US Export Restrictions, Intel Layoffs, Applied Materials, and TSMC | Hacker News Reader

US Export Restrictions, Intel Layoffs, Applied Materials, and TSMC

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Very interesting Twitter thread on this here https://twitter.com/jordanschnyc/status/1580889341265469440?...

Pretty dramatic stuff but unsure how this will benefit the US since obviously to have this much western talent and IP the Chinese weee investing heavily. Remains to be seen if the west is going to do likewise.

I suppose it's about hampering the China's export industry on one hand, and China's ability to make advanced weapons, on the other hand.

It's more an act of the cold war, and less an attempt to help US industry profit more.

Advanced weapons don't need 5nm chips. How will this hamper anything in China long term? Germany for example cut off its biggest energy suppliers is preparing for an economic war with China while claiming they're moving to renewables with a supply chain that is owned over 80% by China. Where is Europes manufacturing these days? India, China, Vietnam, Turkey? Turkey is completely alienated by Europe and is turning more extreme by the day as a result(they applied to the "EU" in 1987 btw). Vietnam went to apologize for Blinkens statements to the Chinese representatives not to long ago and India is actively defying western sanctions even though they dislike China and said that their problems with China are not related to the Ukraine situation at all and that they will deal with China on their own if they need to.

Usually, when you prepare for a war, you set up alternative supply chains, build up your capabilities, set up your independent energy/natural resource supply chain and then cut off what you consider your enemy. How is Europe to build up their military for a confrontation if they can't even power their own factories?

I thought Trump was bad at making these kinds of strategic decisions, but this administration takes the cake. Completely haphazard, ill conceived, badly planned decisions that only make sense if you turn back the clock to 1990.

If I was really generous and speculative I'd say that the plan is to make everyone divest to Taiwan in the hopes that Taiwan is then more important to everyone. But can nobody read a map? You have China 100km across the strait and the US 7000 km away. Last time they tried to upgrade the F16s they had to have an emergency landing in Hawaii. We had missile tests on this island which had to be stopped because the missiles had launch failures. This is local Taiwan news. Cut off China completely and move everything to Taiwan. What does China have to lose from invading and embargoing Taiwan at that point?

If there is one lesson from the Ukraine conflict its not to turn Taiwan into another Ukraine. It's to start some kind of dialogue, and try to involve parties such as India in that dialogue.

EDIT: since the person below had to come up with this "don't talk to terrorists" nonsense, i have to respond.

This isn't some bank raid or a high school fight. These are conflicts with the biggest nuclear power that exports 1/3rd of earths natural resources and the biggest manufacturing and military manpower on the planet.

You ABSOLUTELY talk to them. Estonia made statements like that as well. You ABSOLUTELY talk to a neighbour that has 377 your surface area in land and the worlds biggest nuclear arsenal. What's wrong with these people?

Let's say they are terrorists for the sake of the argument. All the more reason to find a solution. Or if you really want a military confrontation, prepare for it silently and then show your cards when you're ready.

Yes. The Biden admin is creating a two-front war with Russia and China.

I think a key to understanding their thinking is that they believe that the US is winning wrt. Ukraine. And having solidified European allies, now is the time to use that momentum and full-on confront China.

So you would end up with a broken Russia, a humiliated China, and another unipolar American moment like the 90es.

https://foreignpolicy.com/2022/10/12/biden-china-semiconduct...

Biden Is Now All-In on Taking Out China

The U.S. president has committed to rapid decoupling, whatever the consequences.

https://www.nytimes.com/2022/10/12/opinion/china-semiconduct...

We Are Suddenly Taking On China and Russia at the Same Time

A battle over computer chips could have more long-term global impact than the Ukraine war.

> Yes. The Biden admin is creating a two-front war with Russia and China.

It’s important to be clear here that this administration isn’t creating a two-front “war” or conflict with Russia and China but responding to egregious activities by both parties.

It should also be noted that all of these moves have wide bipartisan support. Something like 99-1 senate votes and the like. Trump, a Republican, campaigned on being tough on China after the Obama administration and enacted punitive trade tariffs and the like. Republicans and Democrats campaign in states like Ohio where manufacturing was hollowed out that they’ll “be tough on China”.

Western countries (Germany - Russia, U.S. - China) spent decades trying to open markets and provided peaceful dialog between countries while managing sore spots without conflict. Russia chose to invade Ukraine and disrupt emergent markets. China chose to become a dictatorship and engage in hard-line international policies.

It’s important to remember this less as the US and western allies decoupling and more so responding to a decoupling that already occurred lead by both Putin and Jinping. You can know that this is the case because both leaders tell you that this is the case in their “rejection of the international order” or “American lead order” or similar rhetoric.

Buy why and why now? Is there any significant change of circumstance w.r.t US-China relationships in the past 5 years which wasn't initiated by the US.

It all sounds a bit like Treaty of Versailles like clamp down from the US.

The answer to that is Xi Jinping, and the way he has not only adopted a level of personal power not seen by any Chinese leader since Mao but has shifted China's domestic and foreign policy in a much more authoritarian direction. This has included cutting back on what foreign firms can do, substantially increasing the rhetoric against Taiwan and making clear plans to prepare for an invasion, cracking down on Hong Kong and reversing the 'one country two systems' promise, and taking actions against the Uyghur minority that are so extreme as to arguably be genocide, amongst other actions.

The West pretty universally believed in what the Germans called 'Wandel durch Handel', or change through trade, and the idea that China would become both wealthier and more liberal by becoming an ever more important player in global trade, and give up revanchist imperial ambitions like wanting to take over Taiwan. That has been shown to have been a false belief, as rather than moderating China became stronger and more authoritarian.

