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China lags far behind in advanced semiconductors, despite strenuous efforts to close the gap
China has a fatal shortcoming in its quest for hi-tech supremacy. The US and its close allies control the critical raw material.
AMBROSE EVANS-PRITCHARD3 June 2020 • 8:48pm
For all its successes, China lags far behind in advanced semiconductors, despite strenuous efforts to close the gap. It must import them.
The Chinese Communist Party cannot hope to achieve global dominance of G5 mobile networks without secure access to these chips and their supporting ecosystem.
Nor can it take a lead in telecommunications and artificial intelligence (AI). Xi Jinping’s master plan to control the ‘internet of things’ and the digital economy of the 2030s runs into an insuperable obstacle.
Washington has enormous blockading power and in mid-May it began to exercise that power with seriously hostile intent, forcing the world’s biggest chip maker - Taiwan’s TSMC - to stop taking fresh orders from Chinese mobile leader Huawei.
We can mark the start of the real Sino-American Cold War from that moment. It played to the narrative - both cultivated by Xi, but also made self-fulfilling by his actions - that the US aims to thwart the rise of China, and therefore that restraint is pointless.
The end of Hong Kong as we know it followed in quick succession. Are there parallels with Franklin Roosevelt’s oil embargo against Japan, which set in motion Tojo’s all-or-nothing escalation in 1941? Not yet, but the gloves are off.
We can have a quaint debate in Britain and across Europe over whether Huawei should be at the centre our G5 networks, and therefore whether the People’s Liberation Army should have leverage through Xi’s doctrine of civil-military fusion.
It is out of our hands. Washington is not going to let Huawei gain such a lockhold in the foreseeable future. Which is why the Government is now bowing to US pressure.
It is not hard to manufacture the low-end logic and memory chips for laptops. It is much harder to make specialised chips for telecommunications or AI, or FGPA circuits that can be programmed. Japan, Korea, and Taiwan have the capability, but they are working hand in glove with the US.
Silicon Valley retains paramount power where it matters. It farms out some production to foundries or ‘fabs’ such as TSMC in Taiwan but it does not relinquish ultimate control.
The US and Japan between them also control 85pc of the market for electronic design automation (EDA) needed to create circuits . “Not to sound hyperbolic. All of China’s “self-made” chips are designed, verified, validated, etc, using foreign—mainly US—EDA tools,” said TechNode.
“Semiconductors are not easy to make. The manufacturing process has become progressively more complex as the chips become microscopically small, at the cutting edge of physics and materials science,” said James Lewis, technology director at the Center for Strategic and International Studies in Washington.
“China is not a peer. People don’t realize just how much they have been relying on stolen technology. But stealing is not enough. You need the magic ‘know-how’ and that takes years of experience.”
The Chinese caught up fast after 2015 when the Obama administration cut off two Intel chips used by the military but creating a semiconductor industry is harder. “They are on their third ‘Manhattan Project’ trying, but they are not there yet. They are ten years behind on high-end chips,” said Mr Lewis.
Yet time is of the essence. The next five to ten years will decide whether the US alliance system or China controls the digital infrastructure.
Huawei was able to get around the initial US curbs on technology by purchasing chips from TSMC. The US Commerce Department has now shut this down. All chip manufacturers using US equipment, IP, or design software will need a licence before shipping to Huawei.
TSMC promptly announced that it would halt sales to Huawei even though they make up 18pc of revenue. It will instead double down on its US ties with a $12bn plant in Arizona. Such is the long economic and strategic arm of the United States.
We should not be distracted by Donald Trump’s idée fixe on trade tariffs, cars, and soybeans. The actual fight is going at a more sophisticated level, managed by the professionals of the Washington establishment. Trump is best understood as a bellwether. As Henry Kissinger so tellingly put it, he is “one of those figures in history who appears from time to time to mark the end of an era and force it to give up its old pretences”.
