China Facing U.S. Tech Restrictions

Editor Desk – Said El Mansour Cherkaoui – September 18, 2022

USA and China: Tech War Game Without Warranty

Synopsis:

Growth is a concept defended by the international western economic and financial entities as measurement of the success of the liberal strategy of development.

Not all the society and the social classes benefit from such growth as conceptualized to sustain and justify the investment and the loans that a given country will receive from the exterior.

China does not have a need to demonstrate a growth to attract the “generosity” of the western based financial institutions and industrial conglomerates.

China has the power actually to use its own memory and its own history to define and design every step that needs to be taken as orientation of their national policy and regional strategy as well as global integration through their own terms and conditions in the negotiation of such moves.

What is considered as stalling, it is simply a House Cleaning and Putting Order in the State Priorities.

China State will invest in many sectors to diversify further its direct involvement in the implementation of stabilization policy and recovery from the impact of Covid 19 Pandemic.

With rising Covid cases, residents in China’s technology hub of Shenzhen are fearing a second city-wide lockdown, even as local authorities sought to quash such rumors fueled by restrictions imposed just hours earlier in another megacity to the west.

The options taken by China are duplicating what Western Government applied as remedy to the recessive conjuncture that are frequent in the economy and continuously and anticipately corrected by intervention of the State in the monetary and credit system as the first steps toward setting a control of the variations of the market while trying to attenuate the surge of inflation.

China government approach is more oriented toward reinforcement and consolidation of the driving forces of the economies instead of correcting the weak sided sector “les Canards Boiteux” as is the tendency in the Western economies.

China authorities are likely to reign on the credit availability to reduce the shaking of the real estate and the construction sector, while providing stimulus to the needed infrastructure equipment. In the high tech and related fields, Beijing have already set new forms of collaboration and rallying of the tenors and the first movers that have understood that standing with the Government has also its own advantages.

China’s tech titans have plenty of incentive to pare their stakes in listed companies. In addition to appeasing regulators, high tech can use the reduction of their holdings to slim balance sheets. Less exposure to uncontrolled elements of global conjuncture will gives them the ability to invest those funds into more profitable operations that are more in tune with the objectives of the regulators and the targeted economic growth level sought by the Chinese economic authorities.

These investments can be oriented toward the goal of China to be the global semiconductor industry by 2030 due to its growing market size and domestic production capacity.

Knowing that the semiconductor industry is of a strategic importance for China, European Union and the United States of America are also implementing decisions towards maintaining the stakes high and build an advance to establish the rules of the game in the semiconductor global supply market to the point that this high tech sector is now considered as inseparable aspect of National Security consideration.

The US government’s new restrictions on the ability of Nvidia Corp. to sell artificial intelligence chips to Chinese customers threatens to deal a heavy blow to the country’s development of a sweeping range of cutting-edge technologies.

Semiconductor Manufacturing International Corporation (SMIC), the largest chipmaker in China, has reportedly achieved a major breakthrough. TechInsight, a Canadian tech media outlet, revealed that SMIC had advanced its technology to a quasi-7-nanometer (nm) process, which might be a stepping stone for a true 7nm process. According to TechInsight, SMIC products made from the quasi-7nm process had been shipped for a year. Some media argued that the SMIC’s advancement showed that the U.S. blockade was too little, too late, and out of date.

There is a big gap between chip consumption and chip manufacturing in China, meaning its chip self-sufficiency rate is low. In 2021, the size of China’s semiconductor market was about $186.5 billion, of which only $31.2 billion worth of chips were manufactured in China, both by foreign and domestic companies – a self-sufficiency rate of 16.7 percent. Furthermore, only $12.3 billion worth of chips were manufactured by China-headquartered companies, accounting for merely 6.6 percent of domestic consumption.

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To reach the goal outlined by the “Made in China 2025” initiative, a self-sufficiency rate of 75 percent needs to be achieved by 2030. Under such pressure, it is not difficult to understand why China has subsidized semiconductor companies to build factories through various policy incentives.

if one or two Chinese companies can stand out among the large number of policy-supported foundries, there is a hope that this “national champion” can compete or even dominate the advanced process market. Lenovo in the PC/laptop sector and Huawei and ZTE in communications were all developed using such a model.

Within such environment of continuous threats, conflict of interests and market oriented competition, China authorities are actually seeking to drive their priorities toward consolidated the acquired technology and to advance toward new fields of discoveries to counter and to position itself as a model of development for the countries that are still in the search of their own economic progress and economic translation of their social accomplishments and political wills.

Compilation of various sources, Said El Mansour Cherkaoui Research, Analysis, Writings and Publications including from Yahoo, Bloomberg and The Diplomat