US-China tech war: Without advanced chips, can China’s smartphone industry survive?
This is the headline of an article in South China Morning Post. This is the kind of questions that the anti China camp likes to ask, with the intent and hope that China would fail, just like Gordon Chang everyday praying that China would collapse. What is the reality today is that many things and issues are interconnected and is not a simple black and white problem. Related to this question is another question, can the American chips companies and industry survive without the biggest consumer market, ie China? Who are the American chips companies going to sell their chips to without China? How are they going to expand their business or even to maintain the present scale of production when the biggest buyer is taken out?
It is like a chicken and egg situation. Which comes first, the manufacturers of chips or the consumers of chips? Can both exist without the other?
China is having a temporary set back at the moment with the American sanctions. There would be some chips that would not be available to China. The good thing is that the mobile phone industry has hit a plateau and would stay at this level for a while. So the demand for higher capacity chips would not be that critical for now. In fact there is now a huge surplus of chips and the inventory is going to kill all the chips manufacturers in America.
The shortage of some high end chips is only transcient and China would work towards producing its own chips and this would be overcome. China also has a lot of patents and could use them when the time comes to take on the Americans, to hit back at the Americans, including rare earth and other parts in the supply chain.
But what would not change is the consumer market. China is still the biggest consumer market for the chips manufacturers and growing. There is no alternative to the Chinese market to dump the excess chips. The chips manufacturers need China more than China needs them. And in a year or two, China would be fully self sufficient in the chips it needs and could say good bye to all the American chips manufacturers and even chips making machine. And this day is coming very soon and the window for American chips manufacturers would be closed for good. Many are now sinking with the unsold inventory and could not find buyers. China is not going to buy even at rock bottom prices.
By then, what would happen to the American chips manufacturers? Who are they going to sell their chips to? The likely scenario, many would have to down scale and some would have to go out of business. China would then take over all their market shares. The odds are against the American chips manufacturers, thinking that they could strangle the Chinese phone makers. And their fate is being determined by the simplistic minds of the clowns in Washington, headed by a demented old President.
Good luck, American chips manufacturers. You have only a couple of years left before the curtain comes down on you. It is looking like a different version of the Ukraine War, trying to win it quickly but as the day passes, the more difficult it becomes, and failure becomes an absolute certainty. China would be the last man standing.
American Chips manufacturers by trying to do China in will soon realise they are better off producing potato chips, corn chips, all types of junk food chips to increase their obese population.
ReplyDeleteSome American economists predict the US dollar still has 5 to 10 years of shelf life left before it becomes too obscene for global usage.
- I tend to believe the prediction is too optimistic.
Ya agreed. It's not do simple
DeleteNot to worry. McDonalds is a big chip producer and could turn into an equally big customer for chips. The Chip Alliance members could even vacumn wrap those 'over stocked chips' and sell them like potato chips, wrapped in air tight bags, and sell it at 7-eleven and others. 7-eleven alone has more than twelve thousand stores in the USA as of 2021. A big market, LOL.
ReplyDeleteNot to worry also about the China demand. The importance of the China chip market is all overblown. China is touted to be already in deep shit without the high end chips, and is collapsing. Just like Russia collapsing when the USA and the West sanctioned their energy exports and stole their reserves. Oh, yes China was supposed to collapse 12 years ago, being earlier prophesied to happen 22 years ago by that half Chinese (many believe Japanese) chalatan masquerading as a Chinese.
They forgot that Russia and China holds all the cards in terms of essential elements for chip manufacturing. China controls the major global supply and refining of rare earth. Russia controls the major global supply of Palladium and Neon, all essential elements for chip making.
The shit has not yet hit the fan though. Now, some chip manufactureres are only resorting to special offers vis a vis cheap sales. But China is not buying chips on cheap sale in bulk to stock up, despite the drastic price drop. Already people like TSMC are cutting down production of high end chips, idling some of their EUV machines. Later it will be no sale.
