Near-Collapse of ZTE May Be China’s Sputnik Moment | Hacker News Reader

Near-Collapse of ZTE May Be China’s Sputnik Moment

nytimes.com

197 pointsvnellore123 comments

I think history will suggest that the end of Deng Xiaoping's long-term strategy of "hide our capacities and bide our time" around 2015 was too premature to meet the government of China's long-term goals. The moderate amount of international goodwill that existed seems to have completely evaporated and been replaced with significant amounts of suspicion following the events of the past few years in the region.

Because of this, China finds it harder than ever to access US semi-conductor technology through financial means, being blocked from acquiring companies due to national security concerns. Even deals without any immediately obvious problems such as Broadcom/Qualcomm are being blocked.

Additionally, the demographics situation is very severe in China, and made worse by the gender-imbalance among young people caused by the One Child Policy. While Chinese government debt and household debt rates are relatively low, company debts are extremely high. Far too high for a nation without a high per-capita GDP. Interestingly enough, the demographic situation in the US is highly favorable compared to all other advanced economies (it also has a debt problem though)

The demographic situation dovetails into this interesting op-ed piece [1] about offering more green cards to international students -- it argues that even with the high risks of espionage in certain areas, it's well worthwhile for the long-term US economic competitiveness. I submitted this article to HN a few hours ago, but after 10 upvotes it was flagged -- which is unfortunate, I thought it's a very intellectually stimulating topic of discussion that's urgently required in our open, inclusive society. I highly recommend people read the article and think deeply about it.

[1] https://www.bloomberg.com/view/articles/2018-06-04/trump-is-...

I agree this policy is likely folly and that China showed its cards far too early, but I also believe that the Western policy of hoping that welcoming in China would lead to greater democratic freedoms was one of arrogance.

The current landscape of trade deals and international law is clearly Western focused and to believe that other cultures are simply going to happily go along with that logic in the long run seems foolish. For instance, despite complaints about persistent intellectual property issues in China, there is no strong legacy of this right in Chinese history, but then the idea of rule of law is somewhat alien too.

> and to believe that other cultures are simply going to happily go along with that logic in the long run seems foolish

This framing is problematic. It's not other "cultures" that are resistive to the idea of liberalism and democratic ideals, it's the despots that lead and control those governments that are resistant. How many non Western cultures have thrived under democracies with individual liberties? Japan, a country with a culture that cares little about individualism is one of the most prosperous nations ever.

I am not arguing democratic ideals are bad. Obviously these norms and standards can be introduced to any culture and assimilated over time. What I am arguing is that the method that seems to have been used to get people to accept them doesn't work, was never going to work, but mostly that forcing the construction of certain legal/cultural rights onto groups as part of some international framework was bound to have issues. It has been done in a very sort of, "To join our club, you have to believe that this thing we made up is a universal truth."

As an example, the concept of authors' rights is something that is enforced through the Berne Convention and the original signatories in 1887 were shockingly all Western (or Westernized) nations. Acceptance of it is a WTO membership requirement. The existence of authors' rights is not a thing in some cultures and it is orthogonal to democratic values, but in order to play ball in the global arena, you have to agree that it is a thing.

> but I also believe that the Western policy of hoping that welcoming in China would lead to greater democratic freedoms was one of arrogance.

I'd probably go with 'naivety' or 'over-optimism' rather than arrogance.

I guess it depends on whether one thinks that democracy and freedom are good things as such. They are not necessarily universal values, even if many in the West tend to think so.

Democracy is complicated (we have a complicated democracy because simple democracy doesn't reflect _our_ values, for instance), but freedom? Maybe at-any-costs freedom isn't universal, but freedom generically is. It is tied so deeply into human dignity you might be imagining Chinese culture poorly if you think it's a bad match.

Also, I live in Taiwan, so with a data point of 1, I'm pretty sure freedom and democracy are a really good match for Chinese culture (probably a better match than American culture? hard to say). It works well here. But that's just my two cents. [edit: it sure as hell works better than the white terror]

For those wondering: https://en.wikipedia.org/wiki/White_Terror_(Taiwan)

> I'm pretty sure freedom and democracy are a really good match for Chinese culture (probably a better match than American culture? hard to say). It works well here. But that's just my two cents.

Would you care to elaborate on your point that "freedom and democracy are a really good match for Chinese culture"? I ask because that directly contradicts one of the points that the CCP (probably Self-servingly) hammers on. It would nice to get other perspectives on that.

I'm no expert, I'm not Taiwanese, and I haven't been to mainland China (though I've been to Hong Kong a couple times, which seems pretty similar to Taipei).

It is an on-the-ground feeling. There is a calm chaos here that reflects the "there are basic rules, but beyond that, everybody carves out a slice of how they think they can be useful" spirit WAY better than America (where everything is pre-apportioned, indoors, with permits, etc.).

I also feel that intergenerational households and stronger community ties lead to better group decision making, which America is having some trouble with. People here have actual hometowns. They care about their local community in a way I've literally not seen a single time in America. Putting aside individual elections or politicians, this helps build a sense of public service, not just horsetrading elections (your local DA isn't setting policy on anything in their party platform, but people in America still want party info so they can try and trade for a policy they want).

All of this is a guess, obviously, and I suppose lots of places are like Taipei.