None of these seem a direct/targeted hostile act towards US. While many of these things are concerning, none of these seems like "crossing a red line" (for eg like USSR basing missiles in Cuba) as far as it relates to the US.

It rather more feels like a policy stemming from ideological preference from Biden and US policy makers.

Also has US expended all possible efforts to diffuse tensions and attempt rapprochment, because this policy seems like a one way steet.

This present measures do seem a unilateral targeted hostile measure from the US, not even considering the interests of the allies of US.

Atleast some of the other Asian nations wouldn't see things in such a black and white manner. Would South Korea, Singapore, even Japan think on the same stark lines as US on this?

> None of these seem a direct hostile act towards US.

They’re threats to the status quo. A threat to the status quo is a threat to US hegemonic power.

China does exactly this - restrict business and trade with USA. It’s time USA does the same

I didn’t go into all the ramifications, consequences, and threats to the global order that results from China’s change in direction under Xi, I only showed how Xi’s premiership has been a distinct change in direction for China than his recent predecessors.

From that and China’s own statements about its intentions you can determine why it’s seen as hostile by the US and Europe. For instance, a Chinese invasion of Taiwan is absolutely a huge threat toward US and European interests, and would cause them substantial economic harm. Moreover if China were successful in it there’s also not much that would stop it from using military force to take over other countries in the region, because the justification would be as legally flimsy.

The post-war consensus against the use of force to conquer, annex, and swallow other countries has been extremely effective in preserving a level of global peace and allowed for a level of trade that has lifted hundreds of millions out of poverty. It’s also arguably necessary in an age of nuclear weapons, where wars between major powers become unthinkable dangerous.

What Russia and to a much lesser extent China are doing, with regard to Ukraine and Taiwan respectively, is tearing up that post-war global order, returning the world to a might makes right system without much care given to international law, and therefore destabilising the world. I’d say those are reasons for Europe and the US to begin treating them as hostile and disengaging.

To be clear, none of this means the US or European countries are entirely blameless or saintly either. The US’s invasion of Iraq was wrong, possibly illegal, and cost them a huge amount of moral authority.

It is not clear if any well defined "red line" has been crossed. If it has not been, then this is a "pre-emptive" strike, which could be morally hazardous.

More than the cold war, US-China relationship is now looking more like US-Japan relations in years prior to world war 2. A wary US clamped down on access to resources to Japan, including oil, which denials could be seen as one of the reasons used to justify Japanese expansionism which lead to the war in Pacific which was extremely costly and tragic to all involved. Have US policy makers learnt the lessons of that conflict?

Is Taiwan a major concern for the US?. The status quo on Taiwan is also the result of US policy too, Taiwanese sovereignty is not something US has really stuck out their neck for.

Doesn’t have to have been one specific red line.

Something else that’s being lost is that China has long had similar export restrictions on high technology items of strategic importance, including many items in biotech, AI, materials science, and medicine.

The comparison to US-Japan relations before WWII is not a good one. Relations soured after Japan invaded Manchuria and infamously massacred civilians in Nanjing. That was followed by Japan becoming part of the Tripartite Alliance, aka the Axis, with Nazi Germany and Mussolini’s fascist Italy in 1940 Even then, the US continued to supply oil while cutting back on some other goods.

It wasn’t until Japan invaded French Indochina in 1941, done partially as a way to prevent the US from continuing to support China, that the US embargoed oil exports to Japan. Notably, the Imperial Japanese Navy began seriously working on the plan to attack Pearl Harbor in January 1941, long before the oil embargo was in place. Japan was going to war whether that happened or not.

This chip technology embargo isn’t going to cause the same devastating impact for China as the 1941 oil embargo was for Japan.

And yes, Taiwan is a major concern for the US and for much of the rest of the world, because it houses so much of the world’s high technology semiconductor manufacturing. A war over the island would be devastating for global supply chains and the global economy as a result.

Hostility towards Taiwan is hostility towards the US. The US needs Taiwan to maintain its global naval hegemony. China currently has limited access to the Pacific. They have to sail through the waters of unfriendly countries to get their navy to open ocean.

China is on a higher growth path than the US. So unless US confronts China about now, China will become too big too handle.

It was just before Xi was to give his address at the Communist Party Congress that takes place every 5 years.

> talk to them

Nobody says don’t talk to them. Talking doesn’t mean having to trade.

Europe as an island, as presently configured, is strategically screwed. Europe within NATO, buttressed by AUKUS and the American Pacific alliance, is incredibly strong.

You're simplifying an incredibly complex process. You can't just "flip a switch."

Biden is doing what is necessary, like Trump was doing before. Being too closely tied with a foreign adversary leads to bad outcomes, as we are now seeing with Russia/Europe over Ukraine. If Biden doesn't act swiftly and draw that line China will think Taiwan is there for the taking. Simply can't happen.

> Usually, when you prepare for a war, you set up alternative supply chains, build up your capabilities, set up your independent energy/natural resource supply chain and then cut off what you consider your enemy. How is Europe to build up their military for a confrontation if they can't even power their own factories?

Again, you can't just flip a switch. The war in Ukraine was a surprise in that timescale. We are preparing for war now. And that means hard, fast decisions that won't be easy.

It's not like the US was pumping out aircraft carriers before 1941.

Russia has done exactly that. They have been preparing for sanctions since 2014 and they were hugely successful. Save some twitter keyboard warriors everyone relevant has acknowledged that at this point Russia has won the economic war. Europe is heading for a deep recession and Russia is already on its way back out[1].

There is really no masking the incompetence of these administrations. Pretending that they couldn't have acted more strategic even after decades of firesale exporting US manufacturing to China is just wilfully misleading. Exporting your entire manufacturing for short term profit isn't "integrating economies", it was just pure greed.

