Trade War with China

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Arkboy

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China’s chip import reliance will shift more and more to Taiwan, South Korea, and Japan. It already heavily is. So eventually it will get to the point that the US can’t do anything but blackmail/force/threaten its own vassals into cutting off the supply.

They are already doing it, just look at the situation with ARM, which isn't even an American company. Now the next step is they might apply maximum pressure on TSMC, and if TSMC caves, I don't see how in the short term the Huawei consumer division could survive. Just this Friday new bans have forced AMD to cut its joint partnership with China, and there goes the hopes of Zen/Hygon etc. All of these vassals you speak of have US military bases and/or benefit greatly from US weapons imports. If push comes to shove, Taiwan might choose to side with the US.
 

gelgoog

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Now, I don't know how much Hygon got out of the deal. But Zen was originally designed as a 14 nm FinFET processor using a TSMC process.
SMIC should have a 14 nm FinFET process available this year. So it might just be Hygon can redesign the chip to be fabbed at SMIC.
The chip packaging, I also suspect China could do it. Now the processor won't be sold outside China but that was never the point in it.
That is assuming there is even an issue at all. For all we know the US government order could only apply to future contracts.
If it applies to Hygon's current processor, I think the Chinese government should sanction AMD, and place a fine on them to recoup Hygon's licensing costs.
If AMD don't pay, all products using AMD processors coming into China, that includes the Sony PS4/PS5 console and Microsoft Xbox consoles should be embargoed. They should be held at Chinese customs until they pay.

However AFAIK Zhaoxin is a different deal, the processor is being designed in China, It is not just a license. The Chinese government should also fund them to make a separate shrink for their future design to use SMIC 14 nm process. China's government should also fund SMIC to enable faster ramp-up of 28 nm and 14 nm production and fund the conversion from TSMC to SMIC for critical chip designs.

The Chinese state should also promote concentration of the many independent ARM processor players in China into two or three separate companies to concentrate resources in order to enable them to better compete with MediaTek and Qualcomm.

Concentration should not be mandated to those doing RISC-V or other novel architectures which are independent of foreign patents.
 
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CMP

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vassal country companies dont legally have to comply for any products containing less than 25% us technology regardless. some will comply just to be good vassals, but most will want to keep their revenue streams intact

and the rest will be highly incentivized to ensure that their updated and next gen products use less than 25% us technology as well
 

gelgoog

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I also forgot to add. As an additional condition to sell their processors in China, AMD and Intel could be made to cross-license their patents (not chip designs) with one or two Chinese companies. Otherwise they should be declared to be a CPU cartel and face steep fines (billions each) at the same time their CPU patents are invalidated in China by the courts.

The ARM processor companies, after the concentration, should all have baseband processor designs, either their own, or one licensed from a Chinese company like Huawei. The Chinese state should convince Huawei to do this as it is in their and the market's best interests in the long run instead of feeding MediaTek or Qualcomm which can then be shut off at the whims of the US government.
 
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antiterror13

Brigadier
vassal country companies dont legally have to comply for any products containing less than 25% us technology regardless. some will comply just to be good vassals, but most will want to keep their revenue streams intact

and the rest will be highly incentivized to ensure that their updated and next gen products use less than 25% us technology as well

true, but Trump could just change it to just 1% :)
 

Biscuits

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They are already doing it, just look at the situation with ARM, which isn't even an American company. Now the next step is they might apply maximum pressure on TSMC, and if TSMC caves, I don't see how in the short term the Huawei consumer division could survive. Just this Friday new bans have forced AMD to cut its joint partnership with China, and there goes the hopes of Zen/Hygon etc. All of these vassals you speak of have US military bases and/or benefit greatly from US weapons imports. If push comes to shove, Taiwan might choose to side with the US.

TSMC’s only tie with US is using their market. US can try to throw their entire nation at it like they did with Huawei, but if the international community ignored their word on Huawei, why would they listen on TSMC?

If it came down to the domestic market or the US market, there’s no way they would choose the latter. Not only is it smaller (although not by much), but more importantly the public and even their own employees will lynch them.
 

Biscuits

Major
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Let's see:
The US takes measures vs Huawai =>
1) destroying or severely containing the company =>
2) reverse tide on China's tech rise =>
3) hamper BRI =>
4) foil plans re currency.

Well well. The US can do all these things with a "surgical strike"! Seems absolutely terrifying, but if you examine this scheme, there's a lot of holes.

Take the first step of this sequence, for example. Huawei is not exactly dead yet. It's handset business is affected, but I see no indications that 5G rollout has been hampered in any serious way. Its cloud services should be completely unaffected, and only part of it's product line in servers will be impacted. But Huawei is a resilient company and it is already entering new lines of business to compensate. The talent, organization, and good morale of the company will continue to serve China well.

But suppose Huawei was actually destroyed, as you say. The second step in the sequence says China' tech rise is reversed. There's no logic in this at all. The number of researchers in china won't drop. China has more people involved in R&D than the US already for several years, the the gap is only growing. I believe the university system is expanding again, after reaching a plateau about a decade ago. If Huawei is the top in 5G, the Pentagon says the Chinese military is beginning to field some technologies which the US does not have. Moreover, China is spawning tons of tech startups, and the country in 2018 surpassed the US in the amount of Venture Capital utilized for the first time. Huawei has been the big story in 2019, but in the last couple of years, it was all about BAT (Baidu, Alibaba, Tencent), mobile payments, sharing economy, self driving cars, etc. Huawei has played a good role, but China's tech rise is not the result of one company. Rather, Huawei is the result of China's tech rise.