It's also worth pointing out that the KMT probably made similar statements, about how virtuous martial law was, and how the people didn't want the changes, and western allies couldn't possibly get what they wanted without oppression. Turns out they were wrong. People with power like power, that's true every single square meter of the globe.

But we don't want freedom and democracy because of some weird tradition, we want it because tyrants are miserable to live under (along with their tyrannical regimes). They are a practical device for mantaining human health and keeping rubber hoses off people's backs. That's not the "western way," it's game theory.

The real utility of democracy isn't really the people getting a say, despite the propaganda on the side of the tin. The real utility of democracy is that it enables a mechanism for bloodless revolution, by essentially hosting them periodically instead of letting the pressures build up for years and decades until the whole thing explodes in a violent, civilization-damaging orgy of blood and destruction. It gives a mechanism for factions to win today, and know cleanly that they won, and the losing factions to know that they lost today, but there is no need to resort to active violence because they will have another chance in 2/4/6 years, and in the meantime, are best off using words rather than war. These are the key characteristics that needs to be kept intact. The people voting is merely the only mechanism that I am aware of that has the ability to accomplish these goals; it utilizes the sheer inertial mass of the entire populace as a guarantee of the next vote occurring and as a dampener on excessively excited governments. (For this, the propaganda that Democracy is all about the people getting a say is useful, because it makes the population more likely to get properly feisty if you try to take it from them.) Personally I think there are some other possibilities, though it isn't clear to me they can function under the Westphalian definition of countries and sovereignty.

Looking at China's past decade or so... I'm getting the sense that they're going to be on the usual authoritarian trajectory of countries that decide the democracy isn't for them. Initially it can work better, because democracies are always messy, especially superficially messy in the ways that elites find oh-so-distasteful. But the thing is, while democracies are always about the same level of messy, the authoritarian regimes build up a lot of stress in the system which they hide in various places until they can hide no more, and one day the whole thing simultaneously explodes and implodes and is, on the whole, a great deal more messy than the ever-so-distasteful democracy would have been. Is the messiness of democracy the fault of the governance mechanism, or a reflection of the underlying messiness that exists regardless?

Is democracy good as such? That's a question for personal values. Would democracy be better for China in the next, say, 20 years than its current path? Probably, by any metric you choose. For all of its disadvantages on a day-to-day basis, in a 21st century world democracy really does have some significant long-term advantages, regardless of your local ideology, as long as you like, say, being alive, not fighting civil wars, that sort of thing.

I think of it in the following analogy. Democracy is continuous garbage collection. It is messy and inefficient, sometimes unpredictable for the efficiency nuts. Authoritarianism is manually-managed pointer references. Efficient and very predictable at first. Once the complexity gradient rises above a certain level though...

This is an analogy that only someone on Hackernews would even attempt.

I always thought freedom is kinda a universal value nowadays.

Barring short 1-2 generational periods, increased personal and political freedom causes greater economic outcomes by country. Consolidating power generally stagnates an economy, and when it doesn't because of good leaders allowing selective personal freedom, that is an unstable state - leaders change.

Idk I think US has bigger problems than whether it's semiconductor tech gets stolen. Social media and the news media have created such a dysfunctional environment that I am finding it increasingly hard to believe constructive debate/solutions on anything are possible until the underlying environment producing the dysfunction is cleaned up. If not we are just going to get more and more leaders from both sides propped up purely for skills to pander.

> If not we are just going to get more and more leaders from both sides propped up purely for skills to pander.

While I share some of your concerns about the media, isn't this (just an uncharitable way of stating) the entire purpose of democracy?

Western democracy has always been tempered (and sometimes subverted) by the control exerted by cultural elites on mass communications. Now that control is faltering, and we're seeing the results.

Quite the opposite. Instead, the floodgates have been opened to anyone, like the Russian government, with free access to powerful media platforms if you have the capital. Prior to that the mass media was in the hands of only a few, all based in the US. Control of the masses has been API'd. Basically, China should have bought more Facebook ads.

Looks like you both argue for the same thing.

In times before, news distribution was subject to editorial process and basic standards of journalism. Not that it wasn't without own issues, but it helped sort out outright lunacy, bigotry and conspiracy theories.

Distribution in 2010s bypasses that and mass media are now secondary to social network rumour mills. The political outcomes worldwide and deterioration of Western democracies are related to this.

Not sure they are arguing the same.

"Editorial process and basic standards of journalism" is not "cultural elitism" — it's what we had, lost, and now desperately need again.

The real tragedy of the Internet is this:

It dramatically lowered the costs of broadcasting information. At the time, we idealistically felt that would enable people of all means to communicate, and not just the rich and powerful. It did that, especially in the early days before the rich and powerful noticed.

But it lowers the costs for everyone, including the rich. So once they clued in, it ended up empowering them too. In fact, it preferentially benefits them, because they have more money to throw at it.

There is a useful cautionary lesson here: any technology that reduces the cost of X for all users of X is not a force of equality. Instead, it is a multiplier to any existing disparity.

If you want to reduce inequality, focus on technology that does not scale up and instead is preferentially empowering to those on the low end of the scale.

