US' Chip War On China: Will China Win Or Lose The Tech Race? | Insight | Full Episode

US' Chip War On China: Will China Win Or Lose The Tech Race? | Insight | Full Episode

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foreign 2023 a usf-22 fighter jet shot down a giant balloon that drifted into the U.S airspace China violated U.S sovereignty by sending in a balloon that presumably had military capabilities the president sparked a diplomatic row dealing a severe blow to the already strained ties between the U.S and China any little incident can become a catalyst that can derail the entire U.S China relationship

it has escalated a brewing Tech wall that one cent semiconductor chip the U.S Champion the free trade you know U.S losing all those moral grounds by doing that will America choke up China's right rise or will it only supercharge beijing's bid to become a technological superpower foreign [Music] the world was captivated by a large object flying over U.S airspace was it a spy vessel or a civilian weather balloon thrown off course more than a month after it was brought down it remains unclear if the object was part of China's vast aerial surveillance program or just a load of hot air certain is that it has sparked another round of tensions between the U.S and China 's decision to fly a surveillance balloon

over the continental United States is both unacceptable and irresponsible that's what this is about it's a violation of our sovereignty it's a violation of international law Steve Oaken once served in the administration of U.S former President Bill Clinton as Deputy general counsel at the U.S Department of Transportation he currently heads the American Chambers of Commerce in the Asia Pacific well what we've seen is really unprecedented where China violated U.S sovereignty by sending in a balloon that presumably had military capabilities to hover over the continental United States in particular over ballistic missile sites that has never happened before and this has caused a very serious reaction and strain from the United States towards China it had a large payload capacity it went over very specific sites in the United States at a relatively low altitude and clearly the Chinese denials do not fit with the facts as the United States see them right now the Chinese have maintained there was nothing nefarious in the balloon it was merely a civilian craft designed for weather instrumentation a balloon is actually meant for everyone to see a balloon could be visible through Naked Eyes a balloon does not carry a lot of Secrets for example it is very transparent and balloons especially weather balloons are used constantly by almost all countries in the world for collecting weather information wind patterns for example to predict disasters typhoons hurricanes Etc it is time for Washington and Beijing to calm down and refuse to be hijacked by an innocent harmless balloon incident nonetheless the balloon is just the latest spark in ongoing U.S China tensions begun when former U.S president Donald Trump took office in January 2017. both Nations traded

