades, it wouldn't make a whole lot of sense to deny them chips from Intel, Qualcomm, Micron, Microchip, Texas Instruments, NVIDIA, et al. when such a significant portion of US semiconductor revenue is made through Chinese sales (and they can't do without them). Rather, you place export controls on the chipmaker's suppliers and choke off all access to the materials, machinery, equipment, software and services they require to raise their own industry and which can't be acquired anywhere else to any appreciable degree.

Namely these firms in particular. One of them is based in the Netherlands (ASML) and the other Japan obviously. This is where it would be nice to utilize relationships with geopolitcal allies rather than throwing them under the bus.

How do we know export controls are effective?

America's Assault On China's Tech Ambitions

For a sense of the damage the United States can inflict on China with export controls, take a trip to the city of Jinjiang on the country’s southeastern coast.

That’s where Fujian Jinhua Integrated Circuit Co. built a $6 billion plant to produce semiconductors as part of China’s goal of making the country a self-sufficient technology powerhouse. But after the U.S. President barred exports to the company, its dream is now in tatters with consultants from American suppliers gone, the factories silent and workers rattled.

Less than a month ago, Jinhua was full-speed ahead on an enormous undertaking financed by the local government that blanketed its corner of the city with bristling power plants, hulking workers’ dormitories and modern research labs. It was within months of a deadline to kick off full-scale production of some 60,000 wafers a month, a key step to giving China a competitive producer of memory chips used in smartphones.

Then the U.S. Justice Department accused it of stealing American technology, and Commerce slammed the door on purchases of the chipmaking gear it needed to hit that milestone. Expansion work halted as its American and even European suppliers skipped town. Now, uncertainty shrouds a company President Xi Jinping’s touted as one of three future domestic champions of chipmaking.

The day the U.S. announced its ban, Applied Materials Inc. staff packed up and left, according to people familiar with the matter. The American company had shipped components to Jinhua as recently as Sept. 20, according to an airway bill seen by Bloomberg. KLA-Tencor Corp and Lam Research Corp. also recalled their engineers, the people said. Even Dutch giant ASML Holding N.V. -- whose EUV machines are the linchpin in next-generation chipmaking -- pulled out within days, abandoning work on a second assembly line. The once-smooth influx of equipment ground to a halt. On a windy afternoon in November, a giant plot of land adjoining Jinhua’s campus earmarked for its second facility stood vacant, not even a bulldozer in sight.

So rapid was the exodus that, in many cases, Jinhua employees had no inkling of the departures till they were gone, one person said. Only a smattering of the foreign-employed engineers bothered to inform their peers before catching flights to Shanghai and Taipei, the person said. “They didn’t even give us time to say goodbye,” one person said.

From a broader perspective, the speed with which the U.S. squashed Jinhua’s ambitions underscores the extent to which China -- despite well-publicized intentions of becoming a global tech superpower by 2025 -- remains reliant on American innovation. Jinhua was to spearhead the transition for a country beholden to giants from Intel Corp. to Micron Technologies Inc. It’s an effort that’s become critical as the rivalry between the world’s two largest economies deepens. Indeed, It was Micron that first accused Jinhua and UMC of purloining its trade secrets, setting events in motion.

“Memory chips are cement for the entire IT industry, so China is eager to break the international monopoly and improve its own power of discourse in the world,” said Roger Sheng, an industry analyst with Gartner Research.

Jinhua was a key cog in a campaign to move away from chip imports -- an influx that surpasses China’s annual spending on oil. Now that vision’s in jeopardy. To some, it seems a matter of time until the Trump administration targets the other two designated national champions: Tsinghua Unigroup’s Yangtze River Memory and Hefei Changxin, run by the government of central Anhui province.

It's not just their budding SC firms that can be crushed.

China's second largest manufacturer of telecom equipment and the number four smartphone maker in the United States, ZTE, is on its way to shutting down after the US government banned the company from doing business with American component suppliers, including chipmakers Qualcomm and Intel Corp., both of which it relied heavily on for parts used its smartphones. The company's future may now depend on an appeal to modify or reverse the 7-year ban.