The USA and the West, including Japan is thinking of raising a big stone to drop on the foot of China. But, just like what they intended to do to Russia, it will backfire badly.
Off topic!
ReplyDeleteAntony Blinken is expected to visit Vietnam, to try to coax Vietnam to embrace Washington and cement their relationship. The USA is trying to tell Vietname to forget about the Vietnam War and who destroyed the country and work with them against China. Well, that is what I expect the USA would do, unashamedly.
Vietnam and China have disputes in the South China Sea and my believe is that the USA is trying to pour fuel over fire to turn the Vienamese against the Chinese leveraging on the issues. If I remember correctly, the Vietnamese leaders already told the USA that regional disputes are to be settled by regional parties and outside parties should stay out. Loud and clear.
Blinken is repeating the same mistake of the West in Africa. After destroying Vietnam with millions of tons of bombs, dropping millions of mines with many still not removed, using Napalm bombs and chemical weapons like Agent Orange on Vietnamese and destroying agricultural land and vegetation permanently. And now ostensibly going into Vietname to talk about helping them to confront China, which is the expected purpose of Blinken's trip. Other than that what else can we think of Satan's visit to Vietnam? I am sure there will be threats of economic punishment thrown in if Vietnam resist.
If the Vietnamese have a conscience, they should remember all the help given by China and Russia during the Vietnam War and not succumb to Blinken's threat. The Africans understand the meaning of conscience after all the aid given by Russia, China, North Korea and Cuba to help them fight colonialism. The Africans have not forgotten that and are thankful for that as well.
USA = Wiley Coyote
ReplyDeleteChina = Road Runner
https://www.youtube.com/watch?v=6KDgDYdug6M
For a country that can withstand a century of humiliation and then rise up again, what is a couple of years needed to be self reliant especially in chip manufacturing? The West better remember that and not be arrogant that they can rein in China. Co-operating with China is more profitable than trying to confront China.
ReplyDeleteIt is even more difficult today to push China down, with so many countries betting on BRICS and BRI.
When have the USA or West been able to win over the long term, just by denying China access or participation in most fields of development? High end chip manufacturing is probably the last card left in the USA and Western playbook that they can use to prevent China's rise, but it will be an exercise in futility.
ReplyDeleteThe USA and the West refused to allow China's participation in space programs on the ISS and what did China do? China build its own space station, an even bigger one than the ISS. The USA and the West denied China's access to rocketry, jet engines, super computing and space exploration and what did China do? China still managed to land on the moon and sent a probe to Mars.
China even excelled in 5G applications, AI, electric vehicle development, hypersonic missile technology, high speed rail constructions and all matters relating to infrastructure building.
So, let the USA and the West think that in high end chip manufacturing, they can rein in China's development by forming the Chip Alliance to prevent China from moving forward. They are again going to be disappointed. Give China another five years and they will deeply regret pushing China into the corner that they will regret forever. China will be even more determined to develop its chip manufacturing capacity even faster had the USA and the West not provided the push. What does not kill China will make her even stronger.
Very true
DeleteWhy America’s big companies keep getting bigger
ReplyDeleteThe irony of the Silicon Valley Bank saga is now complete. The crisis started inside the American tech sector’s favourite bank, but the government rescue has benefited Big Tech the most. As calm returns to the market, fuelled by megacap tech stocks, investors are naturally relieved. They need to be aware, however, of where a system built on bailouts is heading.
Even two decades ago, capitalism was marked by boom-bust cycles that disrupted incumbents and created space for upstarts. While still a ubiquitous word, “disruption” is finally fading as churn in the market stalls. The big beneficiaries of post-crisis rescues are big, established companies — and this is not how capitalism is supposed to work.
After the government stepped in on March 10 to rescue SVB, megacap stocks had one of their best runs ever. Today, all of the top five US companies are tech businesses and together they represent more than 20 per cent of the stock market — the highest concentration since the 1960s and more than double the figure a decade ago.
