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US-China tech competition accelerates: on Friday 05/15 new sanctions on Huawei, on Monday 05/18 Samsung chief visits China

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(edited)

We observe a very interesting accelaration of China- United States tech rivalry this week:

 

1. On Friday 15 May 2020 new, much tighter regulations were imposed by Department of Commerce to prevent access of Huawei to any semiconductors.

Key Huawei chip supplier stops taking orders after new US sanctions

https://www.techradar.com/news/key-huawei-chip-supplier-stops-taking-orders-after-new-us-sanctions

TSMC is the world's biggest contract chipmaker

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, has reportedly stopped taking orders from Huawei following the latest round of sanctions by the US government.

Huawei chips

TSMC has become an increasingly important supplier over the past year, producing Huawei’s custom processors and providing it with key components such as networking chips. The Chinese mobile giant is now TSMC’s second largest customer, after Apple, accounting for anything up to a fifth of its revenue.

However Washington is intent on increasing the pressure on Huawei and has closed what it believes to be a “technical loophole” that allows chipmakers to ensure their components are not classified as ‘US-made’ despite including American technologies.

All chipmakers wanting to supply Huawei will have to apply for a licence,  handing the US government greater control over the company’s supply chain.

 

Nikkei says TSMC is no longer taking new orders from Huawei but will honour existing commitments, in line with the latest US regulations. It is said that the Chinese mobile giant hs been preparing for every eventuality over the past year and has been stockpiling networking chips.

 

 

2. On Monday 18 May 2020, Samsung (de facto) chairman Lee Jae-yong visits China in its first overseas trip since the start of COVID-19 epidemic:

https://www.koreatimes.co.kr/www/tech/2020/05/129_289724.html

Samsung's Lee visits China amid easing virus fears
Group leader's visit to the firm's Xian plant comes after US hits Huawei hard

By Baek Byung-yeul


Samsung Electronics Vice Chairman Lee Jae-yong visited the company's key semiconductor plant in Xian, China, Monday, resuming his on-site inspection activities after his pledge to help the consumer electronics giant continue its upward trend.

Samsung said the vice chairman used his Chinese trip to encourage employees who have been trying hard to overcome difficulties from the COVID-19 pandemic. Lee is the first "global businessman" to visit China since the virus erupted, Samsung said.

This was Lee's first overseas business trip since January when he inspected TV and smartphone manufacturing lines in Brazil. His visit was possible as Korea and China began operating a fast-tracked border entry system, exempting businesspeople from a 14-day mandatory self-quarantine period starting this month.
Lee's visit to China came at a time when the United States announced it will limit the supply of memory chips made with its technologies to Chinese telecommunication equipment maker Huawei Technologies, May 15.

Under that new sanction, companies using chip-making technology from the U.S. will be required to obtain a U.S. license before supplying chips to Huawei, which means Korean chipmakers such as Samsung and SK hynix will have to cut off their chip supplies to Huawei unless they get waivers from the U.S. commerce department.

Given Huawei is one of the largest buyers of chips made by Samsung and SK, it remains to be seen how Samsung could seek a breakthrough in the semiconductor industry which faces a series of negative factors such as the U.S.-China trade row and global economy slowdown sparked by COVID-19.
 
 
Comment:
It is interesting how fast are events occuring in the present technology conflict. I am interested what is opinion of people with knowledge about semi industry like @Ward Smith.
A few observations and questions:
- Huawei will probably be finished in the next 12 months if do not find any measures to supply components,
- At the spotlight would be 2 major foundries: TSMC and Samsung,
- Unusual visit of Samsung chief could mean there are already negotiations taking place,
- It is very probable that Huawei workaround would be to move chip manufacturing to Samsung foundries: Samsung is too big to be sanctioned by US this would stop global tech industry, TSMC on the other hand is relatively small,
- the political powers at play are huge, the largest countries involved: US and China. Many smaller countries: Japan, South Korea, Taiwan, Germany, the Netherlands would need to play a cautious game of hedging their bets but not angering any of the superpowers,
- future of 5 trillion dollars technology industry is at stake, with great impact on many other related industries,
- Will China play tit-for-tat now or wait till US elections ? What would be their answer ?
- What would be the impact on global supply chains ?
- Would countries have to choose sides and loose one of the 2 largest consumer markets ?