barbs over many thorny issues from trade to China's claim over the South China Sea Trump declared China as America's strategic competitor in the race for military geopolitical and technological dominance policy that has not changed under current President Joe Biden he's committed to work with China where we can advance American interest and benefit the world but make no mistake about it as we made clear last week if China threatens our sovereignty we will act to protect our country and we did [Applause] in October last year Preston Biden announced what could be the most devastating blow to the Chinese yet sweeping export curbs on Advanced semiconductors made with American Technology just like oil is absolutely necessary for all our Industries semiconductors are also absolutely necessary to empower almost everything that we use in our daily lives such as smartphones vacuum cleaners and rice cookers as well as they are useful for the latest military equipment and radar systems as well as artificial intelligence and Quantum computing in other words these tiny pieces of silicon are the lifeblood of today's modern economy [Music] in instituting the ban Washington's stated goal is to curb advancement in Chinese military and surveillance Tech ostensibly for national security reasons and with reports that the balloon was Guided by Advanced AI American concerns appear Justified to understand what is at stake we must look at what is at the heart of the ban the semiconductor microchip you know the transistor was invented way back in 1947 right after World War II right before that the switches actually look like this it's huge it's called vacuum tube the switches and the wires manipulate how something called electrons move around in a circuit electrons is what made up electricity so what really happened was that they found that as you move the switches into a material course silicon which is a crystal a crystal silicon basically the electrons move a lot faster they move about 10 times faster or even 100 times faster when they move faster they can then shrink down the size of these switches since the first integrated circuit was developed the technology has advanced by Leaps and Bounds current transistors have shrunk to the size of nanometers or one billionth of a meter the first integrated circuit was invented back in 1958 there are only 25 of these switches or 25 transistors on a one centimeter by one centimeter meter scale area of a chip today the same one centimeter Bond centimeter at four nanometer we're talking about 16 billion transistors so from 25 transistors it has increased to 16 billion and this is due to the continuous Improvement and advancement of these printing technology which is called lithography and all the processes that associated with patterning the transistors down to this scale it is a combined effort of lots of people and a lot of scientists and engineers and a lot of their analysis gone through this over several Generations the more transistors that can fit on a microchip the more computing power it has the latest smartphones for example use four nanometer processors a lot of Technology making chips especially Advanced generation became extremely expensive to be individually owned by companies so a lot of the semiconductor companies in the US started to adopt Foundry and fabulous type models that means they would want to take care of the design more of the design for the next generation and Outsource the chip production to a Foundry which is a specialized chip making house many of these Foundry firms are located in Asia which dominates semiconductors manufacturing with more than 70 percent of market share there are generally three stages of Chip manufacturing the first stage is the chip design and and this part is mainly done by American firms and then these firms Outsource the manufacturing to Asian firms then the last stage is known as offset and this stage involves assembling these chips testing their capabilities right and cleaning right these chips osat or Outsource semiconductor and test is the final stage before chips are sent for distribution it is what 66 year old Lee Yen Cho and his team do Lee Jen spent 17 years of his career in Shanghai working for taiwanese-based Semiconductor Company ASE he now runs stats chip pack a subsidiary of China's jset group of companies it is one of the leading semiconductor companies involved in the final stages of Chip making no one single country can do everything so the U.S in the past has been very good in their design they are Innovative Health spirit and entrepreneurial Spirit but however their construction may not be as efficient as those in Taiwan or Singapore half of the world's chips compared to China's semiconductor manufacturing International cooperation which produces a little over five percent of the world's chips and it does not yet have the technology to mass produce the most advanced ships those smaller than 7 nanometer as a result the country imported a whopping 378 billion dollars in semiconductors in 2020. currently China consumes more than 50 percent of global ships because China is the manufacturing Hub of the world now having said that China can only manufacture around 15 of global chips so China certainly depends on other countries such as Japan South Korea and Taiwan for the supply of these chips Biden's export ban places export curbs on the most advanced ships to China it also halts the sales of advanced chip making machines to the Asian country and it applies to any company that uses underlying U.S technology virtually all leading chipmakers worldwide but what is behind Washington's broadside on the Chinese tech industry [Music] the United States was once the Undisputed leader in semiconductor Manufacturing just over three decades ago the country accounted for almost 40 percent of the global manufacturing capacity but today only 12 percent of the chips are made in America none of the most advanced chips are produced on U.S soil [Music] Productions have now shifted to Asia in places like Taiwan South Korea Japan many using American Technology so when the pandemic hit the world hard government shutdowns and covet restrictions led to a severe Global chip shortage according to a report released by the U.S Commerce Department

the median supply of chips held by manufacturers dropped from 40 days worth in 2019 to less than five days worth in late 2021 in the pandemic we had semiconductor shortages and this exposed a clear strategic and economic resilience challenge in the U.S semiconductor supply chain to the point where we did not have the chips that we needed or the expertise that we needed in order to create a resilience chip supply chain so there was a lot of imperative there to then want to onshore some of the chip manufacturing back to America at the same time the Chinese have invested heavily into becoming a tech Powerhouse characterized by beijing's mate in China 2025 plan first announced in 2016 its main goal was to achieve seventy percent of self-sufficiency in semiconductors by 2025. the longer term goal is to surpass Western technological prowess I do think that the XI jinpings made in China 2025 certainly alarmed the U.S government

