About 3 years ago, when the economic conflict against China started in earnest (remember Trump’s Trade War), quite rightly chips were defined as a critical issue. I made a prediction at the time that what we probably could expect from China is some kind of leapfrog in technology. This kind of leapfrog is easily understood with an African example. Africa leapfrogged land telephone lines and installations, as they went direct to cell phones. The issue with chips is that the machinery used to fabricate these is highly complex, the total environment is highly technical, and every little process has intellectual property rights registered. It is not easy and very expensive to enter the market of fabricating these little chips.
Here is a short description of chips, integrated circuits and semiconductors as it gets complex.
We’re seeing this leapfrog starting in China while we see the USA ‘romancing’ Taiwan only in order to take their chip manufacturing to the US mainland and sanctions on any attempt by China to manufacture their own. The cost however is rising and I’ve seen estimates of a whopping 50% increase in the end price to the consumers of the chips.
US blocklists YMTC, a major Chinese semiconductor company that offers prices 20% below market
Having the attention of experts for the speed at which it is outperforming the competition in the semiconductor market, the banning occurred after Republican Senator Marco Rubio’s campaign with National Intelligence to denounce the company as a risk to US security, which interrupted an agreement by Apple to acquire the 3D NAND chip from YMTC.
National security? Well, no. It’s yet another example of innovation that the USA cannot countenance because it threatens its hegemony.
China though has had a breakthrough in a new technology.
“Huawei patented a breakthrough in sub-10 nanometer microchip fabrication. This was an advance in extreme ultraviolet #lithography, dominated only by the Netherlands-based #ASML. 🧵 1/2”#Huawei #semiconductor #China #AI pic.twitter.com/oOc5jsgp62
— China4Tech (@China4Tech) January 12, 2023
If we take a broader look at the trade environment, and take into consideration that China has now signed Belt and Road Initiative cooperation agreements with all five Central Asian countries and this effort is still expanding, one fab plant in the USA with say a 50% more expensive product, leaves us with two conclusions.
- One chip fab plant in the USA is too little too late and too expensive.
- The alignment of the Eurasian Economic Union’s development with the Belt and Road Initiative will take this market, as well as others, for example, equipment for solar panels.
New installations of solar panels in the U.S. fell 23% due to the boycott against China. Trade barriers stem from claims of alleged human rights violations in Xinjiang. 🧵 1/2 pic.twitter.com/sNsyABAJhN
— Dongsheng News (@DongshengNews) January 10, 2023
We say that Europe is shooting itself in the foot with Russian sanctions. The USA is shooting itself in the foot with technological sanctions while hiding itself behind a facade of ‘human rights’.
These Orwellian sanctions and measures instituted against others, will have to lead to more Orwellian measures to reduce the first Orwellian measures.
Or the world will simply ignore them, as South Africa just did. Michael Hudson always says that debts that cannot be paid, will not be paid. South Africa said that sanctions that are odious, will not be obeyed.
A sanctioned Russian ship (Lady R) docked in Simonstown, South Africa’s navy base, despite an alert from the US embassy the ship was under sanctions. South Africa ignored this and further stated: the Minister of Defence and Military Veterans, Modise, criticized the US for attempting to intimidate African nations into not doing business with Russia. African nations should reject the Countering Malign Russian Activities in Africa Act, which aims to penalize any African companies or individuals conducting business with Russia.
We can expect more of this, that sanctions simply will be ignored.