The news was revealed in a press release which noted that, "the major operating activities of the company have ceased". ZTE's English-language homepage has also been stripped of much of its content, including its online store, apparently signifying that the company's days are numbered, at least in Western markets.

ZTE was inexplicably bailed out. Oh Hey, Look.

(HiSilicon isn't there yet, doesn't meet all of Huawei's product demand and is fabless to boot. They're dependent on TSMC for manufacturing. The US protects Taiwan in part because it's home to some of the largest pure play semiconductor foundries and most advanced process technology in the world with assets heavily integrated into the US defense network and supply chain. It kind of adds a layer of context to the relationship, and would be certain war if the mainland ever attempted taking that island.)

And, of course.

 

[Orgasmo]

Muricans haven't been able to form a coherent response to COVID-19 yet and you're already planning on what you're gonna do AFTER the crisis?

Talk about counting chickens before they hatch.

 

[Oceanmachine]

If you want this line to continue then it seems only Trump will continue this or Bernie. Biden is supported by pro chinese guys like Bloomberg and is worrying.

 

[ElKarlo]

TL;DR: Export Controls To Crush CCP High Tech Ambitions

I'm not sure how to make this more concise but there will be a lot of supplemental graphics, so you may as well skim the thread and gain some insight since you bothered to click on it. I personally feel this should've been done years ago regardless and advocated for at least as much. Given how the CCP's initial handling undoubtedly allowed the outbreak to spiral completely out of control, it would seem particularly justified in the aftermath.

The Chinese government implements a top-down, state-directed strategy of intransigent policies, acts and practices which both deliberately and indirectly undercut American output, competitiveness, investment, research, development, innovation and strategic domestically spawned industries which serve as invaluable sources of high wage employment, global exports, sustained economic growth and national security. As found by virtually every bipartisan commission and panel ever assembled.

http://www.ipcommission.org

2011 USITC Report (PDF) /2016 USTR Report (PDF) / 2017 USTR Report (PDF)

I've never been a fan of the Trump Administration's blunt use of tariffs but the instant blocks on FDI have been most welcome and these are not market based transactions anyway. The organic form of Foreign Direct Investment - such as with countries like Canada, UK, Germany - is ordinarily a great thing and means capital investment that results in a lot of stateside American job creation.

OTOH the CCP's idea of "foreign direct investment" is just code for buying up US tech assets, transferring intellectual property overseas and having American employees train their Chinese replacements. Even buying a minority stake gives you access to industrial trade secrets and every single one of the potential rejected Chinese buyers has been connected to the CCP government in one way or another. So yeah, hmm, fuck that.

This is at the core of America's global technological supremacy. To date, the US remains cutting edge in virtually all segments (µP, µC, SoC, GPU, AIC) and it's one of the few industries that never moved the bulk of its production offshore. Aerospace is another notable there, for many of the same reasons including higher IP protection, military applications and national security. Yeah, Broadcom has since re-relocated to the US.

Example: A glimpse into Intel's manufacturing operations.

Why Can't China Make Semiconductors?


In other words, China is quite keenly aware of how condensed matter physics as explained by the laws of quantum and statistical mechanics 'work' at the fundamental level. Yet they've still not been able mount a domestic semiconductor industry - which was literally brought into existence by the United States - for the engineering and manufacturing of cutting edge integrated circuits. They've already been failing at it for decades now. Amusing, but have made (read: stole) notable strides in the last five years.

If you want to set China's ambitions back for at least another couple decades, it wouldn't make a whole lot of sense to deny them chips from Intel, Qualcomm, Micron, Microchip, Texas Instruments, NVIDIA, et al. when such a significant portion of US semiconductor revenue is made through Chinese sales (and they can't do without them). Rather, you place export controls on the chipmaker's suppliers and choke off all access to the materials, machinery, equipment, software and services they require to raise their own industry and which can't be acquired anywhere else to any appreciable degree.

Namely these firms in particular. One of them is based in the Netherlands (ASML) and the other Japan obviously. This is where it would be nice to utilize relationships with geopolitcal allies rather than throwing them under the bus.