The third step in the sequence says that China's loss of momentum in "tech rise" will hamper the BRI. I'm not sure why this should follow either. Cellular networks built with Nokia or Ericsson equipment can be used to develop the connectivity China and everybody else wants. And of course, none of this will affect the fiber optic technology for internet, or the pipelines, railroads, roads and power plants. GE and Siemens are being used for the latter in many cases, and it turns out "Western" watts can turn the lights on just as well. Perhaps there will be a bit less Chinese money for the initiative, but political attitudes and interference are playing a much bigger role in holding things back now, and not lack of funds, equipment, or materials. Moreover, the BRI is taking on a life of it's own, as quite a few players see benefits. This includes not only recipients of projects, buy players taking part in building them (Russia, UAE, Switzerland, Japan, to name a few).

I won't bother with the fourth step, as it's too far into fictionland, but I think it's clear the consequences of this "surgical strike" will not be the ones intended, assuming @Arkboy is right about American reasoning. None of these hopes will be realized.

The reasoning about targeting Huawei is quite simple. US has yet to prove themselves able to hurt the Chinese economy at large despite using up most of their cards, so instead they attack a private company without government protection, hoping that it will cause panic and give advantages in the negotiations.

It’s the same principle as terror bombings. Will losing 10 people to a bomber really hurt the targeted country? No. Even 9/11 deaths were eclipsed by car accidents.

Out of an economy of 27.4 trillion, Huawei is only worth 8.4 billion. The greatest provider of technology by far is still the state owned institutes that make R&D for the government, Huawei and other civilian companies in most cases only apply created technology for civilian use. Furthermore, even if Huawei lost popularity, those people will not be gone and will just rally behind another company.

But by targeting them, they inspire both fear in the Chinese public and hope with the domestic audience. Using that, they can both last longer against the tariffs at home and also create more room for slip ups in China.
 

gelgoog

Brigadier
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Trump had already done it with ZTE, so he thought Huawei would similarly quickly collapse and accept US control.
I think he never expected they would fight and that it would hurt US companies like Qualcomm as it is the case right now.

Trump is doing something the US has done for a long time with European and other Asian companies.
Anti-competitive behavior to protect US companies. Just look at Apple vs Samsung court case.
GE vs Enercon is another case.

In this case they came up with a flimsy case where ZTE and Huawei were evading US Iran sanctions regime. Similar to claims of corruption of foreign officials in Alstom's case. But if it wasn't that it would be something else like Qualcomm patents on 5G. They did not go with Qualcomm patents because ZTE and Huawei are major clients of their chips.

Now, imagine this, the Chinese government plays from the US handbook: GE vs Enercon. They declare Qualcomm to infringe on Huawei's 5G patents and ban all Qualcomm chip sales in China. They only need to do this for a year and it will cause them huge losses. I think the appropriate time to spring this particular trap will be in the Fall, just before Xmas/New Years shopping.
 
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Arkboy

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Trump had already done it with ZTE, so he thought Huawei would similarly quickly collapse and accept US control.
I think he never expected they would fight and that it would hurt US companies like Qualcomm as it is the case right now.
He is doing something the US has done for a long with European and other Asian companies. Anti-competitive behavior to protect US companies. Just look at Apple vs Samsung court case.


Trump took a 500 million "loan" from China in order to reverse ZTE, but at that point (more than three months later) the ban had already done its toll in terms of damage to ZTE so it accomplished its goal. ZTE is tiny compared to Huawei. What he is going to do this time? Offer China a 50% discount (since Ren stated loses of 30 billion) and offer to accept $15 billion in exchange for unblocking Huawei? I think its different beast this time. This is about 5G and #1 smartphone maker, unlike ZTE, Huawei is at the cutting edge of 5G, gained lots of contracts around the world, and otherwise would have become world #1 smartphone maker by September of this year. So I don't see the US ever reversing the ban on Huawei.
 

gelgoog

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GE (USA) vs Enercon (Germany) was similar. Read about the case.
Enercon was prevented from selling their wind turbines in the USA because they supposedly infringed on GE patents.
The thing is, GE copied Enercon technology via industrial espionage and patented it as their own.
This case is well known in the wind power sector.
For many years Enercon couldn't sell in the USA. This hurt them quite a lot financially vs their competitors.
Same way, Huawei is banned from sales in the USA. Just the excuse is different.

With regards to TSMC there is always a danger they could be pressured into pushing companies like Huawei out. Their main clients are NVIDIA, Apple, AMD, all US companies. They could threaten to move production to Samsung or GlobalFoundries for example to coerce TSMC. The US government could also threaten TSMC with denial of machine tools by placing them on the sanction list. It isn't realistic for them to do that, as TSMC can't be replaced in less than 3 years, but it could happen.

Someone like Apple even has enough capital they could have their own fabs, they simply chose not to do it.
 
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