and here the uh you know the concern was not only the China's Tech wise but the pace at which China's Tech wise was taking place and at the same time the U.S China strategic rivalry was intensifying and therefore United States wanted to write uh limit China's technological development as soon as possible China's Tech rise as a national security threat especially alarming is the integration between China's private sector and Military establishment otherwise known as military civil Fusion it is the two-way transfer of Technology resources and information between military and civilian entities which would allow Beijing to modernize its Armed Forces what the Biden Commerce department and Biden's National Security advisor have indicated is that this process is speeding up in this time so there's more integration between the civilian and the military technology development which is creating a little bit of a security and economic challenge for America I don't think clipping China's rise is in the new U.S national interest what the U.S is is asking is what is in our national interest when it comes

certainly to our security and how do we make sure that we continue to have this vibrant economic engagement without harming our national security what's changing is that China is fusing the military and the economic more and more that is changing the U.S model for how to deal with that in China the companies are doing what they are supposed to do and in the philosophical sense everything you produce can be used by either the civilian side of the equation or by the military side of the equation if the United States wants to see a ghost on the wall let me assure you they will see ghosts splattered everywhere on the wall if they want to start with good intentions they will see Angels everywhere in the world China is not an enemy of the United States but that hasn't stopped the U.S from doubling down its Tech war against China and the semiconductor industry is seen as his massive trump card on October 7th last year the U.S announced sweeping export control

measures to curb the sale of advanced chips and equipment to China this follows the chips act signed into law last August which barred American citizens and green card holders from working with Chinese chip companies it is a multi-pronged strategy to Dent China's technological ambitions I think the USA has identified a critical area that could hurt China badly and the USA also knows that China does not really have many other options to respond to this if you're talking about rice cookers right calculators right vacuum cleaners the USA is not concerned that Chinese firms manufacture the chips that go into these machines but when it comes to the latest military equipments the latest Radio Systems the artificial intelligence the quantum Computing stuff that are necessary for the most advanced right digital economy the USA wants to contain China's development and progress [Music] production it allocates more than 50 billion dollars for domestic semiconductor research development and Manufacturing this would ensure American Primacy in the tech space the US is looking at China it's not trying to stop China what the US needs to do is be able to think of it as a track meet how do I outrun China how do I get to be faster how do I get to be stronger I do that by investing in the United States I do and and that's something that the the United States is doing now with the infrastructure act and how it's trying to to move much stronger on the green economy baden's package includes a 39 million dollar manufacturing incentive subsidizing the construction and expansion of semiconductor facilities companies like onsemi a us-based semiconductor manufacturer could stand to benefit manufacturing facility globally where not just the us we have a Fab in Japan in Korea so we definitely want to um we continue with the balance strategy and to support other customers but I think for us we definitely you know are invest you know are investing more in the U.S space for you know manufacturing facility and you know whatever support we got from the federal government is welcome you know especially the last two years when the supply demand become a balanced people start to realize this is such an important thing that's why every country start to um to invest that everyone wants to secure the parts so that you know everything can grow in the future the government subsidies come with strings attached companies that receive federal funds must curtail their expansion into China for at least a decade for the Chinese this is a continuation of the trade war that began under President Trump well I think the U.S chips Act is really very unfortunate and very uh it's a very bad policy probably because I mean U.S is uh the champion for free trade and U.S is is you know build up this global system with WTO with World Bank with IMF and all the Britain wood system that U.S is leading that for the last 75 76 years and so it's very unfortunate to see