 

Edited by Marcin2
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India is about to get a lot of new business.

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20 minutes ago, HermitMunster said:

India is about to get a lot of new business.

India is not a factor. 

A decent state-of-the-art fab is years in the making, and multi-billion to put into place. And India isn't known for protecting IP. Building a significantly capability would take a national initiative, much as Korea has in the 90s for the memory business, and Taiwan for the foundry business. Ironically many of the leading physicists who drive the semiconductor process and tool industry are from India. 

I don't view Samsung as a foundry, though along with Intel and TSMC, are the 600 lb gorillas in the buying tools business. There are small niche fabs. Who knew the same folks who make a B2 bomber had a fab?

Direct labor is barely a factor in semiconductor manufacturing. Why go to an India? And the semi tool company I work with does have a significant footprint in India, but used mostly for sustaining engineering of older products.

There is Saxony Valley, around Dresden, huge in chips for the automotive industry. Israel has significant fabs, and Intel has a major presence there. There are many "fabless" semiconductor companies. They might have a small fab for developing the process, but a foundry does the volume, even for larger folks now like IBM or AMD. China is pretty much still shut out of the sub 25 micron world, but size isn't everything. Especially with analog chips. 

The USA can be, should be, a 5G leader. CISCO will not go down easily. Working remotely is yet another godsend driving demand. And my little sector was already at full capacity. COVID has disrupted supply chains somewhat, but being "critical" has kept us going close to record levels.

I shipped some R&D stuff to a communications chip customer in the states just a few weeks ago. But in the USA it's not a national government thing, it's driven by the corporations. Intel learned long ago, and most everyone else in the industry, you will be cloned and IP taken in China, so if it goes there, it's years old. Life cycles are so short that they are still well behind and can't manufacture much leading edge.

If you are a Chinese National in an American semiconductor company it's tagged the email address, and many accesses are denied. Outfits like Facebook have bought fabs, not to seriously make chips, but rather so they can complete own the design and manufacturing method. In a few years Apple won't have Intel, or Motorola inside for their core CPUs. IP is the war, not the manufacturing. But as Intel has proven, if you don't really know the manufacturing, and control it, you will lose the IP faster. All worthwhile IP will be copied, you just buy yourself time. What is the infamous line, "Only the paranoid survive."

Trump is absolutely right to worry about China. I have issues with the how, not the basic why.

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Also this, honestly I think we're heading towards a real war at this rate...unthinkable but I guess people thought that before WW2 and WW1.

SCMP | US President Donald Trump signs Hong Kong human rights bills into law | 27-11-19
— "US President Donald Trump signed the Hong Kong Human Rights and Democracy Act into law on November 28, 2019.

The law aims to protect Hong Kong’s civil rights and allows diplomatic action and economic sanctions against those Washington views as suppressing freedoms in the city.

Trump’s endorsement came nine days after the US Senate passed the bill on November 19.

Trump has also approved the Protect Hong Kong Act, which bans US exports of crowd-control gear such as tear gas and rubber bullets to Hong Kong."

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(edited)

There's another medium size foundry in upstate NY.

 

On to the fun stuff... Hi Frankfruter, Trump=fascism now thats quite a declaration from a guy who's took the handle of a German food, but Germans should know fascism when they see it. Like when all the Nazi's recently just bubbled back up out of the depth of Germany's subconscious and protested in the streets. 

American fascism.... hummmmm, yeah, did a check and it seems no matter what you think about Trump all you can really point to as far as his HUGE, GINORMOUS effect on the rest of humanity is..... he can be a jackass. So let's do an equation, American (in your eyes) fascism = no real effect besides sanctions (oooo, scary) and jackassery (even more ooooo scary!) on the rest of the world. Germany = you already know.

 

Edited by Strangelovesurfing
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(edited)

2 minutes ago, El Nikko said:

Also this, honestly I think we're heading towards a real war at this rate...unthinkable but I guess people thought that before WW2 and WW1.