Comments like the one above are also not helpful. To improve upon a dire situation you have to first acknowledge that there is a problem. But somehow the democrats are pointing at Trump saying he was a foreign agent and the Republicans are pointing at the democrats saying Biden is a foreign agent but the course is the same, full steam ahead.

One of the first things Biden did was remove most of the Trump imposed tariffs only to impose something even more chaotic a bit later. The current administration is now claiming they will move Missile Defence from Saudi Arabia to Ukraine. It's like watching a toddler throw tantrums and wanting his toys back. As if these things are just plug and play systems you can pull off here and put back there.

[1] https://www.economist.com/finance-and-economics/2022/10/11/a...

From your source: "Western sanctions, launched in response to Vladimir Putin’s invasion of Ukraine, have wounded Russia’s long-term prospects." Russia hasn't demonstrated that it can continue to manufacture advanced weapons (the ones with chips) quite the opposite. Wars tend to repel recession because they mobilize and borrow, that's not all good. Interesting that you clearly support Biden bringing industry back to the US.

You will find that most high quality products are not from china but US, Europe, Japan and SK. US has already secured an ulimited amount of food water and oil. And we have more guns and ammo than anywhere: we already spend more on military than Russia is right now at war. So not completely unprepared, but yes we are missing a few links in the supply chain, most importantly raw materials

> You ABSOLUTELY talk to them. Estonia made statements like that as well. You ABSOLUTELY talk to a neighbour that has 377 your surface area in land and the worlds biggest nuclear arsenal. What's wrong with these people?

I understand what you're saying, but what do you expect countries that want to be left alone to say when the president of that huge country goes on TV and talks about going back to old borders? How do you talk with a country that is influenced by people that say your country, your language, your culture, etc, shouldn't exist?

These countries still have a memory of what it was to be under Russia's rule. They know what happened to them after the Soviets and the Nazis made their deal. For many it's a "if we're going down, then let's go down fighting kind of thing". The bully may win the fight, but they'll go home with a black eye.

We have been talking to them about Taiwan for literal decades. They have never budged. Every single CCP administration has been absolutely adamant that reunification will happen. The only realistic solution is military deterrent to stop them from acting on their desires.

Imo the purpose of these sanctions is to ensure that Chinese supply chains remain reliant on Taiwanese chips. If they invade, they will lose access. The export value of Chinese products made with Taiwanese silicon is massive, it would be a huge economic blow to lose this access.

> It's more an act of the cold war, and less an attempt to help US industry profit more.

As well as to make companies finally decouple from China.

Everybody saw China shake down Apple and should have taken the hint to start moving operations. Yet none of the C-suite in the US were willing to risk their bonuses by being the first company who pulls out of China while their competitors don't.

This puts the boot into the short-term capitalist thinking and forces the issue.

Not sure why you’ve been downvoted.

It’s like when universities pushed state governments to implement COVID pandemic policies because they know they all need to but they also know the first one to do it alone will take it in the shorts.

>This puts the boot into the short-term capitalist thinking and forces the issue.

Yes, but companies where never expected to or supposed to implement these policies. It will be worthwhile to use chinese factories until the moment they are cut off.

The move by the Biden administration is about advanced weapon systems and China’s dangerous rhetoric—especially in the shadow of Russia’s actions.

The war in Ukraine demonstrates that, if anything, the US underestimated the advantage of western weapon systems. That has little to do with the steel and mechanical engineering and much to do with chips and software.

The US has to take China’s threats seriously. They are boasting about Hong Kong. They feel emboldened by it. I don’t think the rhetoric is empty about Taiwan. And if they take the island it will only embolden China further.

If China takes Taiwan it changes the entire global power dynamic. If they try and fail it is probably the beginning of the end of the Chinese government as we know it.

It’s an interesting move. Amidst a strengthening US dollar, a sharp drop in Chinese food security that will likely depend on the US, and a pretty severe real estate crisis unfolding in China; China’s economic leverage has likely done a 180 and begun to look very vulnerable.

Removing dependence on China for things, increasing China’s dependence on an independent and functional Taiwan, and just generally establishing pecking order is probably a really strong geopolitical move.

I would expect that China is further shy of making serious retaliations at the moment due to dependence for food and fear of manufacturing moving to India.

>it’s an interesting move.

It was an US unilateral move after CHIPS4 couldn't agree on export controls that basically killed 1/3 of their semi revenue, i.e. it seems more like US desperation after being unable to get East Asian semi on board after realizing merely "sprint" strategy wasn't enough to stay ahead of PRC, but must sprint and hobble. To me it looks like essential admission that PRC will make it sooner than later, and now US is trying to buy time at all cost despite lack of cooperation from allies who will most likely start de-americanizing supply chains for that 400B PRC semi pot.

>dependence on TW >shy of making serious retaliations

The opposite is happening, US trying to cut PRC Off TW semi that US is 90% dependant in. So PRC now has more incentive to meddle with fabs on the island to disrupt US high tech at little cost to her own industry. I expect we're trending towards developments that will end in PRC disrupting TW fabs in the coming years to destablize US supply chains. Otherwise PRC leverage is still the same, she still has calorie food sufficiency, with now guaranteed long term supplies (grains + fertilizer) from RU. Managable real real estate crisis still being managed. Meanwhile PRC still has controls over most of supply chains and rare earth production, F35 made from PRC metals just got waiver. The reality is, PRC hasn't made serious retaliations so far because it didn't want more high tech decoupling, but once decouple past certain point, PRC hands will become freer to retaliate. We'll have to see TSMC/Samsung and other if waivers stop next year.

It's pretty disturbing and disgusting that the President would threaten to strip people of their citizenship for having the 'wrong' job.

Is there any crime you could commit in the US that is do bad it would result in loss of citizenship?

