Friday, 23 October 2020



North Korea warnings over 'yellow dust coming from China'

16 hours ago
Screenshot of KCTV about yellow virus
image caption North Korean TV warned viewers that the "yellow dust" included "toxic material, virus, and pathogenic microorganism"

North Korea has warned its citizens to stay indoors over fears that "yellow dust" which blows in from China could bring coronavirus with it.

The streets of the capital Pyongyang were reported to be virtually empty on Thursday following the warning.

The secretive state claims to be coronavirus-free but has been on high alert since January with strict border closures and restrictions on movement.

There is no known link between the seasonal dust clouds and Covid-19.

However, they are not the only country to suggest a link. The BBC's Disinformation Team notes Turkmenistan also alleged virus-laden dust was the reason citizens were being told to wear masks. They have denied trying to cover up an outbreak.

'Invading malicious viruses'

State-controlled Korean Central Television (KCTV) broadcast special weather segments on Wednesday, warning of an influx of the yellow dust the next day. It also announced a nationwide ban on outdoor construction work.

Yellow dust refers to sand from Mongolian and Chinese deserts that blows into North and South Korea at certain times of the year. It is intermingled with toxic dust that for years has raised health concerns in both countries.

On Thursday, the Rodong Sinmun newspaper, a government mouthpiece, said “all workers… must clearly recognise the danger of invading malicious viruses” in response to the dust cloud, the BBC's Disinformation Team noted.

Embassies also reported receiving a warning about Pyongyang's dust concerns.

The Russian Embassy in Pyongyang said on its Facebook page the North Korean foreign ministry had warned it and other diplomatic missions and international organisations in the country about the dust storm, recommending all foreigners stay at home and tightly close their windows on Thursday.

Could dust clouds bring in Covid-19?

North Korean state media has reasoned that research linking the coronavirus to airborne transmission means it "should take the incoming flow of yellow dust seriously", reported the specialist news site NK News

The US Centres for Disease Control has said coronavirus can remain suspended in the air “for hours”. However, it also says it is extremely rare for someone to be infected this way - especially outdoors. The main way people get infected is from standing in close proximity to someone who is infected who then coughs, sneezes or talks, spreading the virus through droplets.

Media in neighbouring South Korea has also dismissed the suggestion that yellow dust from China could spread Covid-19 to the North as impossible, according to NK News.

media caption
North Korea's Kim Jong-un chokes up during speech

Despite claiming the country has no cases of coronavirus, there are deep fears about Covid-19 in North Korea and leader Kim Jong-un has been holding high-level meetings to ensure tight restrictions remain in place.

Analysts have said it is highly unlikely that North Korea has not experienced any coronavirus cases at all.

The dust had cleared from the Korean peninsula by Friday and was forecast to stay that way on the weekend.


Huawei’s revenue growth slows as US tightens sanctions

Future growth at Huawei could also be hurt by declines in its consumer business, which accounts for more than half of its revenues © AFP via Getty Images

Revenue growth at Chinese technology group Huawei slowed during the third quarter in the face of new US sanctions and the global economic downturn prompted by the coronavirus pandemic.

Huawei said on Friday that revenues in the first nine months of the year were Rmb671.3bn ($100.5bn). That translates into a 3.7 per cent year-on-year increase in the July to September period, a drop from the 27 per cent growth recorded in the third quarter of 2019. The company had a compound annual revenue growth rate of 21 per cent for the past five full years.

The slowdown comes as the Trump administration has tightened its chokehold on Huawei. US sanctions that took effect from mid-September forced companies worldwide to obtain licences to sell American-made technologies to Huawei, largely cutting it off from its chip suppliers.

Future growth at Huawei could also be hurt by declines in its consumer business, which accounts for more than half of its revenues.

Huawei did not provide a breakdown of sales for this business segment. But figures the company provided to analysts, including research firm Canalys, showed smartphone sales in China fell 18 per cent year on year in the third quarter, marking their first-ever such decline. The domestic smartphone market had helped prop up Huawei sales since the first US sanctions were imposed in 2019.

“It doesn’t matter how much demand the Chinese market has now, because Huawei has limited component supply,” said Nicole Peng, Shanghai-based vice-president at Canalys, referring to the latest US restrictions.