For example, medicine tends to be an equalizer because once you're healthy, having more access to the same medicine doesn't benefit you much. There is a natural upper limit to its efficacy. (Of course, being able to control others' access to medicine does scale up.)

My feeling is the kind of pandering a leader used to do to get into a seat of power has changed thanks to the internet and the state of info overload we live in. They are much more aware of who to target and what that group wants to hear. And since every targeted group is overloaded with info, getting/keeping their attention creates this arms race of who can be the most touching, entertaining or outrageous circus clown. Not just in politics but in every sphere I see more and more absurd attention craving characters being propped up. And I am finding it hard to see how democracy benefits.

This is not new. Huey Long is an excellent example, as is the fact that we have a word for it that is thousands of years old: demagogue.

Democracy assumes constructive attitude towards debate.

Today we are getting it's better to be wrong with our side, than right with the opponent partisanship instead.

Ideally democracy also assumes, for the most part, that the majority of the system is comprised of rational actors.

But it's as they say. In theory, but not in practice.

Are you sure you just don't disagree with people and can't imagine that they'd disagree with you because you're so obviously right, so they must secretly agree you're correct, but continue with a charade? Otherwise you need to provide some clear citations to how millions of people could know they are wrong but continue with their positions out of spite.

It's not only in politics, but also in business, sales, at job, etc. Have you ever witnessed a bubble in opinions in some company, group, etc? Job's RDF was a harmless form of this :)

Many have internalized their position and they won't secretly agree. They won't even realize why they disagree, and won't consider objective facts. Some tiny minority may be aware of that, but many have economic incentive to continue their position, that mortgage won't pay itself after all. Thinking too much about it just makes it harder.

I'm trying to stay in theoretical level and not provide any specific examples except the RDF, because they could be too political/divisive/controversial, and I don't want to argue the specific cases or take sides, but point out to the phenomenon itself.

Oh, I completely get what you're saying about the irrational obtuseness of our species. My only point of contention was that it is worse instead of simply more obvious. And my point was that since it is more obvious, things are very likely better. And maybe it just feels worse because all of a sudden, all of our differences are out in the open and we're going through this cathartic jolt of confronting the faults in our long held opinions in a messy, public contentious debate. But actually, issues such as racism, bigotry of gay people, attitudes towards poverty and early access to education, unequal access to justice, have never been more positive. And they've also never been this publicly debated by so many.

+1 and I wish I could give you +10. You nailed it: we need to get our own house in order and not just made ourselves feel better by focusing on difficulties other countries have. I am a grandpa, and leaving the world in good shape for my grandchildren is top priority.

Fyi- https://philosophy.stackexchange.com/questions/24622/what-fa...

You have a good point, but because we have a problem with social media does not mean we dont need to worry about the semiconductor industry.

Thanks for the link. It's good to have someone point these things out when one gets carried away :)

Everyone always says things are dysfunctional or bad but never says how. Manipulating people through social media has been a thing since there's been social media. Only today more people are aware of it than ever. Same with news agencies with axe's to grind. Journalists have been using their barrels of ink to push their angles since there has been newspapers. Today more people are aware of it than ever.

Agree but there are two new issues today that I can think of -

1. Targeting is much more sophisticated. Today you can round up every lunatic who hates squirrels or whatever by tomorrow morning and influence what people need to focus on.

2. Messed up social signals i.e. like counts/views/retweets/upvotes etc are just misguiding people left and right. If I don't know what to make of something/too busy/too distracted etc I fall back on these highly inaccurate proxies to make decisions. This is happening all the time and not just to the poor or semi-literate but too highly educated folks. Everyone is unconsiously nudged to support X or Y cause, org or person purely based on these numbers. Take those numbers away and it would be a very different world.

I know this is just person experience, but many of the people/organizations I follow on Facebook have posts that are often quite filled with people who disagree with them, explained in rational and professional courtesy. I don't personally experience this mob of group think, but I see popular/unpopular ideas espoused and their weakinessness explored in the comments (not without the internet's normal levels of trolling and batshittery of course).

Of course I curate who I follow often based on the courteousness of their followers - so self-selection and all that.

Great piece from Bloomberg, thanks for sharing. Whilst the US does project itself as the bulwark of free speech, free markets and free thinking its history of protecting them has been cyclic.

I fear we are going through a particularly nasty regression right now.

It’s a perfect storm of liberals moving to cities, slowness to redistrict suburbs hence giving them greater voting sway and also the effect of suppression in wages amongst blue collars and likely all sectors to be honest as globalisation waves its sword and brings 100s of millions out of poverty in the East and also as regressive tax law enriches holders of capital to an alarming extent.

I don’t know what the antidote is - it sometimes feels as if it could go the way towards WW3 at one extreme or people coming to their senses and realising that the promises of Trump and Brexit enrich only the profiteers.

Another challenge to this list: for long the Chinese high growth rate has been fueled by foreign investments (basically foreign companies outsourcing their production to China). This reduced a lot with the financial crisis (and outsourcing of factories is mostly done, now if anything automation is reversing that movement) and China compensated by a massive increase in debt which fueled a real estate bubble and as you mentioned worrying high level of debt. Now that has to stop at one point, and then what?

> the demographic situation in the US is highly favorable compared to all other advanced economies

How can we determine this? Which economies are we talking about?