The decline in competitive churn is a side-effect of the rescue culture that has been growing since the 1980s. Ever since the US Federal Reserve stepped in to prop up the market after the 1987 crash, the stock market has grown dramatically, from half the size of the US economy to two times larger at its peak in 2020. One might assume an expanding market should create room for more churn, but no, not in America.
The number of US companies that remain in the top 10 from one decade to the next has risen steadily, from just three in 1990 to six at the end of the 2010s. And while churn has weakened in the US, it remains relatively robust across much of the world. From the start to the end of the 2010s, just two companies remained on the top 10 list in Japan, four in Europe, four in China and two in the global list, Microsoft and Alphabet.
Today, the top five US companies are bigger than the next five by the largest margin since the early 1980s. The top two alone account for nearly half the market cap of the top 10, up from 35 per cent at the start of the pandemic. Apple is now number one, and is nearly six-times larger than UnitedHealth Group, in 10th place. Three decades ago, Exxon was number one but just over twice the size of the tenth company, BellSouth.
Competing explanations for the rise of Big Tech include the natural advantage of size on digital networks, where companies can add customers at negligible added cost. But “network effects” can’t explain why three out of every four US industries — and not just in the tech industry — have been consolidating in the hands of a few companies. Sweeping government rescues that benefit incumbents can.
In the past, disruption was particularly rapid in tech. New names rose to prominence with each new phase of the computer age, from mainframes to PCs to the internet and smartphones. Now, as the tech conversation shifts to breakthroughs such as AI, it still centres around the same old names led by Microsoft and Alphabet. And this rise of US monopolies has been accompanied by the decline of smaller US companies and start-ups.
ReplyDeleteIn China, where there has been more churn at the top, the prospects of internet giants such as Alibaba and Tencent have risen and fallen mainly with the intensity of government regulation. More than network effects, Beijing is the decisive factor.
The US government is not as intrusive as China’s, but if you think Washington is not distorting markets when it rescues banks, you are not reading this in Texas. There, the mayor of Fort Worth recently said that the “main thing” worrying business leaders is this question: if SVB had served the oil industry rather than tech, would the government “have stepped up the same way?”
Inevitably, rescues distort the way capital is allocated, shifting decisions into political hands. Markets stop trying to figure out what makes economic sense, and start anticipating what the state will support. But a society exhausted by crises seems increasingly comfortable with this perversion of incentives.
Rather than question the wisdom of rescues, many mainstream commentators are asking why governments don’t just double down and nationalise banks. Leaders in other troubled sectors such as commercial real estate are spotting an opportunity, claiming that their industries also pose systemic risks and therefore merit government support.
But churn lies at the heart of capitalism. The state cannot keep all incumbents afloat. If there is any energy left in this increasingly deformed system, the coming years should see the big making way for new winners, not further entrenching themselves at the top.
The thing that worries me most is when banks announced that they are making money as easy as casinos. This is a warning sign as banks does not have the system to make this kind of money, unless they are also gambling or cooking the books.
ReplyDeleteThe thing about saving SVB is more about saving the whole American and maybe the world's financial institutions. Think of the number of banks folding up and the repercussion of the quadrillions of derivatives they are exposed to. Once a card is pulled from beneath, the whole pile will just collapse on its own weight.
The fictitious balloon of financial wealth built of gambling chits called derivatives is frightening and waiting to go bust like the triggering a thousand nuclear bombs. It could wipe out everything in the banking system. Only very irresponsible governments would allow this bubble to grow to this present state and still growing as it is now unstoppable. and cannot be stopped...but would burst as a matter of time.
Whatever America chip factory can do, China can copy. Ok, maybe take a few years, but that's is ok. No phone also, wont die. Phone is not so important in life as health. Now China also got their own MRNA vaccine.
ReplyDeleteThe derivatives problem has never been spoken about much on MSM, despite its frightening size. Maybe it is what they always claim to be something that is 'too big to fail'. But the right description would be, it is just 'a matter of time'.
ReplyDelete