PLOT TWIST: CHINESE CURBS HURT US CHIP INDUSTRY

PLOT TWIST: The west's computer chip industry is being hit by Chinese export curbs, the Financial Times reported today. Key materials gallium and germanium are rising in price and shortages are looming.

This is the latest extraordinary turn in a saga which began with the US coercing the world's makers of high-end semiconductor manufacturing equipment to stop selling to Chinese firms or individuals.

Washington's October 2022 move was a hard blow to China, quickly hitting tens of thousands of Chinese industrial firms—but Beijing barely responded.

NO RESPONSE

For months the Chinese did nothing, and eventually made a tiny adjustment, lowering the amount of germanium and gallium that could be exported. These are two rare earths widely used in semiconductor manufacture.

That change has finally started to bite, a source told the Financial Times today, with prices of the substances doubling in Europe.

"If China reduces gallium exports as it did in the first half of the year, then our reserves will be consumed and there will be shortages," the unnamed source told the newspaper.

CIVILIAN DEVELOPMENT

The western press has repeatedly reported that the US ban on chip-making sales to China was aimed at harming that country's military—but a researcher at an MIT security conference showed this was untrue, with more than 99 per cent of China's high-end chip usage being for civilian use and general development, used in communications equipment, medical imaging technology, and so on

The west's mainstream press also continues to report that there is a tech-centered trade war between the US and China, but this is also misleading. Almost all the steps taken in the "battle" are actually attacks initiated by the west.

SIX SETS OF UNINTENDED CONSEQUENCES

There is growing evidence that US curbs on Chinese technology is having a major negative effect on the west, with unintended consequences in at least six areas.

First, the US attack destroyed the country's reputation, already much battered, as an honest broker. Washington came across as a dishonest bully that would break even the most fundamental rules of free trade to gain an advantage for itself, not caring about the effect on people associated with semiconductors in China, Japan, the Netherlands or elsewhere.

Countries worldwide realized that they had to "de-risk" from the US, not from China.

Second, the US move prompted Chinese chipmakers to work harder. One practical result is the Kirin 9000s, a super-chip jointly developed by Huawei and Tsinghua University.

Third, the US step prompted Chinese scientists to focus on future innovations, some of which have high potential. Tsinghua University has developed a particle accelerator producing a beam that can be used to make two-nanometer chips.

Fourth, the US attack unhappily forced private businesses around the world to stop making money selling equipment to China. The Reserve Bank of New York estimated the losses to the industry as US$130 billion, the Financial Times's Lex column reported today.

Fifth, the US move triggered the growth of business sectors in which the world's tech firms found alternative ways of selling equipment to China. Nvidia and ASML, for example, have found ways to regain Chinese firms as major customers.

Sixth, and probably worst, from the US point of view, is that it changed the global playing field irreparably. Today, many if not most countries are reviewing their trade relationships with the US, studying de-dollarization, considering BRICS membership, and examining options to join the Belt and Road Initiative, the biggest global trade project in human history.

In terms of worst ever "own goals", the US attempt to strangle China's technological development is developing into a case for the history books.

[from Nury Vittachi, editor of fridayeveryday]

by Nury Vittachi

Lai See(利是)

** The blog article is the sole responsibility of the author and does not represent the position of our company. **

In the latest international upheaval, Europe is taking the hardest hit. After 300 years of modern civilization and the churn of imperial powers, that era is gone, and a better tomorrow is nowhere in sight.

Europe has one problem: it cannot take care of itself. “No one really knows whether Europe would still be able to produce toothpaste if it weren’t for China,” the EU Chamber of Commerce said.
 
Europe doesn’t make toothpaste; it sells luxury brands. Fine — look at the latest news. Reuters reports that the U.S.-Israel-Iran war has delivered a blow to European luxury labels. Sales at Dubai’s upscale malls, packed with wealthy shoppers, have fallen 50 percent, and LVMH, France’s largest luxury group, says wealthy Middle Eastern customers have paused spending in Europe because of the conflict in the Gulf region.
 
The New York Times, in a piece headlined “Europe Is Done With Appeasing Trump”, lays out several of Europe’s current pains.
 
“The barrage of tariffs that opened the second Trump administration, aimed indiscriminately at friend and foe; the brazen demands that Denmark cede Greenland to the United States, and now the absence of any consultation with European allies before joining Israel in an attack on Iran that has affected the entire world, have erased any illusion among most Europeans that Mr. Trump is anything but an unpredictable, vindictive and uncontrollable danger,” it wrote.
 
Trump’s latest move is to impose a blockade on all Iranian ports from Monday, adding another barrier in the Strait of Hormuz. The U.S. president has repeatedly said, with obvious satisfaction, that America has oil and natural gas, and that oil shipping blockage cannot bring the United States to its knees. In other words, if Iran wants a war of attrition, the White House is ready to go all the way. America’s NATO allies, meanwhile, make clear they will “decline to join in.” Europe’s oil supply is already under pressure: Russian oil and gas are cut off, and Middle Eastern shipping now faces a second lock. So is Trump punishing Iran, or Europe?
 
“Last year, export controls imposed by Beijing on seven rare earth elements and the magnets made from them had especially severe consequences. China is a global leader in the production of these critical raw materials, which are widely used in electric motors, smartphones, and numerous everyday electronic devices,” Deutsche Welle reported. “The EU Chamber of Commerce said nearly one-third of its member companies indicated in a questionnaire survey at the beginning of this year that their business had been affected by China’s export control measures.”

The EU Chamber of Commerce knows perfectly well that China-EU relations have been pulled off course by the United States, and that Europe has not shaped its foreign and trade policy around its own interests. It has even had to tear out 5G networks built by Huawei and ZTE, while Chinese electric vehicles face restrictions. That has only made China-EU ties more tangled. Europe can hardly be called arrogant now. Energy supplies are unstable, and rare earth constraints have turned it into an industrial power with nothing usable to work with. So what now?
 
Although calls to “de-risk” economic ties with China have persisted for years, many European companies continue to bet on the Chinese market. Over the past year, EU figures show that 26% of companies said they were relocating their supply chains to China, “a proportion twice that of companies choosing to move their supply chains out of China or establish a second hub overseas.” The trend is clearly still going strong.
 
Europe’s major powers, including France, Italy and Germany, all feel the need to break free from the manipulation and humiliation imposed by the United States, especially the Trump team. Europe has finally woken up and is now pushing for independence and autonomy, placing its national destiny firmly in its own hands.
 
Nothing in the world is difficult if you are willing to scale the heights. Europe becoming strong again is no dream, but starting over takes patience. I would say 300 years is enough for you to turn things around.