No other country would behave this way, but I guess we should expect that from one of only two countries that taxes all it citizens worldwide, even if they've never even visited the US.

Given that US citizenship is difficult and ludicrously expensive to get rid of(presumably as some kind of punishment for wanting to do so) possibly some of these people might actually be happy about if they are dual citizens.

Generally (and it's still hard in these cases) you can lose your citizenship if you are convicted of treason, found to have served in a hostile foreign country's army, working for a country's government when you are the same nationality, etc.

I'm sure a LOT of countries have laws like these in one form or the other. I'd imagine that the inside baseball on this is the US is effectively declaring China an enemy, and so therefore can make this threat. The only question is how actionable it is.

>"you can lose your citizenship if you are convicted of treason"

Only if the treason was committed with the confirmed intent of loosing a citizenship. Otherwise the citizenship stays.

I found this [0] that the logic followed is a citizenship generally has to be voluntarily resigned but several actions can make you "accidentally voluntarily resign" it so to speak. It's strange to me Biden would do this especially since we aren't in open war with China but every day I wake up this world gets more strange. It does suggest certain crimes must be done with the intent to lose your citizenship as you suggest which makes Biden's action even more dangerous.

[0] https://www.nolo.com/legal-encyclopedia/when-us-citizens-can...

I did not find anything there that can make one "accidentally voluntarily resign".

>"It's strange to me Biden would do this"

I might have skipped it but where / when did Biden specifically threaten stripping citizenship. The search does not confirm such threats have been made.

https://news.yahoo.com/biden-chip-controls-may-force-0929571...

https://www.theregister.com/2022/10/14/american_tech_workers...

https://www.nytimes.com/2022/10/13/us/politics/biden-china-t...

By forcing Chinese-Americans in particular (as in Chinese, who also hold American citizenship) to choose between their work or their citizenship he is defacto threatening to strip their US citizenship. Dual citizens have basically been handed a choice: give up your US citizenship to continue working in your field or find work in the US.

Well sorry it is totally different. As US citizens they must follow the laws of the US. Break the law and go to jail. If they do not want to go to jail they must stop working in China. Alternatively they can tell the US to go fuck itself and renounce their US citizenship. But they have to do it explicitly. The US will not strip their citizenship on their own.

This isn't true. US born citizens, excluding those naturalized or with a dual citizenship elsewhere, simply cannot be stripped of citizenship for any reason. Because this would reduce them to statelessness.

Although the UN treaty signed on this isn't binding for the U.S., it would certainly break a taboo and give justification for other countries to reduce their citizens to statelessness while they're in the U.S., thus blocking the possibility of repatriating them back to their home country.

He isn’t threatening to strip anyone of their citizenship. He is making certain acts crimes if they retain citizenship.

The government can't strip people of citizenship for this, but they can make it a crime for citizens to work for these firms. Though if you renounce, it is no longer a crime.

The latest rounds of sanctions seems to have been extended to protect in particular Qualcomm and Micron.

Qualcomm by preventing Chinese fabless design houses such as unisoc in creating high end arm socs for mobile phones. And Micron by targeting YMTC.

There's a lot of speculation in this piece. Almost too much for it to be informative.

Well, the URL sets expectations appropriately, at least.

I find only Asianometry on youtube delivers well researched reports on the semi industry. Everyone else just posts FUD that drives clicks.

The CHIP act makes way more sense to me financially + getting the bill passed given this stuff. Long-term this does just push China into self-sufficiency faster... But near term, US co's profit?

I was mostly curious about the jobs market angle (we are busy in the GPU / AI / data center space) but it was light there..

I think it's more about making the US independent from China, not about hurting China. Of course it is phrased as the latter so that it won't hit as much kicking and screaming from US companies who suddenly have to scramble for new supply chains.

Biden dropped a real hammer on Chinese chipmaking.

Thresholds:

• Logic chips with non-planar transistor architectures (I.e., FinFET or GAAFET) of 16nm or 14nm, or below;

• DRAM memory chips of 18nm half-pitch or less;

• NAND flash memory chips with 128 layers or more.

A one-year Temporary General License softens the blow for the US allies. Everything that includes the US made tools and software for design and manufacturing, and machinery is cut out, so is any person with US citizenship, green card or who lives within the US.

Wait for the screaming if China forbids its nationals to work in AI research in the west.

Is this actually a concern? If so, that's actually a huge deal to have so many people from an "enemy state" working in a field.

Do you have any numbers or sources on that?

The communist clique that's enslaved the Chinese people is still reliant on obtaining technology from the West to do that.

People often talk about and accuse the Chinese government of being bad for its people, but in the absence of a better alternative their government is still the best thing for the people. What else would the people of China support?

If you really want to accuse the government of being bad then you must offer a better alternative. There was a point in time where any Chinese person would have given an arm and a leg for a visa to a western country. That’s now changing with the rising middle class in China. But if we really wanted to say the government is bad, then we also need to welcome their best and brightest, grant visas, and offer them an alternative.

Otherwise think about the impossible situation you levy on the ordinary Chinese citizen with rhetoric like “hey we don’t like how your government treats you because your government sucks, but also you can’t join our team. Therefore we will just fight you (in war) and you can either fight against us or help us fight your government (oh but sorry you still cannot join us).” Obviously the average Chinese person will most likely still support their own way of life and government, no matter how bad you think their government is for them, because at the end of the day you are not really doing anything better for them.

Even if you go and “liberate” them from the tyranny then what? Install a puppet government like in Afghanistan? Grant them all citizenship and annex it as part of the US (there are more Chinese people there so they would “take over” if that happened especially if we really believe in one vote per person)?

Cool, the better alternative is to capitulate to Taiwan and reform to republic of china.

That government is 100000% better

Yea honestly they should have let people from China in, but they don’t.

