News on China's scientific and technological development.

The United States strategy towards Huawei is stupid beyond stupid.

Suppose Huawei is no longer number #1 in cell phones sales. They could be either 2, 3, or 4 depending on the amount of chips they have.

Samsung would then again be number #1 in cell phones sales, a Korean company. Then the Chinese companies, if we take them together, probably account for 50% at least of cell phone sales in this world, and maybe 60% to 70% of cell phone manufacturing in this world.

Yet, the United States government will insist on this glorious victory for them (for mostly propaganda reasons).

Now the United States government is determined to degrade American semiconductor companies and undermine their future potential with hinting at restrictions to the China market.

We should note here, that there are no current restrictions, yet everyone just assumes there will be.

Kind of like a married couple who are not officially divorced but they already there.

What did the United States gain out of this?

Huawei still number #1 in 5G network equipment leading the next industrial revolution.

American semiconductor companies have their real interest in terms of profits slashed which will lower R&D which affect negatively their competitiveness. Everyone knows this. Except the Trump administration.

We do not even have to comment on the American 5G manufacturing industry because they do not even got one. Maybe a few companies in China will pick up this mantle of O-Ran and produce some low cost parts.

Bwahahahahahaha!

Trump supposely signed off on the the tik tok deal

According to bloomberg news, ByteDance still holds majority ownership

Hendrik_2000 said:

Unfortunately the Chinese company are blinded by their own short sightedness and a bit of naivety belieiving in all those bs about "win-win" deal with the west because many of their management went to school in the west
They just didn't read their country history

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To that exact remark, the newly circulated directive for the United Work Front fits prefectly.

daifo said:

Trump supposely signed off on the the tik tok deal

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According to bloomberg news, ByteDance still holds majority ownership

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According to what I read on Twitter Oracle and Walmart will be in total control of Tiktok. Bad news. I really dislike the inaction of Beijing on this front. We are seeing the subjugation and forced sell of Tiktok at the hands of U.S. administration. That Bytedance entertains this idea and signs off is very damaging. This will only embolden Washington D.C. in the future and you cannot blame them.

Appix said:

According to what I read on Twitter Oracle and Walmart will be in total control of Tiktok. Bad news. I really dislike the inaction of Beijing on this front. We are seeing the subjugation and forced sell of Tiktok at the hands of U.S. administration. That Bytedance entertains this idea and signs off is very damaging. This will only embolden Washington D.C. in the future and you cannot blame them.

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Beijing must reject this deal, Tiktok in the US be damned. You absolutely cannot let them get their hands on the BD algorithm. They cannot fall for this trap.

Appix said:

According to what I read on Twitter Oracle and Walmart will be in total control of Tiktok. Bad news. I really dislike the inaction of Beijing on this front. We are seeing the subjugation and forced sell of Tiktok at the hands of U.S. administration. That Bytedance entertains this idea and signs off is very damaging. This will only embolden Washington D.C. in the future and you cannot blame them.

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Bytedance can sign anything but they all have to b approved by China, and we all know China won't approve it at all

Hendrik_2000 said:

But by then it is too late like what they are in now. Not necessarily true what is lacking is vision being rational is not always the virtue that you try portrait. Samsung founder go against the protestation of his own Samsung board Sometime you have to go against the stream. He funded the then fledging start up to become what is now Samsung semiconductor.

Look where is Samsung now and where is Huawei now! Can you explain that to me?

There were only so many places to go for major technology financing in Korea. The economic climate was worsening, with oil prices continuing to skyrocket and the Japanese pulling back. Samsung had money. Lee Byung-Chull and his son, Lee Kun-Hee, were convinced they had to enter the semiconductor business, not just buy chips. They tried persuading their management teams that advanced chips such as Hankook was building would be the future. Management balked.

Against such sage advice, on December 6, 1974, the Lees funded a stake in Hankook Semiconductor – using money from their own pockets. By the end of 1977, the operation was fully merged, becoming Samsung Semiconductor.

Kang Ki-Dong acquired a Ph.D. at The Ohio State University in 1962, and went to work at Motorola in Phoenix, Arizona in one of the largest discrete transistor plants in the world. As a Korean engineer who also spoke Japanese, he gave many plant tours to visiting engineers, building a network. When the time came to open a Motorola facility in Korea, Kang was sent ahead to perform an initial assessment for land and contacts, including interviewing prospective engineering staff.

After returning to the US and working for another firm, Kang encountered two old friends. The first was Kim Chu-Han, a prominent radio network operator Kang had introduced to ham radio years earlier. The second was a classmate, Harry Cho, an operations manager in semiconductors. Kim had access to financing, Cho could sell, and Kang knew fab technology. Together, the three formulated an idea for a new company: Integrated Circuit International, Incorporated, or ICII.