How do we know export controls are effective?

America's Assault On China's Tech Ambitions


It's not just their budding SC firms that can be crushed.

China's second largest manufacturer of telecom equipment and the number four smartphone maker in the United States, ZTE, is on its way to shutting down after the US government banned the company from doing business with American component suppliers, including chipmakers Qualcomm and Intel Corp., both of which it relied heavily on for parts used its smartphones. The company's future may now depend on an appeal to modify or reverse the 7-year ban.

The news was revealed in a press release which noted that, "the major operating activities of the company have ceased". ZTE's English-language homepage has also been stripped of much of its content, including its online store, apparently signifying that the company's days are numbered, at least in Western markets.

ZTE was inexplicably bailed out. Oh Hey, Look.

(HiSilicon isn't there yet, doesn't meet all of Huawei's product demand and is fabless to boot. They're dependent on TSMC for manufacturing. The US protects Taiwan in part because it's home to some of the largest pure play semiconductor foundries and most advanced process technology in the world with assets heavily integrated into the US defense network and supply chain. It kind of adds a layer of context to the relationship, and would be certain war if the mainland ever attempted taking that island.)

And, of course.

Word man. Didn't realize minority stakes got them trade secrets. Glad they aren't being allowed aby more. Trump is definitely an imperfect vehicle for this. Guy is hard on China which is great for the world. As they are basically trying for mercantilism version 2.
I also didn't realize they tried to get money gram.

 

[ElKarlo]

If you want this line to continue then it seems only Trump will continue this or Bernie. Biden is supported by pro chinese guys like Bloomberg and is worrying.

If this virus gets Trump kicked out of office, then we have Biden as president. Dude with bloomberg cheering will sell us out to China

 

[Cuauhtemoc]

are u nodak?

 

[PolishHeadlock2]

@MVelsor I don't remember you posting about this and it's related but what are your thoughts on the "Pase 1" China-US trade Deal?

Does it address anything in the OP or is this situation still being addressed Ad Hoc where potential Chinese investments in American Tech companies are reviewed on a case by case basis before being rejected?

Same goes for export controls, were they addressed or does it look like it will be addressed?

 

[PolishHeadlock2]

If you want this line to continue then it seems only Trump will continue this or Bernie. Biden is supported by pro chinese guys like Bloomberg and is worrying.

This appears to be bipartisan.


Obama also blocked these investments.

And TPP would have set the rules by which China would need to play including enforcement of IP rights.

https://www.nytimes.com/2016/12/02/business/dealbook/china-aixtron-obama-cfius.html

"HONG KONG — President Obama on Friday moved to block a Chinese deal to buy a high-tech company on national security grounds, an unusual step that could set the stage for greater tensions between his successor, Donald J. Trump, and a Chinese government determined to bolster its technological capabilities.

The intervention in a Chinese company’s bid to buy a German semiconductor company, Aixtron, comes after Chinese companies have spent billions to acquire technology in Europe and the United States. American officials have increasingly moved to stop such deals, but Chinese companies have shown growing adeptness in getting around those restrictions to strike up relationships that could someday lead to greater access to technology.

A statement from the Treasury Department said the administration blocked the purchase of the American portion of Aixtron’s business because it posed a national security risk relating to “the military applications of the overall technical body of knowledge and experience of Aixtron.”

It wasn’t clear whether other parts of the deal could be salvaged. Officials at the German chip company and its would-be Chinese buyer, the Fujian Grand Chip Investment Fund, did not immediately comment.

By rejecting the deal, the Obama administration showed how far it would go to keep China from using its wallet to acquire sensitive technology from the West. It blocked previous Chinese technology purchases only indirectly, using an advisory panel of government and intelligence officials who can discourage — but not directly kill — foreign deals. That same panel earlier expressed skepticism over the Aixtron deal.

Last year the United States accounted for more than one-fifth of Aixtron’s sales. And nearly one-fifth of its more than 700 employees are based in the United States.