A paper by professors Harold James, Markus Brunnermeier, Rush Doshi from Princeton argues that the Sino-American technology war “holds an uncanny resemblance” to Anglo-German rivalry in the lead up to the First World War. It was a clash between a rising, mercantilist, Wilhelmine autocracy and an anxious Britain, the slipping hegemon striving to preserve control over the nodal points of world trade.
Guglielmo Marconi, backed by the Royal Navy, established a British lockhold on radio telegraphy before the First World War CREDIT: ThoughtCo
What mattered then was radio telegraphy. The Royal Navy teamed up with Marconi to create a radio network with a monopoly over transmissions, buttressed by Britain’s 60pc share of the world’s undersea cable network. The British set the global standard and Marconi leveraged the advantage with a policy of “non-intercommunication” with other operators that refused to toe the line. All were forced to comply.
Kaiser Wilhelm fought back by ordering the electrical companies AEG and Siemens & Halske and AEG to form the rival Telefunken in 1903. Germany pursued its own ‘Belt and Road’, pushing its technology in Latin America and emerging markets, along with the Berlin-Baghdad railway to break out of the maritime blockade - the model explicitly cited by the original author of the Belt and Road in 2012.
Germany did gain a share of radio telegraphy but Britain was still able to monitor German transmissions and force German traffic onto British-controlled networks after 1914, which was how the Zimmerman telegram was intercepted - accelerating US entry into the First World War. In the end Germany failed to achieve its goal through confrontation. It has done spectacularly well instead as a cooperative power.
There are two sides to the Thucydides Trap. Status quo powers can make conflict inevitable by failing to accommodate a thrusting new rival. But rising powers can equally provoke a containment alliance against them if they throw their weight around and misjudge their own strength. Wilhelmine Germany is a salutary lesson.
In my view, Beijing misread the events of 2008 when the US financial system blew up - or seemed to do so - and it looked as America was in steep decline. China in fact suffered the greater structural damage. It drank too deep from the bottle of Leninist-capitalism: credit bubbles and manic over-investment by state-owned behemoths.
Twelve years later, China still has one foot in the middle income trap. The low-hanging fruit of catch-up growth has been picked. Productivity has stalled. The debt ratio is 330pc of GDP. The underlying rate of economic growth has dropped to 4pc and will be 2pc by the early 2020s. The workforce is contracting and demographic atrophy is setting in.
It is not so much that America has done well - although it has regained energy ascendancy to match its hi-tech dominance - but rather that all those charts extrapolating eternal Chinese growth look very silly today. The sorpasso in total GDP may not happen after all.
Xi is now taking a page out of the late Song dynasty in the 12th Century when the leaden neo-Confucian ideology of Zhu Xi smothered a flourishing society that had embraced markets, free thinking, and a high degree of rational science, and was arguably on the cusp of industrial take-off.
The Song dynasty was China's age of invention and free thought. It was shut down by rigid neo-Confucian control. Xi Jinping is repeating the error today
Historian Joel Mokyr said the core of the imperial service exam system became “the mindless memorisation of Zhu Xi’s commentaries on which every ambitious Chinese lad had to waste his childhood” but it also served as an instrument of repressive conformity. China went into 800 years of stagnation.
Xi Jinping’s surveillance regime is doing much the same today. Youth must cut their intellects on his guiding oeuvre, “Thought on Socialism with Chinese Characteristics for the New Era”. It is hard to see how China will achieve the final leap forward to technological supremacy in this political atmosphere.
Xi can muster allies of sorts along his Belt and Road but these are second tier countries. What matters more is that he has antagonized the rich world. The EU has declared his regime to be a “systemic rival” and is erecting barriers against predatory takeovers. His wolf warrior diplomacy is ruffling feathers everywhere.
One can only conclude that hubris has gone to his head. If you are going to take on the developed world, you must at least get your chips in a row first.
https://www.telegraph.co.uk/busines...l-supremacy-likely-fail-huawei-going-nowhere/
China has a fatal shortcoming in its quest for hi-tech supremacy. The US and its close allies control the critical raw material.