Also the 1 billion people capitulating to Taiwan is like government by minority. Not sure if anyone fully thought out that plan. In an actual democratic government, Taiwan would get subsumed by mainland China if the two countries merged.

Where does this meme come from that China is this horror show held together only by torturing and enslaving their population into submission? The Chinese government gets its legitimacy from thousand year old traditions and the fact that the people there have more than doubled their incomes every decade and accordingly it enjoys massive public support. The American government is basically the exact opposite of that.

The genocidal death camps of Xinjiang Muslims may have a role there.

https://www.bbc.com/news/world-asia-china-22278037

But that is not most people's experience. China is 90% Han Chinese and the overwhelming majority of people don't live in those conditions. Trust in government in China is near an all time high (https://www.statista.com/statistics/1116013/china-trust-in-g..., https://news.harvard.edu/gazette/story/2020/07/long-term-sur...). None of this is to say that any of that is morally or ethically justified, just that in terms of social stability China is probably in the top 10% of countries.

Where does this meme come from that China is this horror show held together only by torturing and enslaving their population into submission?

History? Until Deng's reforms created a private market in food, block and village Chinese Communist Party (CCP) committee had absolute power of life and death over those under it through their issuing of food ration coupons. This data from some Chinese grad students I knew who lived through that and the transition, plus it was generally known. See also how the one child policy was implimented. They also still execute a lot of people, and politically a lot of corruption cases which sometimes go that far are clearly Xi and his new Tsinghua clique eliminating competition. Which has created a great many enemies in the CCP, that is its ruling class especially now with the suppression of tech companies.

At a higher level, the estimated 70 million people the CCP killed after gaining power in 1949? That may be high, a lot of it is from Mao's enemies, but on the other hand we keep increasing the estimates of deaths from the Cultural Revolution. Which Mao used to regain power after his very costly Great Leap Forward and the ensuing famine per those estimates killed tens of millions and cost him de facto paramount position.

Post-Mao and the Gang of Four the rulers of China made various agreements to ensure such things would not happen again. Xi and his new clique shredded them, and for a less contentious than the issues with Xinjiang Muslims example look at the brutality of Xi's Zero COVID policy. If Xi navigates the current every five year congress meeting to get his third term there's no reason to expect things to get better. Very possibly the same if he fails and is effectively deposed.

Those thousand year old traditions? Mao did his very best to stamp them out, especially in the Cultural Revolution. I would wonder if they're done at any greater than a cargo cult level today, although that might be enough for the public. Except of course those members of metro areas that are getting smashed when a few cases of COVID are found in them, those "owning" real estate, or those without a social safety net where 4 grandparents depend on 2 parents who depend on 1 child for the extremes of the effects of the one child policy.

For the economics you cite, also see how the residential property bubble is bursting now. That's not necessarily the fault of Xi, was inevitable sooner or later, but it is happening now in concert with other negative things including backlash like this very uncertain in its effects US chip tech embargo (the US Commerce Department has a great deal of discretion in what it will license someday).

How are they going to do AI research without advanced modern chips?

Slowly

They will build their own.

It was the Chinese that pushed through RISC-V at the end of the day.

They are allocating absolutely ridiculous amounts of capital towards building their own lithography expertise now.

Trump pretty much forced Biden's hand when he stuck his dick in ASMLs relationship with China. By playing that card so early Biden effectively has to cut off access to TSMC, GlobalFoundries and Samsung for it to actually stick and not just have wasted the biggest and most important trade card W.R.T semiconductors.

For a long time (basically forever) China hasn't really invented anything of it's own. China has a large, complex, and well run espionage network responsible for stealing trade secrets from western companies. There's a great book, Disunited Nations, that talks about it in gory detail. Essentially, China will steal anything it can and build it locally. Espionage like this is generally expected (even among allies) but the scale at which China operates this is breathtaking. Majority of the large scale hacks they have done in recent history are targeting organizations with special IP (for example military technology).

So, knowing this I would assume they will simply use this system to get access to patents for the chips they need and begin fabrication themselves. This blow slows them down but doesn't stop them. To stop them, you'd need to stop their well oiled espionage machine.

The real screaming would come if either side prohibits Chinese nationals from attending (and paying for) US grad schools.

That may not even be necessary at this point. Chinese nationals I know all went to US/Australia/UK universities but their younger siblings seem to be much more enamored with the Chinese universities in tier 1 cities instead. Combination of growing nationalism and decreased prestige with graduating with an international degree.

There are a lot of things here that I don't understand:

- The issues around semiconductor manufacturing.

- How Chinese politics work.

- How the big Chinese manufacturing hubs like Shenzhen work. The exports are spectacular, so I suspect they're incubating capitalists.

But what I do know is China is ~1 billion people, is moving in to being a country with some savings and is really getting the hang of high technology (eg, Huawei is the cutting edge of telecoms and it is going to shock everyone in a decade that they are at the cutting edge of nuclear tech as their reactor program keeps chugging along).

If they are seriously challenged to a tech war, we are relying on the Chinese government to defeat the Chinese people. It isn't possible to intellectually starve out a country that big, especially not in the age of the internet. They can achieve miracles in 20 years.

> They can achieve miracles in 20 years.

Why they didn't do so already?

There hardly been a single regime in history so eager to slaughter hens laying golden eggs.

China is extremely anti-business, and anti-development (unless it's real estate development.) I first understood it when I seen block, and blocks of factories being bulldozed to make space for luxury hotels, and hooker parlours. Tells of priorities of people in power.

"China is extremely anti-business, and anti-development". Really? Are you absolutely sure about that?