Does anyone with economics knowledge know if there are formulas/math around demographics in order to determine healthy vs unhealthy demographics (if such a concept is even relevant)?

> How can we determine this?

Using a population pyramid graph [0]. You can see the data in [1].

It's a nice way to visualize the amount of working aged people vs dependents (youth and elderly).

In short, a bulge of working age people ("demographic dividend") is good for the economy in the short-term, but unsustainable. The 'baby boomer' generation was one such demographic dividend.

China talks about the '4-2-1 problem' (1 child needs to pay for living costs for their 2 parents and 4 grandparents). If you search for that term you can come across lots of articles.

Interstingly, what is ideal depends on the type of economy: in developed economies closer to retirement is supposedly the most economically productive period of ones life (eg, information workers), but in less developed economies youth is the most productive period (eg, labor workers in factories).

[0] https://en.wikipedia.org/wiki/Population_pyramid

[1] https://www.populationpyramid.net/united-states-of-america/2...

> Interstingly, what is ideal depends on the type of economy...

If that is true, then is the growing consensus that older cognitive economy workers in developed economies are increasingly disadvantaged in the job market a signal that "developed" economies are regressing, or the conjecture needs reformulation to account for other factors? I suspect the latter.

That article, as do so many others, rests its reasoning on a whole bunch of premises that are not facts, and there is not the slightest whiff of uncertainty throughout the entire piece. Granted it's an opinion piece so one shouldn't expect too much, but so much of what one reads in the "news" these days is written similarly: some actual facts, but plenty of opinions presented as fact. I believe much of our post-secondary educational institutions are similar. It's no wonder hardly anyone can tell the difference between fact and opinion anymore.

I'd argue this intellectual Achilles heel is one of the fundamental enablers of the political/gender/etc wars going on right now in Western societies, and this large and growing lack of social cohesion may ultimately play a crucial element in the "China vs US battle for #1 superpower". Anyone who projects into the future based on the premise that Western Liberal democracies are simply unbeatable (Democracy is the worst form of government, except for all the others) would benefit from even mild reading of history.

> The moderate amount of international goodwill that existed seems to have completely evaporated and been replaced with significant amounts of suspicion...

Are you in the USA? Because I'm sitting in Malaysia (who historically has a fraught relationship with China) where China is greeted with a mix of suspicion and opportunistic welcome (knowing that any cash or other assistant will have many strings attached)... basically the same way people think of the USA.

In other words: no change; no international good will to lose.

Speak for yourself. South Koreans love that US has defended them against the maniacal dictators around the country. Taiwanese people love that US has protected them against the Chinese aggression, and support their island of democracy. Even some Chinese people love that US was the main capital provider into the country that lifted Chinese from abject poverty.

While around the world, muslims are angry that China has enacted a concentration camp for millions of muslims. (I'm sure since you're in Malaysia, you should have heard your muslim friends say something about this). Americans are pissed off that China steals trade secrets and doesn't abide by any of the laws in WTO. Vietnamese, Indonesians, and Filipinos are upset about the Chinese aggression in South Sea. Japanese are upset about the perpetual hatred Chinese government has against Japan (tons of WW2 drama portraying Japan as evil).

seems like he is speaking for himself while you are representing a whole bunch of people...

> tons of WW2 drama portraying Japan as evil

Well if I look at Japanese history in China in WWII and before , that portrayal might actually be justified. Especially given Japans stance on it, where museums in the country conveniently leave out Japans actions in China at that time. Coming from Germany that attitude seems… dishonest at least.

I lived in Japan for several years and most people I met didn't ignore Japan's actions during WWII. But they didn't like that basically every interaction between Japan and China/Korea was defined by China/Korea airing grievances from WWII.

WWII has been over for more than 70 years now, and Japan has been among the most productive, peaceful nations in the world since that time. To continuously insist on portraying Japan as evil warmongers qualifies as racist propaganda.

Imagine if the people, and the governments of the nations of the world insisted on portraying Germany as unrepentant Nazis at every opportunity. Surely you can agree how stupid and frustrating that would be as a German.

I think China had no choice in 2015. The collapse of the stock market, spurring the capital outflow (currently, 3 Trillion of 6 Trillion of China's wealth is overseas) and induced by the 'corruption crackdown' by Xi Jing Ping, exposed the fragile economic condition in China (350% debt/gdp). China realized it was playing a severely weak hand, and it had to act belligerent in its own self interest. So it

- threatened several of its neighbors with occupying and later arming the islands in SCS

- threatened to invade Taiwan

- ramped up hacking efforts to steal IP around the world

- told its citizens to stop buying from Korea after the missile crisis

- told its citizens to stop buying from Japan after the island issue

- propping up dictatorships around the world

this is all in an effort to redirect the world to look away from its demographics decline, growth flatlining, reshoring and factories moving out of China, etc

You nailed it in a way I could not verbally articulate.

While there couldn't be a better case than ZTE for the Chinese government to muster domestic support for its "Made in China 2025" policy, the Sputnik analogy is actually wrong for China. Sputnik was a national security matter and ZTE is a case about commerce.

