China Hits Pause on Giant Chip Spending Aimed at Rivaling US

[Jert]

How accurate is Bloomberg reporting regarding the industry?

For general reference, OK. For true truth, not OK.
The big medias cannot comprehend the complexities and nuances of the semi industry.
For example, "Instead, they’re seeking alternative ways to assist homegrown chipmakers, such as lowering the cost of semiconductor materials, the people said, asking not to be identified revealing sensitive negotiations". Seriously?? That will change the tide for china's semi industry?? and "sensitive" in what way?

 

[Paul2]

Both Singapore Taiwan and Korea's high tech industry were kicked off during dictatorship era. The Chaebol in Korea didn't even want to touch semiconductor at the beginning，it was the dictator Park Chung hee forced these Chaebol to get into semiconductor businesses. If they were a democracy at the time，today they would be no different with Latin America banana republic

And back then, getting into semi was infinitely more easy. Even a country like Pakistan had a fab back then.

Samsung Semi only got anywhere in early 200X. Daewoo semi is nowhere, Lucky Gold Star reverted to analog, Hyundai also wrapped its semi attempts.

 

[hist78]

Both Singapore Taiwan and Korea's high tech industry were kicked off during dictatorship era. The Chaebol in Korea didn't even want to touch semiconductor at the beginning，it was the dictator Park Chung hee forced these Chaebol to get into semiconductor businesses. If they were a democracy at the time，today they would be no different with Latin America banana republic

"Both Singapore Taiwan and Korea's high tech industry were kicked off during dictatorship era."

In the case of the Republic of China (Taiwan), the dictatorship (for lacking a better term to describe it, if you will) was ended long before Taiwan's high tech industry started.

That's one of the major reasons why Taiwan can achieve what they are today while mainland China has gone through several failed campaigns to advance its semiconductor industry since 1950s.

 

[tonyget]

"Both Singapore Taiwan and Korea's high tech industry were kicked off during dictatorship era."

In the case of the Republic of China (Taiwan), the dictatorship (for lacking a better term to describe it, if you will) was ended long before Taiwan's high tech industry started.

TSMC started in 1986，the dictatorship in TW ended in 1990. The establishment of TSMC was the effort of then dictatorial KMT regime

 

[hist78]

TSMC started in 1986，the dictatorship in TW ended in 1990. The establishment of TSMC was the effort of then dictatorial KMT regime

Taiwan's journey in developing democratic system was a bumpy one but I don't know if there is any country in the world that implemented their own democratic system in a quick and easy fashion. Nevertheless Taiwan started various democratic elections in 1950s.

By 1960s and 1970s, Republic of China in Taiwan (ROC) already had many routine elections that constantly saw non KMT candidates got elected. Yes, those elections were not perfect and the direct voting for president was still many years away. But it clearly shows that Taiwan's high tech industry was built on a democratic environment (again, not a perfect one) that Chairman Xi and CCP don't want to learn in the second decade of the 21st century!

The CCP asserted full control of mainland China since 1949, a long long 73 years ago!

Sadly, just like the difference in the capabilities of semiconductor industry between the mainland China and Taiwan, mainland China is years behind Taiwan in democracy.

If CCP hadn't abused (and still abusing) its own people on mainland China, we could have seen a robust and world leading semiconductor industry long time ago in mainland China.

 

[Jozo035]

...

If CCP hadn't abused (and still abusing) its own people on mainland China, we could have seen a robust and world leading semiconductor industry long time ago in mainland China.

Well, technology transfer to China happed because of human/workers rights abuse.

By the way, which part of industry in Japan/Korea/Taiwan is fully home-grown? Lot of it was transferred/stolen thanks to loose IP protection. Off course, they heavily expanded on that but again, thanks to fact that EU gave up. What would happed if companies like ASML decided to support local industry instead of east?

Main difference is that these countries are allied, while China/Russia/Iran.... is actively trying to destroy USA/west to assert new world order or something... Trump realized that this might be problem... Luckily Biden is continuing.

 

[Paul2]

Well, technology transfer to China happed because of human/workers rights abuse.

By the way, which part of industry in Japan/Korea/Taiwan is fully home-grown? Lot of it was transferred/stolen thanks to loose IP protection. Off course, they heavily expanded on that but again, thanks to fact that EU gave up. What would happed if companies like ASML decided to support local industry instead of east?

Main difference is that these countries are allied, while China/Russia/Iran.... is actively trying to destroy USA/west to assert new world order or something... Trump realized that this might be problem... Luckily Biden is continuing.

Far more technology transfer to China was done by Taiwan, Korea, Japan and, disproportionately, Singapore than USA, or any European country.

And they benefited from economic exploitation in China enormously in comparison to US, or Europeans.

However, it was USA who greenlighted relations with the mainland as legit in nineties. Before businesses from all these Asian countries have set up shops in the mainland, it were US companies who leaped into China first, thus raising a legitimate question: If Americans themselves can trade with China, why can't we? Japanese went in to China shortly after, and US did not sanction them any more.

 

[cliff]

Mrs Greenbaum's medical records are better protected than our transceiver IP. Can you imagine what China can do if they found out about Mrs. Greenbaum's kidney stone?!!