That indirect strategy kept Mr. Obama from looking like a free-trade opponent, especially when the company in question was not American, and softened any potential response from Beijing. But Aixtron and its Chinese suitor tested that strategy by plowing ahead despite the panel’s concerns, forcing Mr. Obama to act.


Mr. Obama’s cancellation sets a stronger tone as Mr. Trump prepares to take the White House. As president, Mr. Trump will have considerable power to appoint the members of that advisory panel, called the Committee on Foreign Investment in the United States. He is likely to hear from members of Congress who have been pushing to toughen up and to broaden the panel’s reviews to encompass more types of deals.

Mr. Trump has been critical of China’s trade practices.

“It could feed into the narrative about how the Trump administration is going to get better deals for things, and this is the kind of deal he wouldn’t allow because it would affect U.S. jobs and U.S. manufacturing capabilities in one of the areas where we’re still the most competitive,” said Adam Segal, a technology security expert at the Council on Foreign Relations.

Still, simply rejecting deals is not so simple, Mr. Segal and others say. Wall Street sometimes pushes for such deals to go through, arguing that American companies can use Chinese money to invest or save jobs. Steven Mnuchin, a Wall Street veteran, is Mr. Trump’s pick to be Treasury secretary, heading a department with considerable say over the advisory panel.

The panel is crucial to the outcome of future deals. Created in 1975 by President Gerald Ford, it includes representatives from 16 executive departments and intelligence agencies including Commerce, Defense, Justice and Homeland Security. It judges whether a foreign investment in companies with operations or business in the United States poses unacceptable security risks. Because its deliberations are confidential, little about it has been made public.

Just the prospect of such an investigation can be enough to kill a deal. Under Mr. Obama, its scrutiny scotched Chinese deals for a European lighting-panel maker and an American manufacturer of microchips.

But China has already been testing ways to get around the panel. Such methods do not necessarily give Chinese buyers access to crucial technology, but experts say they could open a route to access down the road.

In some cases, it has struck other types of deals with Western companies, like licensing agreements, outside of the panel’s jurisdiction. When the panel opposed a Chinese bid for the American semiconductor firm GCS Holdings this summer, the American company instead signed a joint venture to make chips with its would-be buyer. GCS makes an advanced chip with military uses.

A spokesman for GCS said the joint venture makes products like cellphone chips that have long been commercially available, and that it follows U.S. government guidelines for all technology exports, whether sensitive or not.

In another case, the Chinese buyer appeared to be testing how far it could push the panel.

In September 2015, Tsinghua Unigroup, the main corporate vehicle for China’s microchip ambitions, offered $3.8 billion for a board seat and a 15 percent stake in Western Digital, a maker of hard-disk drives. Lawyers who specialize in Committee on Foreign Investment law say the deal structure was unusual: The size of the stake walked the line of where the panel has investigated in the past, and the agreement had a clause that allowed either side to call it off if the panel became involved.

To many lawyers who studied the deal, it looked as if the Chinese buyer was trying to find out what it could get away with.

Tsinghua did walk away, citing the panel, and began to look for smaller deals. In April, it successfully took a 6 percent stake in Lattice Semiconductor, despite the fact that in 2012 the Federal Bureau of Investigation indicted two Chinese men who it said illegally tried to procure chips from the company that could be used on spacecraft. In filings, Tsinghua said the stake had been taken for “investment purposes,” while Lattice has said military applications were only a tiny part of its business.

Tsinghua has since sold some of its stake, and Lattice is now the target of a new acquisition offer by a venture capital firm based in Silicon Valley but backed by Chinese government money. Lattice did not immediately respond to a request for comment.

Because information relating to its decisions is kept secret, the Committee on Foreign Investment in the United States remains one of the least understood parts of the United States government. The companies involved in the deal sometimes do not find out why a proposed acquisition was rejected.

Foreign companies applying for approval have to submit information about corporate ownership, including passports and records of the military experience of shareholders. Emails go out across American military research and development laboratories to check whether companies might unwittingly be important to American security. For instance, some seemingly harmless technology may be a component of an American defense project.