Certainly Xi doesn't think that he's anti-business, and much that he's done mirrors the EU's actions vs monopolies. But Xi also has no understanding of business, and wants to micromanage everywhere. I think he's already had a large chilling effect without wanting to do that. He could easily, clumsily, kill off most of the geese laying golden eggs for him by instilling more terror of the government than hope of profit. I'm not sure that'll happen, but reading his speeches to this new PRC congress I suspect so.

> Why didn't they do so already?

China's GDP has increased 8x since the year 2000.

It has an enormous and well educated population. Thousands of universities. Their research and development output is soaring.

It's become a manufacturing hub like nothing the world has ever seen before.

There are lots of challenges with respect to the ideology of the government.

But the development in China the last couple of decades has been miraculous already.

> China's GDP has increased 8x since the year 2000.

China was a 3rd world nation which experienced an industrial revolution, which like all industrial revolutions beforehand was faster and more prosperous because they could just buy the relevant technology and expertise, which was now even cheaper then it was for the previous industrial revolution.

Their GDP growth tells us nothing about whether their government is good at running a modern economy (evidence says no): because you have to pretty much be actively trying to fail to not have "miraculous" GDP growth when industrializing up from subsistence level farming.

> China was a 3rd world nation which experienced an industrial revolution

Why did that happen? Why isn't it happening so rapidly for other "3rd world" nations? I mean it wasn't luck. Economists will point to specific policies of the Chinese government that made it happen so quickly.

  > Economists will point to specific policies of the Chinese government that made it happen so quickly.

and those policies are not some special secret; they are the same "industrial policies" that japan, south korea, and the u.s (and many other advanced countries) used to develop rapidly and fully...

> they are the same "industrial policies" that japan, south korea, and the u.s (and many other advanced countries) used to develop rapidly and fully

At a very high level yes. But when you look closer, not at all. Abenomics for example, can be contrasted with Reagonimics [1]. Because while there are some similarities, there are also important differences.

But more importantly, why does this matter? No one said the Chinese government used "special secrets" for the wildly successful past two decades. The original question was "when will China start".

You seem to be of the same view as everyone else here: they already did start.

You also avoided the question I asked. Can you answer it?

Why didn't China's rapid rise out of poverty happen to other "3rd world" nations? Some poor countries have the same industrial policies as the US but aren't quickly rising out of poverty. You need to explain why China is different.

[1] https://www.wsj.com/articles/BL-JRTB-18051

  > Abenomics for example, can be contrasted with Reagonimics [1]

oh definitely

what i was referring specifically to was the period of dramatic growth and improvement in quality of life, so japan up until the 90s, the us until around the end of the 60s etc

in those periods, they had real honest-to-god industrial policies how they wanted to direct research and development, improve technology and investment etc

abenomics and regonomics are basically the opposite and signal the neoliberal turn in thinking

  >  The original question was "when will China start".
     You seem to be of the same view as everyone else here: they already did start.

sorry, maybe i missed that, but anyways i agree with you 100%

  > You also avoided the question I asked. Can you answer it?
    Why didn't China's rapid rise out of poverty happen to other "3rd world" nations?

i didn't know i avoided it, but im happy to try and answer ^^

  > Some poor countries have the same industrial policies as the US but aren't quickly rising out of poverty. 
    You need to explain why China is different.

as i alluded to earlier, the us and many other "1st world" countries had mostly given up on what is called "industrial policy" and directed investments that gave them so much growth and prosperity in the early days.

following neoliberal economic thinking (mainstreamed in the 70s) that austerity and free-market economics (including allowing vast monopolies) and privatization of public services would somehow bring everlasting high growth (supply-side economics) but instead results in lower growth, higher costs (just look at cost of healthcare in the us) and bigger wealth-gap causing all kinds of issues

many "3rd world" countries followed those neoliberal economic policies and quickly found out that austerity and privatization of too many public services (to name just a few things) just caused collapse and chaos, and then they cant pay off their imf loans meaning... more privatization and austerity as part of the condition to extend payments (this just causes a downward spiral and locks many countries in and almost "debt peonage" type of situation)

---

actually this is really a long discussion hard to do in hn, but probably we are more in agreement than disagreement i am guessing

but if you have a different perspective im very curious to see your explanation as well, so please by all means ^^

"block, and blocks of factories being bulldozed to make space for luxury hotels, and hooker parlours"

Where did you see this?

> Why didn't they do so already.

They did. The Chinese economy has pulled more people out of poverty in the past few decades than any economy in human history. By far.

"In 1990 there were more than 750 million people in China living below the international poverty line - about two-thirds of the population.

By 2012, that had fallen to fewer than 90 million, and by 2016 - the most recent year for which World Bank figures are available - it had fallen to 7.2 million people"

Mistaking the China of today for the China of 50 years ago would be naive and dangerous. Fortunately most world leaders are savvy enough to be taking action to compete.

This is not an endorsement of the Chinese government. It's just a factual observation of recent history.

I never quite understood that line since they pretty much purged themselves in the first place and were "lifting themselves" after sinking themselves in the cultural revolution. They opened up after visiting Asian Tiger economies and realizing they were far behind Singapore, South Korea, et al.

If you want to blame them for the bad you need to give them credit for recent accomplishments.

Unless you think it's a line that Americans sunk themselves in The Great Depression and therefore American leaders should get no credit for the following recovery.

Leaders change. Economic policy changes. China changed direction and lifted a huge number of people out of poverty. It's as simple as that.

> They opened up after visiting Asian Tiger economies and realizing they were far behind Singapore, South Korea, et al.

And? What's the point? That they learned by observing? Is that bad?

The Great Depression was not a deliberate purge, markets follow boom and bust cycles.

>And? What's the point? That they learned by observing? Is that bad?