you as now become a protectionist and then started this trade war with the Trump Administration now is the by the administration with the ship was Beijing is responding in kind it has pledged to invest more than a trillion yen to boost domestic chip capabilities but China is playing catch-up replacing the 300 billion dollars worth of chips that it Imports annually will take time China is the largest the buyers of importers of chips product uh the China spending on the ship's import is larger than China's spending on the petroleum import where 70 percent of petroleum of China's depends on import you can see how big how big is that China is the largest buyer of cheap product and you can see the companies in Taiwan in South Korea become the largest cheap company in the world because they're selling at the doorsteps of China how can you alienate and antagonize your biggest customer it's the wrong approach to start with by trying to kill China as the largest buyer of chips products of all kinds from different countries and regions you are killing your own semiconductor business to start with still the balloon instant has done little to Cooks Washington to lift the export ban instead the U.S outflanked China roping its allies into the export controls it has secured an agreement with the Netherlands and Japan to restrict sales of some Advanced chip making Machinery to China the agreement between the United States the Netherlands and Japan was one of the preconditions for creating the export controls and having them be a success we did not have agreement from the other nations at the time that the export controls were enacted however it was an essential component to ensuring their success the chips War definitely was launched and initiated promoted by no other country but the United States and in this context of a global chip war against China the governments of the Netherlands and Japanese government were very much forced onto the bandwagon of the United States if we really talk to the Dutch decision makers and to some extent the Japanese decision makers they do not want to go along with a maximum pressure from the United States why because the only way to nurture and grow their semiconductor businesses in their own countries is to work closely with their largest customer that is China how can anyone in the world truly believe that they can maximize their own benefit by killing their largest customer as the U.S begins to tighten the screws around China's semiconductor industry the Chinese tech industry is already feeling the strain will this Mark the end of China's dream of becoming a global technology superpower [Music] thank you 23 year old GAO yushun has Big Dreams the engineering graduate from Xian aspires to enter the field of artificial intelligence one day he believes in the power of Robotics and AI to improve human lives and so he decided to pursue a post-graduate degree in AI at the Hong Kong University foreign foreign [Music] to see his home country of China at the Forefront of innovation becoming a global technology leader um that vision of a more advanced and prosperous China came into sharp focus in March 2016.

that was when the Chinese leadership announced made in China 2025 the goal was for Chinese ascendancy and advanced technology Industries such as semiconductors Ai and Robotics and it hasn't looked back ever since in the area of semiconductors alone the government has pumped in some 150 billion dollars to close the technology Gap with the West but so far China has only reached a self-sufficiency rate of barely 17 in the semiconductor Manufacturing a far cry from the target of 75 by 2023 China has deeply in this complex Global Supply chains of cheap manufacturing therefore if China wants to achieve some level of self-sufficiency it has to be able to increase its standing in IPS softwares equipments materials in addition to the manufacturing capacity and to do this in a short period of time to me is a mission impossible in the meantime China must rely on ships from overseas to support its ambition s are primarily sourced from Taiwan South Korea and Japan together with the US they are part of the chip for Alliance producing some of the most advanced ships on the market if you look at today the advanced technology notes are typically the single digit nanometer type of nodes right when we call we talk about uh seven nanometer five nanometer and below this would today be called really advanced now really Advanced Cutting Edge stuff like you know let's say four nanometers found in your iPhone 14 that can only be made in a few places so this is some of the most complex and most uh micro scale Nano scale type of structure that men can ever make and and I think this is where is it signifies as a very deep technology China doesn't have the capacity to manufacture these Advanced chips these seven nanometer or below chips only come from Taiwan and South Korea and their Chinese Reliance on these markets or other countries is 100 China was a late come on the chips making because China was really think of this competitive Advantage if Us and other companies doing well China doesn't have to really reinvent the wheel and start over again you know trying to trust this global system now this global system led by U.S you know has has attacked China now and so China you know caught by surprise I would say 80 of the world's chip design and about half of the world's Global chip manufacturing equipment depends on U.S intellectual property some of these will be covered at President Biden's sweeping export curb in response China launched a case against the U.S with the World Trade Organization claiming the ban flouts WTO rules we have the U.S Champion the free trade I mean you know U.S losing all those moral grounds by doing that and the U.S already had the