SCMP | US President Donald Trump signs Hong Kong human rights bills into law | 27-11-19
— "US President Donald Trump signed the Hong Kong Human Rights and Democracy Act into law on November 28, 2019.

The law aims to protect Hong Kong’s civil rights and allows diplomatic action and economic sanctions against those Washington views as suppressing freedoms in the city.

Trump’s endorsement came nine days after the US Senate passed the bill on November 19.

Trump has also approved the Protect Hong Kong Act, which bans US exports of crowd-control gear such as tear gas and rubber bullets to Hong Kong."

If the US taking it's ball and going home is reason for the CCP to start a war, then war has always been unavoidable.

Edited by Strangelovesurfing
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(edited)

16 minutes ago, El Nikko said:

Also this, honestly I think we're heading towards a real war at this rate...unthinkable but I guess people thought that before WW2 and WW1.

You are right , It is probable, but Fortunately not in 2020. Chinese ( and all other countries) reaction is NO reaction until 2020 US election.

I do not think Hong Kong would be the reason for the start of new war.

The farthest the animosity US-China can go here is Economically  treating  Hong Kong as another Chinese province.

I think the trigger of the war would be Taiwan or technology.

Edited by Marcin2
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5 minutes ago, Marcin2 said:

You are right , It is probable, but Fortunately not in 2020. Chinese ( and all other countries) reaction is NO reaction until 2020 US election.

I do not think Hong Kong would be the reason for the start of new war.

The farthest the animosity US-China can go here is Economically  treating  Hong Kong as another Chinese province

Agree, this is no different than what's come before in regards to Hong Kong. This is just another human rights gambit by the US, it's back to the future there. I don't get the war bit, how would that work? China advances over the Pacific? They advance up through Siberia? How does this exactly happen. For all the bluster of Trump I do not believe he is seeking war, but he may not be aware of how far to push it.

I wouldn't hold my breath about Chinas reaction, it's not going to amount to much besides more repression and nationalism at home IMO.

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“TSMC is the world's biggest contract chipmaker

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, has reportedly stopped taking orders from Huawei following the latest round of sanctions by the US government.”

Let’s see, China believes they own Taiwan and consider it a rogue ‘state’, yet Huawei actually needs TSMC if they are going to stay in business (at the moment anyway).

China does not recognize Taiwan, and forces others to withhold recognition as well. Yet Taiwan had a very robust response to the pandemic and many countries now want them included in the WHO.

Seems like Taiwan is developing some international clout re China these days. It’s about time!

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7 hours ago, John Foote said:

Trump is absolutely right to worry about China. I have issues with the how, not the basic why.

I more or less agree with everything you have written in your comment.

My major concern ( apart from start of the war due to broader US-China conflict) is also about how.

My concern is caused by the history of the last 2 years of the conflict.

China and Huawei had 2 years to prepare for the latest Department of Commerce Decision. It is a lot of time. It is way too much time. At present Huawei is stocked in components at least till the end of 2020.

And China is playing a very long game in tech competition.

They have not sanctioned yet any tech company as an answer to many US actions.

They did the opposite: changed rules of investment in high-tech and invite anybody to build fabs in China. 
There are at least 15 fabs under construction in China, many of them finished in 2019-2020.

I do not know how US can counteract to slow or stop this process ?

I think that US should immediately create government fund for the development of semi industry lets say 100 billion dollars and use it to attract fab investment with direct subsidies. The same as China does.

I think that otherwise these sanctions would not stop Chinese high tech industry.

 

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52 minutes ago, Strangelovesurfing said:

Agree, this is no different than what's come before in regards to Hong Kong. This is just another human rights gambit by the US, it's back to the future there. I don't get the war bit, how would that work? China advances over the Pacific? They advance up through Siberia? How does this exactly happen. For all the bluster of Trump I do not believe he is seeking war, but he may not be aware of how far to push it.

I wouldn't hold my breath about Chinas reaction, it's not going to amount to much besides more repression and nationalism at home IMO.

When we used to be confronted with a totally brainwashed local in China, spouting this and that about what he "knew" about the evil U.S., we used to say: "Wow!  It's a good thing China doesn't have an FLA!  (Blank look on Chinese "friend's" face)  Because the PLA (People's Liberation Army) fights against its own people.  If there was an FLA (non-existent Foreign Liberation Army) we'd need to be worried."  To which they would normally stalk off, mad.  Bless their hearts.