AMBROSE EVANS-PRITCHARD3 June 2020 • 8:48pm
For all its successes, China lags far behind in advanced semiconductors, despite strenuous efforts to close the gap. It must import them.
The Chinese Communist Party cannot hope to achieve global dominance of G5 mobile networks without secure access to these chips and their supporting ecosystem.
Nor can it take a lead in telecommunications and artificial intelligence (AI). Xi Jinping’s master plan to control the ‘internet of things’ and the digital economy of the 2030s runs into an insuperable obstacle.
Washington has enormous blockading power and in mid-May it began to exercise that power with seriously hostile intent, forcing the world’s biggest chip maker - Taiwan’s TSMC - to stop taking fresh orders from Chinese mobile leader Huawei.
We can mark the start of the real Sino-American Cold War from that moment. It played to the narrative - both cultivated by Xi, but also made self-fulfilling by his actions - that the US aims to thwart the rise of China, and therefore that restraint is pointless.
The end of Hong Kong as we know it followed in quick succession. Are there parallels with Franklin Roosevelt’s oil embargo against Japan, which set in motion Tojo’s all-or-nothing escalation in 1941? Not yet, but the gloves are off.
We can have a quaint debate in Britain and across Europe over whether Huawei should be at the centre our G5 networks, and therefore whether the People’s Liberation Army should have leverage through Xi’s doctrine of civil-military fusion.
It is out of our hands. Washington is not going to let Huawei gain such a lockhold in the foreseeable future. Which is why the Government is now bowing to US pressure.
It is not hard to manufacture the low-end logic and memory chips for laptops. It is much harder to make specialised chips for telecommunications or AI, or FGPA circuits that can be programmed. Japan, Korea, and Taiwan have the capability, but they are working hand in glove with the US.
Silicon Valley retains paramount power where it matters. It farms out some production to foundries or ‘fabs’ such as TSMC in Taiwan but it does not relinquish ultimate control.
The US and Japan between them also control 85pc of the market for electronic design automation (EDA) needed to create circuits . “Not to sound hyperbolic. All of China’s “self-made” chips are designed, verified, validated, etc, using foreign—mainly US—EDA tools,” said TechNode.
“Semiconductors are not easy to make. The manufacturing process has become progressively more complex as the chips become microscopically small, at the cutting edge of physics and materials science,” said James Lewis, technology director at the Center for Strategic and International Studies in Washington.
“China is not a peer. People don’t realize just how much they have been relying on stolen technology. But stealing is not enough. You need the magic ‘know-how’ and that takes years of experience.”
The Chinese caught up fast after 2015 when the Obama administration cut off two Intel chips used by the military but creating a semiconductor industry is harder. “They are on their third ‘Manhattan Project’ trying, but they are not there yet. They are ten years behind on high-end chips,” said Mr Lewis.
Yet time is of the essence. The next five to ten years will decide whether the US alliance system or China controls the digital infrastructure.
Huawei was able to get around the initial US curbs on technology by purchasing chips from TSMC. The US Commerce Department has now shut this down. All chip manufacturers using US equipment, IP, or design software will need a licence before shipping to Huawei.
TSMC promptly announced that it would halt sales to Huawei even though they make up 18pc of revenue. It will instead double down on its US ties with a $12bn plant in Arizona. Such is the long economic and strategic arm of the United States.
We should not be distracted by Donald Trump’s idée fixe on trade tariffs, cars, and soybeans. The actual fight is going at a more sophisticated level, managed by the professionals of the Washington establishment. Trump is best understood as a bellwether. As Henry Kissinger so tellingly put it, he is “one of those figures in history who appears from time to time to mark the end of an era and force it to give up its old pretences”.