Companies can discuss with the committee what they will do if the proposed deal causes a public backlash, as has happened before. The committee can recommend changes or broker agreements that could include the sale of a sensitive part of the company.

The panel has considerable investigative and intelligence resources at its disposal, but the new influx of Chinese money has led some to argue it does not provide enough protection. Critics say it can examine each deal only in isolation and not consider a more widespread campaign of purchases.

Stewart Baker, a former representative to the committee under the Department of Homeland Security, also cites resources as an issue.

“My sense is they do have the resources now,” he said, “but if Chinese deal flow continues to increase, it is going to be a challenge.”

 

[Sauron]

At this point I think China is well aware of this and will be putting an awful lot of emphasis on developing its own semiconductors. It's just a matter of how long the US can hold them back.

Basically China is going to do everything possible to strip US products out of its supply chain.

 

[xcvbn]

This sounds like an excellent catalyst for a massive public infrastructure project

The problem is the severe myopia in our politics. Our elected officials cannot think outside the bounds of free market economics.

 

[MVelsor]

@MVelsor I don't remember you posting about this and it's related but what are your thoughts on the "Pase 1" China-US trade Deal?

Does it address anything in the OP or is this situation still being addressed Ad Hoc where potential Chinese investments in American Tech companies are reviewed on a case by case basis before being rejected?
Same goes for export controls, were they addressed or does it look like it will be addressed?

Unfortunately, it mostly works to fix problems that didn't exist before the Admin created them (re: tariffs). The manufacturing sector has been fighting through a recent recession of sorts that almost feels artificial. A 10-year low on the ISM sounds worse than it is, but still ridiculous.

The Shale boom and rise of Industry 4.0* both lowered the total cost of ownership for US based industrial production and had manufacturing on a multi-year upswing. The tax cuts definitely gave the sector some extra temporary juice, but then came the tariffs on top of tariffs.

* (big data, developments in analytics and machine learning, ability to transmit digital instructions to the physical world, predictive capabilities to generate value and more efficient logistics to handle materials throughout the supply chain)

This appears to be bipartisan.

Indeed.

This landed on Barry's desk the month he was leaving office.

are u nodak?

He was killed by hateful savages, man. RIP.

Spoiler

<45>

 

[MVelsor]

Muricans haven't been able to form a coherent response to COVID-19 yet and you're already planning on what you're gonna do AFTER the crisis?

Talk about counting chickens before they hatch.

COVID clearing the boomers out hasn't made me give any consideration to scaling back on the rabid nationalism or cut throat geopolitics. This world has no regard for the weak. I did make my mom cancel a business meeting in Vegas for next week though, so there's that.

 

[Bunk Moreland]

TL;DR: Export Controls To Crush CCP High Tech Ambitions

I'm not sure how to make this more concise but there will be a lot of supplemental graphics, so you may as well skim the thread and gain some insight since you bothered to click on it. I personally feel this should've been done years ago regardless and advocated for at least as much. Given how the CCP's initial handling undoubtedly allowed the outbreak to spiral completely out of control, it would seem particularly justified in the aftermath.

The Chinese government implements a top-down, state-directed strategy of intransigent policies, acts and practices which both deliberately and indirectly undercut American output, competitiveness, investment, research, development, innovation and strategic domestically spawned industries which serve as invaluable sources of high wage employment, global exports, sustained economic growth and national security. As found by virtually every bipartisan commission and panel ever assembled.

http://www.ipcommission.org

2011 USITC Report (PDF) /2016 USTR Report (PDF) / 2017 USTR Report (PDF)

I've never been a fan of the Trump Administration's blunt use of tariffs but the instant blocks on FDI have been most welcome and these are not market based transactions anyway. The organic form of Foreign Direct Investment - such as with countries like Canada, UK, Germany - is ordinarily a great thing and means capital investment that results in a lot of stateside American job creation.

OTOH the CCP's idea of "foreign direct investment" is just code for buying up US tech assets, transferring intellectual property overseas and having American employees train their Chinese replacements. Even buying a minority stake gives you access to industrial trade secrets and every single one of the potential rejected Chinese buyers has been connected to the CCP government in one way or another. So yeah, hmm, fuck that.