China can actually supply most what ZTE needs to build functional telecom products (for example when the Obama administration cut off Intel sales to Chinese supercomputer projects, China went ahead and built the world's then fastest supercomputer with domestic chips anyway), it is just that they won't be competitive enough commercially. If both Huawei and ZTE were denied access to US products the pair could probably survive nicely in a closed Chinese market with somewhat inferior but perfectly functional offerings to Chinese telecoms. As it currently stands ZTE can't survive when its competitors don't suffer the same disadvantage.

This being a commercial matter means the Chinese effort may very well be commercially wasteful even if their defense ministry might appreciate the enhanced capability. Indeed if they could make commercially competitive products in the area there is no reason why they would not have made them already.

The right way to deal with this really is to just treat it as a commercial matter. ZTE would have failed with its resources transferred to a more capable firm. This still could be the effective outcome -- it is hard to imagine how telecoms world around can have confidence in ZTE when the supply could be turned off again over any minor infractions in the next ten years. The fine may be just the price to pay to buy time for a more orderly re-org.

> Sputnik was a national security matter and ZTE is a case about commerce.

China views not having full control of semiconductors and operating systems (desktop and smartphone) as a national security matter.

And not unreasonably, given the possibility of putting backdoors into these.

It is possible for China to catch up here relatively fast. I give it 3 years and China will likely be better than Qualcomm although the maybe not Apple.

> China can actually supply most what ZTE needs to build functional telecom products ... it is just that they won't be competitive enough commercially. If both Huawei and ZTE were denied access to US products the pair could probably survive nicely in a closed Chinese market with somewhat inferior but perfectly functional offerings to Chinese telecoms.

There are other markets than the USA. SE Asia is flooded with phones from Oppo, Ding-ding etc which never sell in the USA anyway. And if China's RF chips are slightly out of standards compliance, as long as they work with Chinese base stations all will be fine in most markets.

The US has overplayed its hand.

China has an official plan, "Made in China 2025".[1] It's about moving up the value chain. Key areas are semiconductors, pharmaceuticals, and aircraft engines.

China is still way behind in wafer fabs, but SIMC is coming along. Wikipedia says they're at 40nm, which is not close to the state of the art, but is good enough for much consumer electronics.

[1] https://en.wikipedia.org/wiki/Made_in_China_2025

Slightly off-topic (sorry for taking oxygen away from the semi-conductor fabrication discussion): I find that Wikipedia page you linked to very frustrating: understanding the central economic policy document of a growing superpower is very important but it's just a stub. A stub that almost only links to the non-independent sources.

The page history shows that it was once a much bigger article but just a copy/paste job from the source policy documents. At least the page doesn't seem appear actively sabotaged by highly-motivated, non-impartial user accounts like some others.

I wish there was a way I could help fund some Wikipedia editors to write a long, impartial, well-cited article about this very important government policy document.

You might find a public policy institute who would be willing to accept financial compensation for creating the article you’re interested in.

It's grating to hear people calling each other shills. If the only evidence is motive then it's too weak to draw that conclusion. The world is full of politically motivated people on all sides who aren't being paid by anyone.

I read reports years ago they were at 28nm:

https://www.qualcomm.com/news/releases/2014/07/03/smic-and-q...

https://anysilicon.com/smic-28nm/

http://smics.com/eng/foundry/technology/advanced_logic_28.ph...

They're at 28nm and building 8 core x86 chips that don't look terrible.

https://en.wikichip.org/wiki/zhaoxin/microarchitectures/wuda...

While the article was insightful we cannot think linearly where two superpowers clash.

So I think we are lefting out the chance for a breakthrough. I imagine China could do their own Manhattan project for semiconductors and catch up faster.

I mean, they pretty clearly are doing their own Manhattan project for semiconductors, and are currently catching up.

No they arent, those are all on paper, also "The architecture and SKUs were officially unveiled at a conference on December 28, 2018" looks like they also make time machines.

Or, you know, it's a typo.

Things move too fast for a country to be fully self-sufficient in ALL technologies, unless you either accept being behind, and/or be stuck in trade wars.

Different countries have different "personalities" and thus will shine in some areas and stink in others. You have to think global to be competitive because you cannot do everything on your own.

The US is mostly an integrator of hardware and technology made abroad, for example. US focuses on cutting edge stuff, and "glues together" the parts from abroad to make it. When a product becomes a commodity, it slips offshore and the US then jumps into the Next Big Thing.

This model may not work for China. For one, they depend much more on personal relationships than contracts. Business relationships in the US are more transnational: easy come, easy go. This is well suited to fast-paced change. China's relationship model may struggle against this approach. But that doesn't mean there are not other niches. Germany and Japan do quite well by focusing on perfecting a niche(s) and less on changing quickly.

I'm surprised nothing has been said about Huawei's HiSilicon Kirin ARM chips. Their latest mobile chips are definitely on par with the best on the market.

Mediatek is also another big player among the chip manufacturer and they make their own-designed chips as well.

I don't think either of those companies have their own CPU cores though (they use Cortex).

Mediatek is Taiwanese.

I found this article pretty educating personally. Somehow, I always assumed/believed microchip tech is very advanced in China, but apparently its quite behind. 90% of the chips are imported according to this.

I think this article paints a picture that somehow China is incapable of making semiconductor technology, whereas I think the main problem is that they just focused a bit too much on new technology (internet and software) as opposed to older stuff like processors. That's understandable when you consider that it would be grossly inefficient to reinvent the wheel.