It's a self-serving bias to attribute their economic development to their leadership. They would've developed sooner and are simply taking credit for getting out of their own way. Sure, you can point to specific projects and say "the government bankrolled this therefore it exists" but it's not like in their absence nothing would have developed. Hong Kong, Singapore, Taipei, Seoul, Tokyo et al have pretty skylines and good public transportation too.

> The Great Depression was not a deliberate purge, markets follow boom and bust cycles.

Right. You're doing exactly what I pointed out before: making excuses for US economic policy when it fails but giving it the credit when it succeeds.

> They would've developed sooner and are simply taking credit for getting out of their own way.

Who is "they"? You do realize China has had more than one leader in the past 50 years?

> They would've developed sooner

Uh sure. So what? The point is that they are wildly succeeded the past couple of decades. The original claim that started this was they haven't done anything remarkable yet. Which as a matter of historical record, is wrong. The past 20 years have been remarkable for wiping out poverty in China. Regardless of whether or not that poverty could have been wiped out earlier, it was wiped out. And this happened under the current Chinese government. So the claim that the current Chinese government can "achieve miracles" in 20 years -- while exaggerated -- is far closer to the counter claim that they have achieved nothing yet.

> taking credit for getting out of their own way.

That would not be how most economists would describe Chinese economic policy. It doesn't even describe the relatively less controlled US economic policy.

>first understood it when I seen block, and blocks of factories being bulldozed to make space for luxury hotels, and hooker parlours

The US did this on a national scale.

I'd call this post a lot of wishful thinking that doesn't look at where the economy in China is heading nor the attitude of countries around the world to China.

There are uncertainties, but it is hardly wishful thinking to theorise that the world's premier manufacturing superpower could figure out how to manufacture something new.

If anything it speaks volumes about their 2nd rate governance strategies that the outcome is in question.

Russia was the premier manufacturing superpower yet rapidly fell behind the west in many areas of manufacturing.

Just because you make a lot of widgets doesn't automatically mean you can climb the value chain.

Huawei stole its telecom tech from Nortel. I wouldn't call them innovative, more like great at industrial espionage.

That has been debunked on a HN a few times already.

I do not doubt that Huawei would not have hesitated to steal from Nortel, given an opportunity, but everything that I have read about the alleged theft from Nortel did not seem to indicate that Nortel really had something valuable to be stolen and there is little doubt that Nortel's doom was caused by their management and not by thieves.

On the other hand, I know for a fact that Huawei has entered the mobile phone market by buying, and not by stealing, all the required technology and know-how from various companies, e.g. from Siemens.

Like other Chinese companies activating in various domains, after being taught well how to duplicate Western designs, Huawei was able to make them both better and cheaper, so the companies which have foolishly sold their smartphone technologies to Huawei have exited the market, while Huawei would have become the dominant producer, had it not been sabotaged by USA in order to prevent that.

Those who believe that the only reason that explains the commercial successes of the Chinese is IP theft are delusional.

Obviously they have started by copying whenever they could do that, but in recent years the Chinese companies have been much more innovative than most US companies, which are too risk-averse and too much oriented only towards corporate customers or towards very rich customers, to be able to launch any really innovative product.

Global semiconductor industry has the deepest and widest value chain compared to any other industry. China must replicate very specialized industries spread across the US, Europe, Japan, South Korea.

>How the big Chinese manufacturing hubs like Shenzhen work.

99.9% of Shenzhen is relatively low value added on top of core technologies. They bring high value added tooling from South Korea, Japan, Taiwan, buy chips from Taiwan and assemble them into products.

> But what I do know is China is ~1 billion people

China built its massive manufacturing industry on vast quantities of cheap labor and a massive global consumer base. However, Chinese labor costs have been rising sharply for the past decade for many reasons but one major factor is that the one child policy was very successful and lead to a drastic hollowing out of their younger workforce and consumer base. Meanwhile the older experienced generation are aging out and China is entering a demographic winter which will lead to a 50-60% decline in population by mid to late century depending on whose numbers you trust. There is a similar hollowing out of the consumer base occurring all over the world with few exceptions. So it is highly improbable that China can fill in the most complex high tech supply chains by itself quickly enough to be useful while its workforce dwindles, it’s losing markets to sell to, and while its major trading partners are actively trying to thwart its progress.

Very well said.

And it doesn’t have to be this way. America would take a much different stance if the Chinese system were less “malignant”. Live and let live. Like the Japanese, Australia, UK etc.

> if the Chinese system were less “malignant”

China is a country with so much racial, linguistic, and geographical diversity that it would likely break up if it were less draconian. Historically this has occurred repeatedly. This is likely to happen anyway sometime over the next few decades given the geopolitical and demographic headwinds and in a much more devastating manner than it otherwise would, but it shouldn’t be surprising that the CCP won’t lie down and accept it.

Can't speak for ianai but when he said "malignant" that should certainly include its policies towards its neighbors and the rest of the world. "Wolf Warrior" diplomacy is pretty iconic in representing that, but note how the CCP has managed to get so many of its neighbors to ally with Japan of all nations. After the horrors of occupation by Imperial Japan which are still an issue in South Korea for example. Where Japan's replies including a licencing regime for several classes of specialty chemicals used in IC fabrication.

The world also cares very much what happens with Taiwan if that results in one way or another it no longer exporting chips. That island also makes quite a bit of higher end stuff for many nations' and companies' supply chains, as well as finished goods.

>one major factor is that the one child policy was very successful and lead to a drastic hollowing out of their younger workforce and consumer base

IMO just the opposite. One child policy was also "very successful" in concentrating wealth and is largely responsible for why PRC is spitting out 11M STEM graduates a year, around all OECD combined. There will be generation wealth transfers once old folks start dying (many in tier1/2 own homes + have enough savings) and analysts are predicting increasing consumption when multiple inheritances get concentrated in the one-child gen households.

