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ZTE - a penalty or accelerating independence?

The recent ban on sales to ZTE, while no doubt a problem for ZTE, seems to have encouraged the Chinese to accelerate efforts to become independent of US chip makers. You could argue they were headed there anyway but presumably US chip makers would have reaped revenues/profits in the meantime and the better among them might have developed plans to replace the eventual loss of that business. Instead we seem to have scored an own-goal in accelerating the decline in our chip revenues. Perhaps this is OK in the new anti-globalism world, though exactly how we replace major export partners is unclear to me.

Exclusive: China looks to speed up chip plans as U.S. trade tensions boil - sources | Reuters
 

Daniel Nenni

Admin
Staff member
Accelerating independence, absolutely. I always complained that the US Government ignored semiconductors and thus America was behind the manufacturing curve. Now I wish the US Government would us again. :p
 

hist78

Member
I think many people might not have time to dig into the detail of the ZTE activities that led to this ban.

Here is the the agreement signed by ZTE Chairman and President Zhao Xian Ming and US Justice Department on March 6, 2017:

https://www.justice.gov/opa/press-release/file/946281/download

On page 1:

It is hereby agreed by and between ZTE Corporation (ZTEC), its attorneys, Clifford Chance LLP and Burleson, Pate & Gibson LLP, and the United States Attorney's Office for the Northern District of Texas and the United States Department of Justice, National Security Division (collectively, the Department), that the following is true, correct and can be used in support of the defendant's plea of guilty:
On page 24:

68. Because ZTEC and ZTEC senior managers created an elaborate system to hide the 2013-2016 Iran data, authorized the false information that ZTEC defense counsel unwittingly provided to attorneys for the Department of Justice and federal law enforcement agents, and took steps to delete all communications related to this cover-up,· the company obstructed the due administration of justice.

On page 25:


ZTE agreed and signed: View attachment 21539

So the question is why ZTE signed the agreement and paid the US$1.19 billion fine (about $300 million is deferred pending on ZTE's execution of this guilty plea agreement), but is still thinking they don't have to follow through the agreement?

Secretary Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements to the U.S. Government | Department of Commerce

The Department of Commerce has now determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to senior employee disciplinary actions the company said it was taking or had already taken. ZTE’s false statements only were reported to the U.S. Government after BIS requested information and documentation showing that employee discipline had occurred.
“ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation.” said Secretary of Commerce Ross.
These false statements covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.
Remember China along with USA and other countries had agreed to sanction Iran due to Iran's nuclear weapon program. ZTE pled guilty to the US Justice department for violating the sanction and they paid a huge fine, but why they didn't punish those employees involved in the offense as required by the agreement?

ZTE got a second chance in 2017 but decided to fool around the US Justice Department. So, I can only say ZTE is unusually stupid and arrogant.
 
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hist78

Member
Definitely not saying the punishment isn't well-deserved. I'm commenting more on the unintended consequences.
Yes, I agree. Except comparing to what China is already doing, with or without this ZTE incident, how much faster is an open question. Chinese government has aggressively thrown a lot money (publicly and through other means and ways) into semiconductor industry in the past several years. They will keep putting a lot money on it in the foreseeable future.

China Is Raising Up to $31.5 Billion to Fuel Chip Vision - Bloomberg

China Is Starting to Rethink Its Dreams of Chip Domination - Bloomberg

More money will definitely help the development speed but after certain point, in the Chinese environment, it can only help certain group of people to get rich quicker.
 

Arthur Hanson

Active member
China's Next Move in Technology War

With the ZTE dispute in play, China will soon have to make their move. They can either develop their own technology, which will take years and leave them vulnerable to failing behind due the "Great Acceleration" where technology advances ever faster, many times in unpredictable ways or just outright steal it for internal use, which would deny them many economies of scale, which is also a poor option. Outright theft on this scale would also create a myriad of unintended consequences both legally and technically. Developing their own would also present huge disadvantages as to cost and scale.

The best option for everyone would be an internationally recognized patent, copyright and IP protection system. The best option for handling IP of all types would be a stock market for IP with the value being highest at the IPO and declining as other options are developed. An open market of this type would be fair and transparent to all parties. It's time for the world leaders to step up to the plate and create a new, regulated, fair market for IP. The mess we have now is obsolete and out of date and has little ability to adapt to a changing future. Only a transparent, fair and open market can create the foundation for advancing technologies in everything from biological, mechanical to electronic. IP in business models will be a whole separate challenge, but should be done on a world wide scale. The structures for handing technologies can be as important or even more important than the technology itself.

Properly handling and fostering technology and IP could accelerate the whole process of developing IP of all types and its adoption on an international scale.

All this presents tremendous opportunities for everyone and a chance to adapt everything to a faster and accelerating world in which everything changes. More than ever knowledge is power and free and fair access is a threat to bad governments and companies. Our current models are obsolete and holding us back. It's time more than ever to embrace the change so all can benefit from the "Great Acceleration".
 
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