Their lack of working semiconductor technology is definitely not the result of any lack of attempts at it on China's part.

> In return, the company — once a symbol of China’s progress and engineering know-how — will be allowed to buy the American-made microchips, software and other tools it needs to survive.

Aren't most mobile device SoC/ASICs made by non-US companies like TSMC and Samsung?

Your premise is very narrow. Six or seven of the ten largest semiconductor companies are American. The US has a lot of big companies working in or around the semiconductor market.

Eg - Texas Instruments, Qualcomm + NXP, Apple, Intel, AMD, Applied Materials, Cisco, Xilinx, Analog Devices, GlobalFoundries, Maxim, Microchip Tech + Microsemi, KLA-Tencor, Lam Research, Marvell, Broadcom, Micron, nVidia, Teradyne, Cypress, On Semi, Praxair, Skyworks, Ambarella, Cirrus Logic, Diodes Inc, Integrated Device Tech, IPG Photonics, Semtech, Qorvo, Cavium, Mellanox (US-Israeli), Inphi, Monolithic Power, Lumentum

Now you've even got Microsoft, Google, Facebook, Amazon looking into/working on their own chips.

Unless I’m mistaken, your list contains both semiconductor companies with and without fabs.

I think for this discussion semiconductor companies with fabrication facilities are more interesting.

How much fab is still done in the US?

You can start answering that question with this:

https://en.wikipedia.org/wiki/List_of_semiconductor_fabricat...

If fab manufacturing is what mattered, ZTE would have never had a problem in the first place.

Those companies I referenced control a large part of the global technology industry. If you can't access their products or sell to them, you're often going to have a very hard time operating.

I believe almost no Fab manufacturing happens in the US anymore. This is why the article seems a little hyperbolic to me. I understand US companies lead in chip design, but if Asian companies are manufacturing the chips, how long will it take to reverse engineer? To add to this, many engineers working for these American Giants are Asians and can be poached back. Look how it little it took for Chinese manufacturers to produce state of the art smartphones that are "almost" Apple level.

> I believe almost no Fab manufacturing happens in the US anymore.

That's incorrect. The US has four or five dozen fabs. It's one of the largest fab manufacturers globally, along with Taiwan, China, Japan, Singapore, South Korea. The US is likely to grow its domestic fab manufacturing over the next decade, thanks to the new lower corporate income tax rate and tighter restrictions on IP exportation (those two things lured Broadcom home).

> how long will it take to reverse engineer?

That's where China faces a problem: that only works if you have no plans to integrate further into the global economy.

For the most part, the EU, North America, South America, Australia/NZ, Japan, South Korea, etc. isn't going to buy your stolen semiconductor tech.

If you're going to steal semi tech and use it as your own, at best you can only sell it domestically.

If you mean stolen chip designs, no we're likely not to want to use them ... but there are lots of smart Chinese chip designers doing great stuff - some using on licensed US IP (the ESP chips), others based on licensed Arm IP (I've lost track of who owns that), some home built.

Remember China is not just 1/4 of the world's population, it also has 1/4 of the world's smart people

China is actually slightly less than 1/6 of the world's population.

Almost all of Intel's fabs are in the US: https://en.wikipedia.org/wiki/List_of_Intel_manufacturing_si...

> I believe almost no Fab manufacturing happens in the US anymore.

I kinds lost count at least half way though, but this list has about 60-70 US fabs.

https://en.wikipedia.org/wiki/List_of_semiconductor_fabricat...

how long will it take to reverse engineer?

Long enough that by the time they do, the chips they've ripped are behind the times.

Chips march on a pretty fast cadence, and with billions of transistors they are no small feat to reverse engineer.

The fabrication of SoCs for mobile is mostly at TSMC in Taiwan and Samsung in Korea, but the ownership of the chips is American. TSMC manufactures the die, but it's fair to say that Qualcomm is the one "making" it since they own the IP and do the front and back end design-work. Similarly, you can say Apple makes the iPhone, even though final assembly is done at Foxconn or Wistron.

Complete tangent, but in case someone else gets a chuckle out of it: the word "fabrication" means "creation"... but also serves as a synonym for "falsehood", almost an antonym in some contexts. I'm not aware of many words in English that can mean both a thing and its opposite. "Cleave" means to bind together, or to completely separate... Any language geeks out there know of others? Or what such words are called?

auto-antonyms.

bingo! thanks :)

My feeling is that "lie" and "creation" go together. Similar to "he made that up". Something is a fabrication (in the lie sense) when it's created by the person saying it and not drawn from evidence or observation.

> The fabrication of SoCs for mobile is mostly at TSMC in Taiwan

Given China's attitude towards Taiwan, it might be tempted to acquire TSMC's technology by military force at some point in the future.

Yes, Qualcomm is US, but then there's Samsung at the high end and Allwinner & Mediatek at the mid/low end. ARM is also non-US, and some modem IP is also non-US. So it's not a controlling stake.

More funding coming this way for RISC-V

And http://en.c-sky.com/

Curious how will this workout with Xi's unlimited terms presidency?

This will not work, unless Xi resigns with his staff, replacing them with actual competent ones. That would be a miracle.

Good article for information and anecdotes but it also rubbed me wrong: smacking a bit of American Exceptionalism.

