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)

** 博客文章文責自負,不代表本公司立場 **

Presidential candidate Donald Trump invited Chinese electric carmakers to enter the US market—as long as they made the China-designed cars in America.

This would be a stark contrast to the Biden-Harris system of keeping the popular clean-energy cars out of the country by slapping a 100 per cent surcharge on them.

BANKERS INTRIGUED

The Trump plan has investment bankers intrigued.

"If acted upon, this would be a revolutionary change in the US-China trade relationship," said Marko Papic Chief Strategist at BCA Research.

"First, it would separate national security concerns from trade, adjusting US trade policy to the realities of a global multipolar environment. Second, it would resolve the trade dispute using tried and tested policies from the 1980s."

The strategist was referring to a period when Japan was the world's leading carmaker and was coerced into building its vehicles on US soil.

INVITATION INCLUDES THREAT

Trump has repeated the offer to Chinese carmakers several times, although it has had little coverage in the mainstream media, since it doesn't fit the narrative.

In March this year, he said: “If they want to build a plant in Michigan, in Ohio, in South Carolina, they can, using American workers, they can."

The offer was repeated last month in a convention speech, but in keeping with his tough guy image, a threat was included. "We don’t mind it happening but plants will be built in the United States and our people are going to man those plants. And if they don’t agree with us, we’ll put a tariff of approximately 100 to 200 percent on each car and they will be unsellable in the United States."

US CAR MAKERS NEED CHINA I.P.

Of course, all politicians make promises that fail to turn into actions. Yet Trump has made this offer repeatedly, and the electric car issue is not going to go away, so something will have to be done about it. Geely, BYD, Chery and other Chinese firms are enjoying remarkable sales growth in multiple countries.

There would be other advantages too, including IP transfer from China to the United States carmakers: In America, Tesla is over-dominant (51% of the electric market) and the Big Three car firms (13% between them) do need some creative input.

Would China consider accepting the deal? Probably yes. It has shown repeatedly that making trade deals overseas is the country's superpower.

WAY OUT OF TOXIC POLITICS

But more importantly, the offer shines a light on an unexamined difference between the two political parties in the United States.

The hyper-politicized Biden-Harris administration is controlled by the security establishment (call it the blob or the swamp or whatever), which gives an insanely paranoid military-intelligence quadrant the final yea or nay to every deal involving China.

Trump, for all his faults, is showing that a business deal can be handled as a business deal. This is something that China, and indeed all of Asia, can understand.

Trade is often beneficial, while US geo-politics is now always toxic.

Yet the Chinese should not make the mistake of thinking that Trump is friendly towards them. In the same speech that he invited them to build factories in the United States, Trump said: "If you go back 20, 25 years they’ve stolen, going to China and Mexico, about 68 percent of our auto industry. Manufacturing jobs. We’re going to get them all back. We’re going to get them all back, every single one of them."

His motivation sounds less like a hope for a win-win deal, and more like revenge.

by Nury Vittachi