 

[hist78]

Well, technology transfer to China happed because of human/workers rights abuse.

By the way, which part of industry in Japan/Korea/Taiwan is fully home-grown? Lot of it was transferred/stolen thanks to loose IP protection. Off course, they heavily expanded on that but again, thanks to fact that EU gave up. What would happed if companies like ASML decided to support local industry instead of east?

Main difference is that these countries are allied, while China/Russia/Iran.... is actively trying to destroy USA/west to assert new world order or something... Trump realized that this might be problem... Luckily Biden is continuing.

@Jozo035

"Lot of it was transferred/stolen thanks to loose IP protection"

Do you mean those technology transfer (such as RCA/ITRI/UMC/TSMC and Phillips/TSMC) are shady and dirty activities? If your answer is "yes", then you probably need to read many good articles that described how Taiwan built its semiconductor industry. Semiwiki.com is a good starting point.

Without a robust IP protection, TSMC can't build its ecosystem and can't find companies who are willing to partner with them. Intel, AMD, Apple, Nvidia, Qualcomm, Amazon, Google, and Broadcom have been TSMC's and/or UMC's customers for a while that's partially due to the trust they have on Taiwan's IP protections.

 

[Jozo035]

Yes.


But it was not my point.

Point is that autocracy in china is not reason for their failure. Autocracy and human rights abuse is actually reason, why they attracted so many customers.

Reason for chinese failure is nationalism.

And i don't mean only in semiconductors...

 

[M. Y. Zuo]

Top down ‘encouragement’ of industrial development rarely ever works out as envisioned anyways.

The more interesting question to ponder is whether a bottom up approach, with some strategic nudges from Beijing at the right time, might actually be the superior approach.

 

[horace]

After seeing what CCP did to Jack Ma, there won't be any next generation big-tech in Chinese. Why bother?

In a central planning economy, it is easier to get ahead by sucking up to your superior then doing honest hard work. If engineers can't get rich, no one will try their best to make the difference. It is easier to get grants from CCP than building something that sells well.

 

[Artificer60]

Top down ‘encouragement’ of industrial development rarely ever works out as envisioned anyways.

The more interesting question to ponder is whether a bottom up approach, with some strategic nudges from Beijing at the right time, might actually be the superior approach.

I like to look to the Japanese steel industry as a blueprint of how to do this right. At a high level the approach Japan took was to lower the barriers to entry. They did this through tax incentives in the form of tax exemption measures, exempted Imported machinery from import duties along with clauses that allowed for special depreciation in corporate tax. In addition, reductions were made to the municipal property taxes for participating enterprises. They later included subsidies in the form or reducing the price of iron ore since they were heavily reliant on imports. Monetary handouts like the US CHIPS act were minimal. This approach encouraged efficiency and self selected for the most capable companies.

Given the reportedly high levels of graft in the Chinese economic system (I have no personal experience with this, it is just hearsay) I don't know how well this would fly. Probably better than in the US where all the political rhetoric is around making sure those "greedy corporations pay their fair share." That attitude fostered by the government only leaves handing out piles of cash as an alternative. I look at Intel's effort to build out capacity and have to think that reduced property taxes and import duties on semi-equipment along with changes in the taxes on depreciation of the very expensive manufacturing equipment would encourage smart decision making rather than the use it or lose it mentality that government funding usually brings.

 

[samwilde]

After seeing what CCP did to Jack Ma, there won't be any next generation big-tech in Chinese. Why bother?

You would be wrong. These people already exist. Like BYD and CATL's founders.
BYD's founder Wang Changfu is 2 years younger than Jack Ma.
CATL's founder Robin Zeng is 4 years younger than Jack Ma.

You also have even younger generations of Chinese "tech" billionaires.
Shein's founder Chris Xu is 20 years younger than Jack Ma.

Jack Ma did two things wrong.

He started Ant Capital where he was skimming money by doing high risk micro-loans, using capital from loans he took from Chinese banks owned by the government. He was doing arbitrage, he got low interest rate bank loans because he was a corporate, but he was using the money he got from the banks to issue risky micro-loans. If you know China, they had huge issues with similar financial micro-credit scams just recently, namely peer to peer lending, and Jack Ma was doing much the same, except he was putting the risk on the government banking sector.

What today’s shake-out in China’s peer-to-peer lending market means for fintech | Greater China

As the P2P industry in China emerges from its first major crisis, the survivors will hopefully apply the lessons they’ve learned to build more sustainable businesses.

www.mckinsey.com

Jack Ma's claims that he would not go under on the loans because of some sort of algorithmic secret sauce did not convince the financial regulators. So he was torpedoed on that.

Jack Ma also started buying newspapers (South China Morning Post), and founded his own university. SCMP is typically highly critical of the Chinese government and HQ in Hong Kong. I bet that did not win him any friends with the central government either.

In a central planning economy, it is easier to get ahead by sucking up to your superior then doing honest hard work. If engineers can't get rich, no one will try their best to make the difference. It is easier to get grants from CCP than building something that sells well.

All modern states have some kind of central planning. Unless you want to go live in Somalia, Afghanistan, or some place like that.