sanction over a thousand Chinese companies China has a sanctioned none of them in the U.S you know I mean the world can see you know they are expecting U.S to take the leadership I mean is this kind of leadership that expecting uh you know so this is really very ironic free trade is businesses compete with businesses countries compete with country when it comes to trade but if you have a business competing with a government and then that government includes the military it's not free trade anymore and that's I think what people need to understand is that we're going into a different type of model you can't use the old model of saying well free trade everything should be open well everything should be open you can make that argument when it comes to business but what happens when business fuses with the military then that free trade argument doesn't work anymore the impact of the U.S export controls of advanced ships has been disastrous for many Chinese companies one of the earlier casualties is Huawei at its peak the Chinese Tech Giant overtook Apple in 2019 as the second best-selling smartphone manufacturer a year later is the past Korea's biggest technology company Samsung as the largest maker of smartphones today it has been crippled under the weight of the U.S sanctions huawei's struggles first began after the Trump Administration imposed export control measures on the company in May 2019 it alleged without evidence that the company was used by Beijing to spy on Americans Washington also banned all microchips and us-made component sales to Huawei it has since tumbled to the sixth spot in the smartphone market share so we know that Huawei has been pretty much removed from the global smartphone market and is another Chinese firm called high silicon which is wholly owned by Huawei has also received major negative impacts because of the U.S sanctions not only that there are other Chinese chip manufacturing or design firms so qingwa uni group for example has gone bankrupt so we do see some evidence that the U.S trade sanctions and the chip pressure has been harmful to China so far Shenzhen has been called the Silicon Valley of China driven by the tech sector the city's GDP overtook Hong Kong in 2019 but the U.S ban has been felt by many businesses here

like smart Jade a chip Distributing Company according to its CEO Tom Zhang many bigger tech companies in China would often go to him when they face supply chain issues um foreign [Music] the U.S export ban on Advanced ships to China has made his task a lot tougher these days [Music] um foreign also based in Shenzhen song Lee Jun is the CEO of win semi microelectronics a semiconductor manufacturer an engineer by training he founded his company more than 20 years ago it provides electronic control and integrated circuit solutions to top telecommunications and technology companies such as Oppo Huawei xiaomi and Vivo while he's also facing business difficulties he chooses to take another view s foreign [Music] pessimistic reports the band could set Chinese tech industry back by decades on the other hand prohibitions could end up accelerating China's advancement already Beijing has responded with a 143 billion dollar package to Spur research and development meanwhile there are rumors that Huawei is developing a three nanometer chip if it materializes this would be the company and China's most advanced any maximum pressure on China try to push China down in the semiconductor sector will only result in one thing and one thing only that is China will keep pouring millions of billions of dollars into semiconductor research and development and by another 10 years or so I truly believe China will no longer need to import any chips from anywhere in the world yes temporarily we will see likely a Slowdown in China's ability to be a technological superpower however we shouldn't take that as a prediction of the future China has been developing their technology Sphere for decades and will continue to do so but regardless of whether China comes out a hit in the end many feel hot done but the American actions um foreign [Music] I would say if any country bets on depriving the Chinese people or the right of development that will constitute the biggest crime against humanity in human history so be aware of that don't play with fire or try to hold China down depriving the Chinese people their right of Economic Development with the tech War unlikely to fizzle out in the near future what does this mean for the rest of the world [Music] [Music] [Music] on the sidelines of the G20 Summit in November presidents Joe Biden and Xi Jinping met for the first time since the pandemic their warm exchange sparked hopes of throwing trade relations hopes that were deflated less than three months later by the balloon incident I think this the balloon instance just shows how frazzi the U.S China relationship is at the moment so any little right incident can become a catalyst that can derail the entire U.S China relationship [Music] instead the tech War has escalated the Biden Administration is now working on further legislation to curb American Investment in advanced technology in China China meanwhile remains defiant is [Music] as the saying goes when two elephants fight the grass gets trampled that appears to be the case when the superpowers are on a collision course if China becomes increasingly self-sufficient in semiconductors countries that rely on the Chinese market will be caught out over 60 or around 77 billion dollars of South Korea's semiconductor exports flow into China same goes for Taiwan its chip sales to China represent around 60 percent of its semiconductor output amounting to some 155 billion dollars chipmakers in the region could suffer if they lose the Chinese market [Music] China has really you know accounts about 30 40 percent of a global chips uh demand and so this is a very unfortunate and it's going to cut profit lines cut the r D's budget cut the all the Innovation uh you know all the development r d photos chip companies including the US so I don't know how those companies can sustain that I mean I'm sure there's a lot of companies not happy with that in terms of the chips War I will be happy to bet with you eventually the ultimate loser will not be China why because China has the largest market for chips products and with the market you have huge amount of sustainability you can raise huge amount of funding to support r d and if anyone wants to apply maximum pressure on China try to kill China as the largest buyer of chips product they commit suicide by themselves they kill their own semiconductor businesses but at the same time there are opportunities to be found by picking sides I think some of these Asian firms and com countries perceive that in the longer one that they should go with the United States and here there's also some historical Essence in the 1986 the United States put pressure on Japanese chip manufacturing firms and that gave an opportunity for South Korea and Taiwanese chip firms to rise so given that history they the way they see the U.S chip pressure on China is that this gives them opportunity