I am so used to hearing what is basically propaganda in our press about how much better we are than the rest of the world, that now articles like this inspire scepticism.

Our country (USA) does indeed have a lot of advantages with: technology and geographic isolation.

But we also have problems in income inequality and increasing corruption in our political system (Clintons, Trump, etc., etc.)

I really like the ‘Sputnik’ analogy because just as my country had an ‘oh shit’ moment when we realized we were behind, I expect the Chinese to go through the expensive and long process of owning the entire stack, micro chips, and up.

> I expect the Chinese to go through the expensive and long process of owning the entire stack, micro chips, and up.

None of America's allies have chosen to "go through the expensive and long process of owning the entire stack" - America's allies use Windows, Android, Qualcomm, Intel, etc.

If China really does want it's own home-built silicon running it's own written-at-home operating systems, they need decades and they'd just replicate what Microsoft or Google have done to date (and probably less well.) I don't doubt that the CCP do want that independence from American technology, but to truly be independent is really quite an extreme proposition.

There's certainly no need to write custom operating systems. China already happily customizes Android and Linux extensively across a wide range of devices. You can see this today just by walking down the street where there are street lights running linux.

As for silicon China doesn't have much choice in the matter. Their dependence on American silicon may in fact be their greatest security risk. It's clear that the US and its allies will weaponize this advantage (see Stuxnet) so anybody relying on these chips is ultimately at their mercy.

> Their dependence on American silicon may in fact be their greatest security risk. It's clear that the US and its allies will weaponize this advantage (see Stuxnet)

Please elaborate on this point, my understanding is Stuxnet relied purely on software vulnerabilities (to spread and to take control of the centrifuges). I don't think it used any hardware backdoors or anything. If it did, I'd have expected the roar to be enormous, probably several times what we just had with Spectre/Meltdown.

The actual attack vector relies upon drivers signed by Taiwanese chip makers. (Taiwan happens yup be a country whose continued existence depends entirely upon the US.) If you depend upon say a Realtek card reader you're vulnerable.

> The actual attack vector relies upon drivers signed by Taiwanese chip makers.

But that's not a hardware attack. IIRC, Stuxnet used driver signing certificates to bypass some OS-level safeguards. It's quite possible that the needed certificates were stolen from a manufacturer that poorly protected them.

When you said:

>> Their dependence on American silicon may in fact be their greatest security risk. [emphasis mine]

The implication is that American silicon itself is backdoored. That may be true, but I don't think Stuxnet is in any way an example.

> The implication is that American silicon itself is backdoored.

There was no such implication. Compromising hardware never makes sense unless you can intercept the hardware en route (something the NSA has been known to do [1]).

> It's quite possible that the needed certificates were stolen from a manufacturer that poorly protected them.

It's also possible that unicorns exist. Considering that certificates have been "stolen" from Taiwanese firms multiple times [2] I'd say it's not irrational to consider the possibility that these firms either are directly or via the Taiwanese government cooperating with US cyberattacks.

All of this indicates that yes, relying on such foreign chipsets is huge security threat. China imports an incredible $200 billion a year in such chips so even putting aside the huge technological attack surface associated with such a dependency the dependency constitutes an immediate economic vulnerability.

[1] https://arstechnica.com/tech-policy/2014/05/photos-of-an-nsa...

[2] https://www.wired.com/2015/06/foxconn-hack-kaspersky-duqu-2/

> I'd say it's not irrational to consider the possibility that these firms either are directly or via the Taiwanese government cooperating with US cyberattacks.

But to be totally clear: that's no more than speculation.

It's also not irrational to consider the possibility that there's been no cooperation but that the certificates were stolen.

> It's also possible that unicorns exist. Considering that certificates have been "stolen" from Taiwanese firms multiple times [2]

Malware that uses stolen certificates is less unique than once thought. If a group building a bank trojan can steal certs, I'm sure state intelligence agencies can too.

https://arstechnica.com/information-technology/2017/11/evasi...

There is also some reason to think their certificates would be targeted for theft, because code signed by those firms would be some of the least conspicuous. There are a lot of Taiwanese firms that make a lot of low-profile specialized support silicon that's literally everywhere (Sound, USB, Wifi, etc), and a driver signed by one will arouse less suspicion. Inconspicuousness would be a high priority for a nation-state hacker trying to avoid detection.

The possibility that the Stuxnet and Duqu certs were stolen is speculation too, but it's less inflammatory and more likely in my judgement.

It's also worth noting that getting explicit cooperation from a company to use their certificate would be risky for clandestine nation-state operation, since the more organizations that know about aspects of it, the more likely it will fail. If word got out that a particular code signing cert was shared, a rival actor could focus attention on suspicious code signed by that cert and be more likely to detect it.

>> The implication is that American silicon itself is backdoored.

> There was no such implication. Compromising hardware never makes sense unless you can intercept the hardware en route (something the NSA has been known to do [1]).

That's wrong. If the silicon is comprised from the get-go, there's no need for an interception step.

China happily poorly customizes Android and Linux. It's complete shit.

I’m not refuting your broader point (I have no opinion).

But corruption & income inequality exist in China as well. Depending on how you measure China has waaaay worse problems in those areas than the States do.