A paper by professors Harold James, Markus Brunnermeier, Rush Doshi from Princeton argues that the Sino-American technology war “holds an uncanny resemblance” to Anglo-German rivalry in the lead up to the First World War. It was a clash between a rising, mercantilist, Wilhelmine autocracy and an anxious Britain, the slipping hegemon striving to preserve control over the nodal points of world trade.
Guglielmo Marconi, backed by the Royal Navy, established a British lockhold on radio telegraphy before the First World War CREDIT: ThoughtCo
What mattered then was radio telegraphy. The Royal Navy teamed up with Marconi to create a radio network with a monopoly over transmissions, buttressed by Britain’s 60pc share of the world’s undersea cable network. The British set the global standard and Marconi leveraged the advantage with a policy of “non-intercommunication” with other operators that refused to toe the line. All were forced to comply.
Kaiser Wilhelm fought back by ordering the electrical companies AEG and Siemens & Halske and AEG to form the rival Telefunken in 1903. Germany pursued its own ‘Belt and Road’, pushing its technology in Latin America and emerging markets, along with the Berlin-Baghdad railway to break out of the maritime blockade - the model explicitly cited by the original author of the Belt and Road in 2012.
Germany did gain a share of radio telegraphy but Britain was still able to monitor German transmissions and force German traffic onto British-controlled networks after 1914, which was how the Zimmerman telegram was intercepted - accelerating US entry into the First World War. In the end Germany failed to achieve its goal through confrontation. It has done spectacularly well instead as a cooperative power.
There are two sides to the Thucydides Trap. Status quo powers can make conflict inevitable by failing to accommodate a thrusting new rival. But rising powers can equally provoke a containment alliance against them if they throw their weight around and misjudge their own strength. Wilhelmine Germany is a salutary lesson.
In my view, Beijing misread the events of 2008 when the US financial system blew up - or seemed to do so - and it looked as America was in steep decline. China in fact suffered the greater structural damage. It drank too deep from the bottle of Leninist-capitalism: credit bubbles and manic over-investment by state-owned behemoths.
Twelve years later, China still has one foot in the middle income trap. The low-hanging fruit of catch-up growth has been picked. Productivity has stalled. The debt ratio is 330pc of GDP. The underlying rate of economic growth has dropped to 4pc and will be 2pc by the early 2020s. The workforce is contracting and demographic atrophy is setting in.
It is not so much that America has done well - although it has regained energy ascendancy to match its hi-tech dominance - but rather that all those charts extrapolating eternal Chinese growth look very silly today. The sorpasso in total GDP may not happen after all.
Xi is now taking a page out of the late Song dynasty in the 12th Century when the leaden neo-Confucian ideology of Zhu Xi smothered a flourishing society that had embraced markets, free thinking, and a high degree of rational science, and was arguably on the cusp of industrial take-off.
The Song dynasty was China's age of invention and free thought. It was shut down by rigid neo-Confucian control. Xi Jinping is repeating the error today
Historian Joel Mokyr said the core of the imperial service exam system became “the mindless memorisation of Zhu Xi’s commentaries on which every ambitious Chinese lad had to waste his childhood” but it also served as an instrument of repressive conformity. China went into 800 years of stagnation.
Xi Jinping’s surveillance regime is doing much the same today. Youth must cut their intellects on his guiding oeuvre, “Thought on Socialism with Chinese Characteristics for the New Era”. It is hard to see how China will achieve the final leap forward to technological supremacy in this political atmosphere.
Xi can muster allies of sorts along his Belt and Road but these are second tier countries. What matters more is that he has antagonized the rich world. The EU has declared his regime to be a “systemic rival” and is erecting barriers against predatory takeovers. His wolf warrior diplomacy is ruffling feathers everywhere.
One can only conclude that hubris has gone to his head. If you are going to take on the developed world, you must at least get your chips in a row first.
https://www.telegraph.co.uk/busines...l-supremacy-likely-fail-huawei-going-nowhere/