This is at the core of America's global technological supremacy. To date, the US remains cutting edge in virtually all segments (µP, µC, SoC, GPU, AIC) and it's one of the few industries that never moved the bulk of its production offshore. Aerospace is another notable there, for many of the same reasons including higher IP protection, military applications and national security. Yeah, Broadcom has since re-relocated to the US.

Example: A glimpse into Intel's manufacturing operations.

Why Can't China Make Semiconductors?


In other words, China is quite keenly aware of how condensed matter physics as explained by the laws of quantum and statistical mechanics 'work' at the fundamental level. Yet they've still not been able mount a domestic semiconductor industry - which was literally brought into existence by the United States - for the engineering and manufacturing of cutting edge integrated circuits. They've already been failing at it for decades now. Amusing, but have made (read: stole) notable strides in the last five years.

If you want to set China's ambitions back for at least another couple decades, it wouldn't make a whole lot of sense to deny them chips from Intel, Qualcomm, Micron, Microchip, Texas Instruments, NVIDIA, et al. when such a significant portion of US semiconductor revenue is made through Chinese sales (and they can't do without them). Rather, you place export controls on the chipmaker's suppliers and choke off all access to the materials, machinery, equipment, software and services they require to raise their own industry and which can't be acquired anywhere else to any appreciable degree.

Namely these firms in particular. One of them is based in the Netherlands (ASML) and the other Japan obviously. This is where it would be nice to utilize relationships with geopolitcal allies rather than throwing them under the bus.

How do we know export controls are effective?

America's Assault On China's Tech Ambitions


It's not just their budding SC firms that can be crushed.

China's second largest manufacturer of telecom equipment and the number four smartphone maker in the United States, ZTE, is on its way to shutting down after the US government banned the company from doing business with American component suppliers, including chipmakers Qualcomm and Intel Corp., both of which it relied heavily on for parts used its smartphones. The company's future may now depend on an appeal to modify or reverse the 7-year ban.

The news was revealed in a press release which noted that, "the major operating activities of the company have ceased". ZTE's English-language homepage has also been stripped of much of its content, including its online store, apparently signifying that the company's days are numbered, at least in Western markets.

ZTE was inexplicably bailed out. Oh Hey, Look.

(HiSilicon isn't there yet, doesn't meet all of Huawei's product demand and is fabless to boot. They're dependent on TSMC for manufacturing. The US protects Taiwan in part because it's home to some of the largest pure play semiconductor foundries and most advanced process technology in the world with assets heavily integrated into the US defense network and supply chain. It kind of adds a layer of context to the relationship, and would be certain war if the mainland ever attempted taking that island.)

And, of course.

I think Export controls in some instance are good. But in the case of China I don’t think export control will be the end all be all. It will just slow the transfer of tech and use of legal and illegal means to gain access to these technologies.

Devils advocate: who will fill the void left by US tech companies when they can export some tech to China. It’s not like it’s one or two companies, it’s a lot.
Who will help these companies make up for the loss of market share/value? Government?
How would export controls help our relationship with allies such as Japan and the Netherlands if we are chocking them off from dealing with TI, Microchip, Intel etc?

 

[MVelsor]

I think Export controls in some instance are good. But in the case of China I don’t think export control will be the end all be all. It will just slow the transfer of tech and use of legal and illegal means to gain access to these technologies.

Devils advocate: who will fill the void left by US tech companies when they can export some tech to China. It’s not like it’s one or two companies, it’s a lot.
Who will help these companies make up for the loss of market share/value? Government?
How would export controls help our relationship with allies such as Japan and the Netherlands if we are chocking them off from dealing with TI, Microchip, Intel etc?

China wouldn't be choked off from semiconductors themselves and no modern economy can do without. That's also far too devastating of a revenue cut on US firms but it means letting telecoms such Huawei and ZTE survive. The export controls would be placed on the chipmakers' suppliers, two bit Chinese companies attempting to get off the ground and produce domestic chips thankfully aren't their primary base.