Like most things you read in NY Times it's about 5-10 years too late. It's been widely known for a while that China imports huge amounts of microchips and this creates enormous dependence on the West while also posing as a significant security risk [1]. China has no choice but to invest tens of billions into growing an alternate, "reliable" semi-conductor industry [2] and there's reason to believe the real number may be a multiple of the headline number. Nobody knows whether China will pull it off; the next ten years will tell but there's reason to believe they're already closing in on 14nm fabrication (no hard evidence here yet) and they're in it for the long game.

I suspect this will be a big problem for existing chip makers in the long run. Chinese chip makers will happily attack the fat margins that exist today and will offer (quasi-subsidized) prices that will prove irresistible elsewhere.

[1] http://nationalinterest.org/feature/how-china-will-benefit-a...

[2] https://www.bloomberg.com/news/articles/2018-03-01/china-is-...

The recent rhetoric of NYTimes around a Trump-administration related issue is always like 'Why A would actually become not-A'.

A professor in physics dept. in University of Science and Technology of China at Hefei has complained that he could not find any student able to solve problems in textbooks, e.g. condensed matter physics, for years. Demography together with education reforms favoring liberal arts has destroyed tomorrow's engineers in China. Salary gaps from IT and financial sectors prohibited talents from entering traditional industries. Investment into the new tech surely helps but is not likely to completely overcome existing shortcomings in traditional materials and manufacturing industry in China.

If Chinas leadership was smart they would push for open source commodity ics.

Opensource always wins and they could do a run around the US where old technologies like x86 die and all the experience built around then becomes irrelevant.

> Opensource always wins

Zero evidence of this claim at any level.

Linux Kernel vs Windows NT kernel

In what sense did the Linux kernel "win"? Microsoft continues to make a lot of money from Windows Server. Nobody but Red Hat makes any money off the Linux kernel.

That you mistake a monopoly for a victory and not a market failure says a lot more about your values than about the relative merits of open source vs closed source.

> That you mistake a monopoly for a victory and not a market failure says a lot more about your values

One, insulting others on this forum isn't productive. Two, our broader discussion is about Chinese technological policy. I doubt anyone in Beijing is concerned about victory by way of market failure.

>Nobody but Red Hat makes any money off the Linux kernel.

You forgot about Canonical.

But the real point is, in the wild, the Linux kernel predominates.

Every Android user is a Linux kernel user. Every Chromebook user is a Linux kernel user. Every iOS user is a Unix user. Every Google server is a Linux kernel installation.

The fact is, Linux/Unix rules. Except for the corporate desktop, where Windows predominates, at least for most (uninteresting) instances of "corporate".

> Nobody but Red Hat makes any money off the Linux kernel

Only if you define making money as directly selling... A big point of free software is that it is the user who makes the money !

Nobody makes money on Linux by selling it as a stand-alone product, obviously. Even RedHat sells support, not software. But Linux makes some of the world's most successful companies possible in the first place: Imagine either of the FANGs if they had to pay Microsoft a license on every server.

I'd say that's a win. (But agree that Linux hasn't necessarily won over Windows in any general sense).

Not "evidence" (a legal term anyway) but techonomic theory: In technology, businesses strive to commoditize aspects of their competitors tech stack. As this occurs across all tech stacks, all are eventually commoditized - often in the form of opens source. Hence "open source always wins".

If it was smart, wouldn't the people who possess the knowledge and talent to turn sand (silicon) into borderline magic (modern nanometer fab) currently be doing that?

They aren't. So they are themselves either 'not very smart' or the contributions from 'open sourcing' is not actually very valuable. I think it's the latter.

Valuable for who? Open source (at the margin) is more valuable for everyone--except the inventor, for whom it is not as valuable. So the inventor keeps the design proprietary, and keeps more money for themselves.

But, as is often the case, decisions that are optimal at the margin can often lead to suboptimal outcomes in aggregate.

I'm not convinced that's the case in IC fabrication, but its not impossible.

They were the first movers so they cornered the market with an inferior product. Now that China has no hope of capturing the market to extract rents the next best alternative is to make extracting rents impossible, destroying the business model of the US companies who rely on said rents.

In terms of a trade war this has all the downsides of dumping products on the US firms with none of the downsides to the rest of the economy outside of the very top end of the supply side.

'Inferior product...rent seekers' - Yeah, that's why the Soviet Union started the silicon revolution, and why the Chinese currently lead the field, right?

They open sourced their fabs, and random farmers on collectives would come home (while starving) and make improvements in fab technology by candlelight.

If only they had you to guide them, with your advanced knowledge of economics, trade and process technology.

Every communist nation had a much larger high technology sector than similarly developed capitalist nations.

Unless you want to talk to me about the fabs in Portugal and Mexico in 1990 when compared to the ones in Bulgaria and the USSR you're making my point for me.

Yeah that's why engineers from Soviet Societies would scale barbed wire fences at the risk of getting shot to get here!

Communism is great if you like hunger and oppressive stupidity. "But it's never really been tried!" - No, it has: it is fundamentally incompatible with freedom and/or intellect.

Nobody is buying what you're selling, champagne socialist.

Somehow there weren't that many engineers in Guatemala. Plenty of child prostitutes though. I guess capitalism really gives you want you want.

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