to maintain their Competitive Edge over Chinese firms [Music] your license to continue its expansion of its Chinese facilities with this timeline it is looking to Pivot to other markets setting up manufacturing plants in U.S and Europe other huge multinational companies including Apple and Samsung are already shifting their manufacturing capacity out of China following the curbs foreign t means is that a lot of investment that used to be in China some of that has got to diversify out so some of that is diversifying into southeast Asia some of it's diversifying into India some into Eastern Europe some into into Central and South America some being you know re uh you know repatriated back to the United States so this this recognition that we can't ignore risk anymore is going to have and is having an impact and it's creating both challenges for business but a lot of opportunities certainly for countries in Southeast Asia the companies which deal with the less Advanced microchips it will be however business as usual because of the product we're doing are not the super high end like the wafer processing or certain specific software that goes into the manufacturing or design process I think that is not the concern and furthermore we have a sizable customer base including the Euro US Japan Taiwan so we are very International in that context so it's like any other Chinese based or Chinese registered company they are still operating around the world yeah so I don't think the trade ban is affecting jset as a group so in the if you look at recent export regulation for uh you know from U.S then that focus on more on the advanced Computing and also the artificial intelligence and this is not our Focus area so for us with the recent changes you know within and we don't see a significant the right impact to us but we always you know study and we always analyzed and analyze the detail to understand what we can do what we cannot do for our product but while these companies Escape The Fallout for now there are longer term risks if the ships War intensifies into a technological decoupling one outcome would be different standards and protocols where Chinese made ships no longer interface with American devices countries could also be forced to choose size whether to do business with China or the US where it's bad for everybody right including the US and China right but the game that we play now because the U.S China strategic rivalry intensifies it's not one of positive some game here we are not you know thinking about you know where to generate profits and so and so forth the game that we play is one of negative sum game the real question is who's going to disbenefit less and the USA is willing to Bear out the course so long as the China right suffers more from this decoupling process and Tech competition my view is that unless the Chinese government can come up with some sort of revolutionary technology to achieve some level of surface sufficiency China will definitely stand to lose [Music] sessions meeting President C called on his fellow countrymen to unite in the face of mounting challenges posed by the West to contain and suppress China's development a call which some likein believes they can answer [Music] um uh social um [Music] foreign no one can exclude China from the digital economy and the new economy that are unfolding as we speak China will be a leader and a major pillar in this new and exciting sector which will benefit mankind as a whole let's cooperate rather than kill each other if you want to kill your largest customer your largest customer in this case China in the semiconductor business will refuse to be killed it will bounce back and become more prosperous [Music]

2023-03-25 12:00

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