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(edited)

1 hour ago, Marcin2 said:

I think that otherwise these sanctions would not stop Chinese high tech industry.

What is China going to stock those Fab's with? They're not getting anything from the US or from anyone else that produced machinery with US IP which is everyone. The talk about China being 5 years behind doesn't even scratch the surface, they have no real tech ecosystem, they just drafted off the US ecosystem. China can start pumping out chips that are way behind the times all they want. Your about to see what China's real level of IT is and it's not going to be very impressive. For a preview go grab a Huawei Hero budget phone. They actually used a chip produced in a Chinese fab for the CPU. Of course the real phone is going to be even worse than that one when all the other US tech is stripped out including all the above referenced ecosystem, not to mention bye bye ARM.

Edited by Strangelovesurfing
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(edited)

Posted this on another thread but it belongs here more. If your wondering why this has really ramped up the past few years-

In HR McMasters new book he recounts a trip he took with Trump in 2017 for an official visit. After being led on a tour of the Forbidden City, Chinas Premiere declared to the US delegation, who included McMaster (then Nat. Sec Advisor) that "China developed it's economy and no longer needed America. From now on Americas place in the world was to provide China with raw materials and agricultural goods while China produced the machinery and high tech products of the future."

Chinas philosophy is "muddy water catches more fish". Confusion and deception isn't a bug, it's THE feature. Only problem is muddy waters even makes the Chinese confused and you get what just happened in the tech realm.The CCP is so insane they convinced themselves they owned the tech sector when their whole industry depends on US tech. China just pointed a gun to their head and pulled the trigger.

Edited by Strangelovesurfing
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41 minutes ago, Dan Warnick said:

One day the CCP will invade Taiwan.  When?  What will the U.S. do IF/When that happens?  Rather large questions, I'd say.

China still can't invade Taiwan. I saw a breakdown recently and currently China can only possibly land and support something around 20,000 troops/day, if Taiwan didn't fight back. Realistically Taiwan would wack ~50% of Chinas boats, loose another ~10% to mechanical problems/general confusion and your looking at 7-8k troops landed and thats being charitable. There are only two beaches that can be assaulted from the west coast of Taiwan, the remaining coastline isn't workable.

If they try it the US won't have to lift a finger. 100-200 LRASM's "mysteriously" ending up in Taiwan's quiver would end the PLAN. It's a PLAN with no real plan.

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8 minutes ago, Strangelovesurfing said:

China still can't invade Taiwan. I saw a breakdown recently and currently China can only possibly land and support something around 20,000 troops/day, if Taiwan didn't fight back. Realistically Taiwan would wack ~50% of Chinas boats, loose another ~10% to mechanical problems/general confusion and your looking at 7-8k troops landed and thats being charitable. There are only two beaches that can be assaulted from the west coast of Taiwan, the remaining coastline isn't workable.

If they try it the US won't have to lift a finger. 100-200 LRASM's "mysteriously" ending up in Taiwan's quiver would end the PLAN. It's a PLAN with no real plan.

Maybe.  In North Korea they kept sending soldiers at the front, and getting machine gunned down, until the U.S. soldiers' machine guns started to sag from the heat of firing, at which time they were replaced, rinse and repeat.  The breakdown you saw might not take into account what level of losses the CCP is prepared to take in any given battle.  Just sayin', as the saying goes these days.

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1 minute ago, Dan Warnick said:

Maybe.  In North Korea they kept sending soldiers at the front, and getting machine gunned down, until the U.S. soldiers' machine guns started to sag from the heat of firing, at which time they were replaced, rinse and repeat.  The breakdown you saw might not take into account what level of losses the CCP is prepared to take in any given battle.  Just sayin', as the saying goes these days.

I guess... they could load them on fishing boats. From what I've seen they have only a few landing vessels that are capable, a total Navy of ~400 ships (most ~250-300 are glorified boats) and a giant fishing fleet that spends a lot of time not fishing.  It's a big difference though between the ocean and land. Successful Amphib landings are incredibly difficult to pull off. The US is one of the few countries, and the only one with real combat power, that still has large capacity for amphibious landings. 