> improbable

11M STEM grads per year = PRC has the LARGEST demographic divident of SKILLED LABOUR in human history trying to capture high tech supply chains by itself. They just started moving up Academic + S+T + R&D over last few years, will take another 5-10 years to filter way through industry. The chances are not only good PRC will succeed but it's likely PRC will eclipse west in medium term. As for internal market share, the point of moving up value chain is to produce wealthier consumers. Shedding 600M lower income who buys $1000 rmb phones while gaining 60M upper income who buys 10000rmb will increase the value of the consumer base. Meanwhile we're still looking at PRC with ~700M until 2100s, which is still a stupid large market to serve. It's the kind of scale that enables PRC to drive down costs in any industry state decides to focus on.

> thwart its progress.

Once PRC starts reaching parity, it will start to thwart back. Not only will western high tech lose 1/3 of PRC revenue, they'll start losing market share from emerging economies, meanwhile PRC could turn on that industrial policy valve to ensure western high-tech become permenantly loss making unless supported by huge industrial policy.

> 11M STEM graduates a year, around all OECD combined. There will be generation wealth transfers once old folks start dying (many in tier1/2 own homes + have enough savings) and analysts are predicting increasing consumption

If STEM graduates alone could increase a country’s wealth then India would be the global superpower. You need a consumer base in proportion to your production which China lacks, and your production needs to be focused on high value add production which China’s is not. Wealth transfer between generations only works if there is a large enough number of people to buy or at least value the assets being transferred. When your population is going down sharply then there are too few people chasing too many assets which leads to an asset price crash so that wealth will go up in smoke to a significant degree. Similarly, a surge in spending based on concentration of inheritance is inflationary which leads to a loss of wealth. This is not a recipe for economic strength.

Good thing PRC isn't India and has the infra and institutions to move up value chain, which it has consistently over the past decade, from capturing 8$ in iphone assembing fees to 25%/~100$ by iPhoneX to YMTC and other suppliers chasing after rest of BOM, which triggered current US efforts to contain. PRC export data over couple few years reflect PRC exporting much less low-end goods and more intermediate/high end (i.e. passing Germany in car exports), and trend is only continuing specifically because PRC is focused and succeeding in transitioning into high value add production. So PRC not only has talent but also the base to support it, she's is demonstrably moving up various innovation/S&T indexes and value chain. Unlike India, PRC is by all acounts a super power.

>economic strength.

Hence the huge savings rate. Yes, a lot of housing wealth will (hopefully) get inflated away / go up in smoke. There still is significant amounts of general savings currently locked away will naturally be released into consumption, particularly by T1/T2 consumers which is enough to drive demand to sustain competitive indigenous industries. Like the shit tier consumption right now from small % of high-income PRC markets is still enough to make PRC significant market for many global companies, that share is set to increase as population mix shift away from poor migrant workers in informal economy to high income, high skilled workers. Overall the share of consumers who sustains transition into advanced economy will be growing, which is a recipe for economic / comprehensive national strength. The wealth transfer release won't be a surge (deaths spread out over time) but over decades along the predictable demographic pyramid slope that is also relatively easy to plan for. Also historically, countries moved up value chain fine without the recent absurd financialization of "wealth", which is arguably a social detriment. IMO PRC that address issues relating to wealth is one that will be "stronger" than societies that can't.

> If STEM graduates alone could increase a country’s wealth then India would be the global superpower.

India is plausibly on the way to being a global superpower [0]. Unless something changes that they can outdo the US in the next 20 years.

If the Chinese government goes dictatorial and predictably suicides their own economy, and the US government keeps committing to the print-money-no-worries "strategy" it isn't out of the question that India could be the global superpower by 2040.

[0] https://www.weforum.org/agenda/2019/01/india-will-overtake-t...

This is likely to turn out to be the biggest failure of US policy maneuvering of this century.

By keeping China coupled to the Wests semi-conductor supply chain there was always pressure that could be applied in various ways, veiled threat of back-doored chips, etc.

Instead all you are doing is creating the perfect incubating scenario for a massive surge in Chinese semi-conductor technology.

If you think about where the Chinese are right now economically etc they are ready to move away from their previous growth engines and onto new things.

Part of that started happening about 10-15 years ago when they started massively investing in solar and kicking off their nuclear program. These days they produce ~80% of the worlds solar cells and the cells they produce are straight up better than what you can get elsewhere. CATL and their perfection of the LiFePO4 chemistry is another.

So maybe for the next ~5-10 years the US/West will have a substantial lead in semi-conductor process nodes. Unfortunately this is essentially the least effective time to do this. Moores law scaling has massively slowed down, we still get faster processors each years but not at the same rate as before and not so much through increased transistor density and even where that scaling is still relevant it's not scaling at the same cost anymore. True increased performance of computer systems in this day and age comes from software and the Chinese are not behind on that front at all and it's incredibly unlikely anything can be done to slow them down.

After that all it's really done is create most likely the ultimate competitor with infinite amounts of funding with a huge pipeline of STEM grads that will be encouraged to go into semiconductor supply chain tech. All the while with an expanding consumer class to buy all of this stuff and keep the wheels moving.

Sadly I just don't see this ending well for the West and in particular countries like mine that are at odds with China and yet dependent on them for economic continued existence.

The only way I could see it working would be to find some means to bring back trade agreements like the TTP that Trump canned and also work to ensure India doesn't get pushed into a closer relationship with China but I really don't believe the US has the required nuance in international relations to make that happen anymore.

Did anyone else watch/read Doug's podcast with YAVB about SiTime? I tried to read the transcript but gave up about 1/3 through, obviously podcasts are a low signal medium but even for a podcast I thought the pitch was very speculative and hard to follow.

Sorry to hear that - I would like to think it wasn’t speculative!

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