ICII designed a digital watch chip, and made its first 5 micron CMOS large-scale integration (LSI) parts on a small 3” line in Sunnyvale, California during 1973. Demand was substantial, many times bigger than what ICII could produce, and customers held back volume production orders. Kim’s firm was willing to finance expansion, but would only do so if the capital expenditure remained inside Korea.

Kang decided to pivot. He would continue ICII chip design operations in the US, but send the ICII fabrication line to Puchon and expand it there. The new joint venture was Hankook Semiconductor. However, the global oil crisis in 1974 and a litany of import red tape made the relocation much more expensive than planned. The fab finally came up and produced chips, but operating funds dwindled dangerously low within a few months.

There were only so many places to go for major technology financing in Korea. The economic climate was worsening, with oil prices continuing to skyrocket and the Japanese pulling back. Samsung had money. Lee Byung-Chull and his son, Lee Kun-Hee, were convinced they had to enter the semiconductor business, not just buy chips. They tried persuading their management teams that advanced chips such as Hankook was building would be the future. Management balked.

Against such sage advice, on December 6, 1974, the Lees funded a stake in Hankook Semiconductor – using money from their own pockets. By the end of 1977, the operation was fully merged, becoming Samsung Semiconductor.

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It is *not* too late. China still has a lot of cards to play, and is actually in a good position to play them.

The fact of the matter is that it’s very hard and very wasteful to try to force indigenization in an open market environment for a mature industry until you need to. Trying to get ahead of need in a complex, mature, and competitive market by forcing indigenization with less optimal domestic suppliers is exactly how countries end up starving themselves of the capital and industrial share to catch the lead. The best strategy is to try to do your best to maximize your assets and production inputs (especially human capital) with whatever capital you can generate, but *only* mobilize for indigenization, which will incur the penalty of a phase where you have to absorb inefficiencies, when you most have to, which is *exactly* what China has done and is doing.

Samsung is *not* a good example here, first because Samsung’s semiconductor industry is *not* fully indigenous so this isn’t an apple to apple’s comparison, and second, because Samsung invested in the industry when the industry was still small, simple, and nascent. When those are the conditions you can and absolutely should make early investments, as China has done with renewables, EVs, and high density batteries. This works because by function of an industry being small and nascent you can reap *much* higher returns with *much* smaller investments, and it’s *much* easier to build a capital advantage and convert that into a lead in those conditions. That is *not* what the semiconductor industry looks like today. What we have is the total opposite condition where competition and execution is so hard even many well established players are falling behind or exiting segments of the market, so that they can specialize only on their strongest competencies to survive as a business. This means for Chinese firms to get any shares to capitalize and sustain their businesses they have to be as efficient as possible. There’s no room for error for new entrants, which spells poorly for an indigenization first approach rather than a marketshare first approach. You need to tailor your strategies to your situations, and China’s situation today is not identical to Samsung’s in the 70s.

Finally, it’s worth emphasizing that these tech bans aren’t just hurting China. This is a double edge sword that will also end up hurting a lot of US companies that will now see revenue shortfalls from their financial projections, which will cause all sorts of headaches for their business. Honestly, while this blow is certainly painful for China, China is not in a weak position right now. China did exactly what it was supposed to do, strengthen whatever fundamentals that it can, as quickly as it can, so that they have options to execute in crisis.

The technology and science we’re talking about isn’t outside of China’s capabilities. The barrier for Chinese semiconductors tech has always been *commercialization* which selects for consistency and efficiency of production, *not* basic technological capability. The commercialization piece can only be bridged with learning by doing, and if you can’t get marketshare you can’t get opportunities to practice and refine your process. This was hard to achieve when the market was open, but it was also not a necessity while the market was open. Now that it’s not, the upstream parts of the chain finally have breathing room to bridge the last step to building an industry via a captive domestic market.

Winning a competition and avoiding pain are not the same things, and I feel like a lot of people here and in the broader conversation in China think that the former means the latter. There’s no such thing as flawless victory. That only exists in the naive fantasies of fragile and insecure egos. The bans are both a setback and an opportunity, but the sky is not falling. Everyone needs to calm down.

machupicu said:

Bytedance can sign anything but they all have to b approved by China, and we all know China won't approve it at all

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Why did bytedance agree to this sale? Does Zhang Yiming know what he’s doing. Was he charmed by the western investors that have stakes in Ticktock.

cbl21 said:

Beijing must reject this deal, Tiktok in the US be damned. You absolutely cannot let them get their hands on the BD algorithm. They cannot fall for this trap.

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Yeah, I totally agree with you. We will see what happens.

machupicu said:

Bytedance can sign anything but they all have to b approved by China, and we all know China won't approve it at all

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The future will give us the answers we need. These days Chinese entrepreneurs like Zhang Yiming are entertaining a forced sell-out. Not good. We need some action from Beijing. They should grow some spine and intervene otherwise this will be a precedent for some bleak future for Chinese entrepreneurs to expand outside China. This will signal you can harass them and there will be no consequences.