The new Marine commander is changing this though. They're reconfiguring the Marines to fight from the small pacific islands using small groups of soldiers pimped out to the max with gear. China is building capable amphibious ships though, they just commissioned a real one with actual, on paper, capabilities. I'd think it's going to be a long slog for the PLAN before they're even proficient and by then Taiwan will be even more ready. Like you wrote though, well see.

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I wish China would just sanction everything American. Everybody would know where they stand, China could crawl back into their shell, and the world could move on....

Come on Xi, don’t threaten...DO IT!

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2 hours ago, Strangelovesurfing said:

Agree, this is no different than what's come before in regards to Hong Kong. This is just another human rights gambit by the US, it's back to the future there. I don't get the war bit, how would that work? China advances over the Pacific? They advance up through Siberia? How does this exactly happen. For all the bluster of Trump I do not believe he is seeking war, but he may not be aware of how far to push it.

I wouldn't hold my breath about Chinas reaction, it's not going to amount to much besides more repression and nationalism at home IMO.

No they could attack Taiwan, and Japan would get involved and things escalate from there.

I don't think either sides are seeking war but sometimes wars happen regardless.

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17 minutes ago, El Nikko said:

No they could attack Taiwan, and Japan would get involved and things escalate from there.

I don't think either sides are seeking war but sometimes wars happen regardless.

And when, for years, you’ve been claiming the entire South China Sea at the expense of your neighbors, you’ll quickly find out what they really think of you...

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46 minutes ago, Douglas Buckland said:

I wish China would just sanction everything American. Everybody would know where they stand, China could crawl back into their shell, and the world could move on....

Come on Xi, don’t threaten...DO IT!

That is the major problem with current US strategy of China tech containment . China is not going to sanction any US companies, for sure not manufacturing in China.

They are playing long game, 20 years game, that is why it is so dangerous for US, that is why I started this thread.

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(edited)

26 minutes ago, El Nikko said:

No they could attack Taiwan, and Japan would get involved and things escalate from there.

I don't think either sides are seeking war but sometimes wars happen regardless.

I think China would never attack Taiwan. They could attack US forces if they are located in Taiwan, cause this is worse for China than were Soviet nukes in Cuba.

I think attack on any other country is also out if the question, it is not that CCP is such benevolent power, it is premeditated, smart strategy of economic expansion. China makes tributary States in Asia, war is out of the question.

But as everything is 1 minute by ICBM from Chinese capital, any miscalculation and error is possible.

Fortunately if it starts it would get fast: 2 hours and it would be over, there would be probably 500 million less people on the planet but it would be really fast and short war.

But i do not want to discuss such doom scenarios, they are upon us any minute since 2017 but nobody has any impact on them.

Edited by Marcin2
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2 hours ago, Strangelovesurfing said:

What is China going to stock those Fab's with? They're not getting anything from the US or from anyone else that produced machinery with US IP which is everyone. The talk about China being 5 years behind doesn't even scratch the surface, they have no real tech ecosystem, they just drafted off the US ecosystem. China can start pumping out chips that are way behind the times all they want. Your about to see what China's real level of IT is and it's not going to be very impressive. For a preview go grab a Huawei Hero budget phone. They actually used a chip produced in a Chinese fab for the CPU. Of course the real phone is going to be even worse than that one when all the other US tech is stripped out including all the above referenced ecosystem, not to mention bye bye ARM.

But when you Would have  30% of global fab capacity in China it would not be easy to sanction China. South Korea and Japan would still co-operate with China.

That is Chinese assymetric strategy for many years. Create so many dependencies so that you are crucial stakeholder in the game.

What i would do if were Trump or any US President ?

I would create 100 billion dollars fund to Bring whole semiconductor supply chain back to US.

I would give subsidy of 50% for any fab built on US soil providef That construction starts No later than 31 December 2021.

I would pay  damages of 50% of initial investment for any company that would close fab in China provided that they : close fab until 2022, do not open any fab in China till 2030.

And China is a toast before 2025, job done.

 

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