Edit: On related note, it's a massive cunt and many billions up front to set up and maintain a semiconductor fabrication plant. It requires tons of materials and machinery for the photolithography, etching, doping and dicing; some single pieces of equipment (i.e. steppers) run a cool $150 million a pop. A fab also runs through excess consumables (liquid nitrogen, hydrogen gas, solvents, etchants, acids) and they all have to be of extremely high purity.

 

[Orgasmo]

COVID clearing the boomers out hasn't made me give any consideration to scaling back on the rabid nationalism or cut throat geopolitics. This world has no regard for the weak. I did make my mom cancel a business meeting in Vegas for next week though, so there's that.

Life will grind to a halt in the next few weeks in US as the outbreak expands, mainly due to Trump administration botching the response. We still don't know how bad it will get in US and how long it will last. The economic and political fallout will be immense. China just managed to slow this thing with draconian measures, while it's gaining traction in US. The priority is restoring supply chains and business normality. Now is not the time to be picking fights to exacerbate economic woes, especially when we are headed towards recession.

In short, don't engage when your pants are down.

 

[Anung Un Rama]

*bookmarked

 

[Whippy McGee]

We need to protect ourselves as a nation. Now, I hope people get why borders matter.

We should not let more than 51% of any vital industry to be manufactured outside of our borders. A Chinese official actually threatened to withhold our meds. They could do it with steel, technology, and much more. They do have us over a barrel on rare Earth minerals, but we should be self sufficient and able to take care of our own in an emergency.

 

[MicroBrew]

TL;DR: Export Controls To Crush CCP High Tech Ambitions

I'm not sure how to make this more concise but there will be a lot of supplemental graphics, so you may as well skim the thread and gain some insight since you bothered to click on it. I personally feel this should've been done years ago regardless and advocated for at least as much. Given how the CCP's initial handling undoubtedly allowed the outbreak to spiral completely out of control, it would seem particularly justified in the aftermath.

The Chinese government implements a top-down, state-directed strategy of intransigent policies, acts and practices which both deliberately and indirectly undercut American output, competitiveness, investment, research, development, innovation and strategic domestically spawned industries which serve as invaluable sources of high wage employment, global exports, sustained economic growth and national security. As found by virtually every bipartisan commission and panel ever assembled.

http://www.ipcommission.org

2011 USITC Report (PDF) /2016 USTR Report (PDF) / 2017 USTR Report (PDF)

I've never been a fan of the Trump Administration's blunt use of tariffs but the instant blocks on FDI have been most welcome and these are not market based transactions anyway. The organic form of Foreign Direct Investment - such as with countries like Canada, UK, Germany - is ordinarily a great thing and means capital investment that results in a lot of stateside American job creation.

OTOH the CCP's idea of "foreign direct investment" is just code for buying up US tech assets, transferring intellectual property overseas and having American employees train their Chinese replacements. Even buying a minority stake gives you access to industrial trade secrets and every single one of the potential rejected Chinese buyers has been connected to the CCP government in one way or another. So yeah, hmm, fuck that.

This is at the core of America's global technological supremacy. To date, the US remains cutting edge in virtually all segments (µP, µC, SoC, GPU, AIC) and it's one of the few industries that never moved the bulk of its production offshore. Aerospace is another notable there, for many of the same reasons including higher IP protection, military applications and national security. Yeah, Broadcom has since re-relocated to the US.

Example: A glimpse into Intel's manufacturing operations.

Why Can't China Make Semiconductors?


In other words, China is quite keenly aware of how condensed matter physics as explained by the laws of quantum and statistical mechanics 'work' at the fundamental level. Yet they've still not been able mount a domestic semiconductor industry - which was literally brought into existence by the United States - for the engineering and manufacturing of cutting edge integrated circuits. They've already been failing at it for decades now. Amusing, but have made (read: stole) notable strides in the last five years.

