D2D China: Not Tariff-ied
China's response underscores the futility of the US tariffs.
Over the past few years, China’s semis industry operated under a constant state of anxiety over geo-politics. The latest round of US tariffs seem to have flipped that narrative on its head. We found a high degree of confidence now reflecting both relief that the long-awaited threat has finally arrived, but also a sense that the US misplayed its hand. The situation is obviously very much in flux, a lot could change, but so far the US policy seems to be having the opposite effect of what the government intended.
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Noteworthy Items
Tariffs and Semis
There is obviously a lot being written in China about the US tariffs. We found this piece offered the most sober, cold-eyed look at situation. It reads like a pre-battle assessment. It does not stint on criticism of the state of the PRC’s semis industry, including a sharp criticism of online conspiracy theorists in China, but it also a exudes a steely confidence. “We have seen this game already”. It then makes a comparison to the US and the USSR in the Cold War, but in this analogy the US is the decaying, sclerotic empire. The key takeaway holds that the PRC needs to stop paying attention to the US and build its semis industry. Bonus points for a good look at the PRC’s progress in EUV lithography systems (progress, but still a ways to go).
This article caught our eye for its taunting tone. China imports more semis than anyone and the US just made them cheaper.
Another commentator noted that the US tariffs are going to hurt Japanese and especially South Korean semis companies. The unspoken context is those companies are wounded at just the moment that PRC chip companies are starting to come for them.
A Taiwanese academic proposes a Solomon-esque solution for TSMC. Spin-off R&D into a standalone entity and then break up TSMC into three companies running fabs in Taiwan, the US and the PRC. Of course, this appeared in a PRC publication, and carries the explicit condition that the government there would be allowed to take a direct hand in managing the PRC branch. Also note the repeated threat that TSMC is going to be investigated for monopoly practices. Are PRC regulators going to go down that path?
The PRC’s counter-tariffs look to be really bad news for TI and Intel. Noteworthy in that both of those companies have fabs in China and have stayed out of trouble with the government for decades, no easy feat. The fact that these two are getting examined is even worse news for companies like Qualcomm which have had a highly contentious relationship with the government.
This author points out that wafer fabrication equipment (WFE) just got more expensive for the US. File under unintended consequence.
Semis and Deep Tech
Malaysia recently published a plan to move up the value chain in semis. Curious timing.
SiTime is starting to get a lot of interest for its MEMS timers in smartphones and the data center. There are many PRC MEMS companies, but Mandu looks to be pushing its way into the lead.
More signs that PRC semis are headed towards consolidation. This author says that over the next three years three sectors will see a flurry of M&A deals - chip design, wafer manufacture and test and packaging.
We cannot tell is this author intended to be humorous, but it is the funniest thing we have seen this month. Writing what is essentially a primer on how to seek out loopholes and evade tariffs.
Software
A look at China’s unused data centers from the MIT Technology review, highlights a common feature of the PRC’s development model. Overbuilding capacity in a high priority area to encourage Darwinian competition. The situation with data centers is not quite as bad as it was with housing (remember all those “ghost cities”), but it does a highlight what remains a flaw in the model. Or is it?
Automotive, Industrial and Macro-Economics
While the US is slashing research budgets and curbing new energy usage, the PRC just announced 101 low carbon demonstration projects. These are government sponsored pilot programs to encourage specific areas of research, a bridge between theory and commercialization. They are ambitious projects, from groups which have a pretty good track record. Once they reach this level of support, these things typically become widely adopted. Good news for Climate Change.
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For paid users, we look at the ways in which China’s response to US tariffs underscore the absurdity and counter productive affects of those tariffs.
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