If you want to set China's ambitions back for at least another couple decades, it wouldn't make a whole lot of sense to deny them chips from Intel, Qualcomm, Micron, Microchip, Texas Instruments, NVIDIA, et al. when such a significant portion of US semiconductor revenue is made through Chinese sales (and they can't do without them). Rather, you place export controls on the chipmaker's suppliers and choke off all access to the materials, machinery, equipment, software and services they require to raise their own industry and which can't be acquired anywhere else to any appreciable degree.

Namely these firms in particular. One of them is based in the Netherlands (ASML) and the other Japan obviously. This is where it would be nice to utilize relationships with geopolitcal allies rather than throwing them under the bus.

How do we know export controls are effective?

America's Assault On China's Tech Ambitions


It's not just their budding SC firms that can be crushed.

China's second largest manufacturer of telecom equipment and the number four smartphone maker in the United States, ZTE, is on its way to shutting down after the US government banned the company from doing business with American component suppliers, including chipmakers Qualcomm and Intel Corp., both of which it relied heavily on for parts used its smartphones. The company's future may now depend on an appeal to modify or reverse the 7-year ban.

The news was revealed in a press release which noted that, "the major operating activities of the company have ceased". ZTE's English-language homepage has also been stripped of much of its content, including its online store, apparently signifying that the company's days are numbered, at least in Western markets.

ZTE was inexplicably bailed out. Oh Hey, Look.

(HiSilicon isn't there yet, doesn't meet all of Huawei's product demand and is fabless to boot. They're dependent on TSMC for manufacturing. The US protects Taiwan in part because it's home to some of the largest pure play semiconductor foundries and most advanced process technology in the world with assets heavily integrated into the US defense network and supply chain. It kind of adds a layer of context to the relationship, and would be certain war if the mainland ever attempted taking that island.)

And, of course.

I was going to make a thread on ASML.

I was at the Motorolla plant in Illinois some years back ; not a single electronic test equipment was Chinese. Everything was German, Japanese and American.

People keep hyping China's technology prowess but in cutting edge tech and industrial technology, they are far behind the West and Japan. They need Japanese and Western expertise and equipment, because they don't know how to make it themselves.

 

[MMAisGod]

GOAT threads.

 

[MVelsor]

In short, don't engage when your pants are down.

What if they're always down? <45>

We need to protect ourselves as a nation. Now, I hope people get why borders matter.

We should not let more than 51% of any vital industry to be manufactured outside of our borders. A Chinese official actually threatened to withhold our meds. They could do it with steel, technology, and much more. They do have us over a barrel on rare Earth minerals, but we should be self sufficient and able to take care of our own in an emergency.

That was a serious threat, and not the type of thing you recklessly throw around. In regards to the OP industry, less than 3% of our fabrication manufacturing is done in mainland China. Virtually all of the R&D is done stateside (per usual) and there are currently 65 operating factories in 19 different states dedicated to advanced manufacturing and process technology.

http://indexes.nasdaqomx.com/Index/Weighting/SOX

'National Champion' by Market Segment:

µP: Intel (IDM)
µC: Microchip (IDM)
SoC: Qualcomm (Fabless)
DRAM: Micron (IDM)
GPU: Nvidia (Fabless)
AIC: Texas Instruments (IDM)

Obama also blocked these investments.

I remember this from April 2015. It was in vein though.

US Government Bans Intel, Nvidia and AMD From Selling High End Chips To The Chinese Government

Related: Mindblowing.

A new era of supercomputing offers unprecedented opportunities for scientific and industrial breakthroughs. The global competition among high-performance computing (HPC) systems heats up at the International Supercomputing Conference in Frankfurt, Germany.

The next generation of supercomputers will provide scientists and researchers with powerful new tools to accelerate scientific discoveries and drive innovations. Intel is on the forefront of the convergence of artificial intelligence, analytics, simulation and modeling and other HPC workloads that will drive the industry toward the next era in supercomputing.

ISC kicked off with the release of the Top 500 list, which shows today’s supercomputing platforms continue to rely on Intel Xeon processors as the preferred processor in the world’s leading Top 500 supercomputers. Intel processors power a record 95 percent of all systems in the Top 500 list, an increase of 2.4 percent since June 2017.