Ms Peng said Huawei might be attempting to “strategically prolong” its presence in the global smartphone market by throttling sales in China in order to hold back inventory for elsewhere. Huawei’s strong relationships with local distributors and its established customer base could help it win back buyers in China if and when its supply issues are resolved, she said.

There are already signs that shortages of components due to Washington’s sanctions are taking their toll on the company. Huawei has suggested its latest flagship Mate 40 smartphone, announced on Thursday, could be its last after admitting to “shortages” in sourcing the high-end chips needed for these products.


Top White House Official Criticizes ‘Totalitarian’ Xi in Chinese

Peter Martin
  • Mandarin-speaking Pottinger attacks Xi’s ‘totalitarianism’
  • Speech reflects U.S.-China tensions at highest in a decade
Matthew Pottinger has warned democratic nations not to shy away from criticizing Beijing and its leader, Xi Jinping.
Matthew Pottinger has warned democratic nations not to shy away from criticizing Beijing and its leader, Xi Jinping. Photographer: Jabin Botsford/The Washington Post via Getty Images

A senior White House official delivered a speech in Mandarin attacking Xi Jinping’s “totalitarianism” and calling on the Chinese people to research the “truth” about the country’s oppression of Uighur Muslims.

The remarks by Deputy National Security Advisor Matthew Pottinger, to the Policy Exchange think tank in London, are likely to be seen as a deliberate provocation by the Chinese government, which closely controls the information that reaches its citizens through censorship of the Internet and media outlets.

Pottinger, a former journalist who was based in China, urged his audience to meet President Xi Jinping’s “technologically-enhanced totalitarianism” with “reciprocity and candor,” warning democratic nations not to shy away from criticizing Beijing. “By portraying truth-telling as an act of belligerence, autocrats try to badger democracies into silence,” he said.

Tensions between China and the West are at their highest in decades over issues including Beijing’s hacking and control of key technologies, handling of the Covid-19 outbreak, tightening grip over Hong Kong and treatment of Muslim Uighurs in China’s Xinjiang region.

Pottinger spoke at length about the Chinese Communist Party’s efforts to collect data on citizens around the world, as well as its efforts to influence politics of democratic societies. He warned of the “party’s sheer ambition to wed traditional Leninist techniques with powerful new tools of digital surveillance,” adding that even children are “fair game under Beijing’s rules of political warfare.”

He also said that there was no justification for China’s use of detention centers in Xinjiang, calling them “concentration camps” and urging Chinese citizens to research the truth about the Communist Party’s policies there. China has denied human rights abuses in the region and says that the centers are used to provide vocational training.

Jordan Schneider, an adjunct fellow at the Center for New American Security’s Technology and National Security Program, said the speech’s impact may be muted inside China.

“Xi has very broad-based support across all levels of Chinese society,” Schneider said.

Still, the speech is emblematic of the strained ties between the world’s two largest economies. Pottinger said that a second-term Trump administration would “build on the dynamics” now in place in the relationship, without providing more details.

Wednesday, 21 October 2020


State Department Approves $1.8 Billion in Weapons for Taiwan

Updated on 
  • Land attack missiles and mobile rocket systems included
  • Approval follows the sale of 66 new F-16 fighter jets

The State Department approved $1.8 billion in new arms for Taiwan and submitted the package to Congress Wednesday for a final review in a move aimed at improving the island’s self-defense capabilities against a long-threatened invasion by China.

The package includes 135 SLAM-extended-range land attack missiles from Boeing Co. valued at $1 billion if the entire sale goes through, $436 million for Himars mobile artillery rocket systems made by Lockheed Martin Corp. and $367 million in surveillance and reconnaissance sensors from Raytheon Technologies Corp. to be mounted on aircraft.

The submission to Congress for a 30-day review, which is unlikely to draw opposition, comes two months after the U.S. and Taiwan completed the sale of 66 new model F-16 Block 70 aircraft from Lockheed.

China’s Foreign Ministry spokesman Geng Shuang criticized that sale as “severe interference in China’s internal affairs” that would “undermine China’s sovereignty and security interests.” He vowed retaliation including sanctions against the U.S. companies involved.

The latest arms package comes as tensions between Taiwan and China rise following Beijing’s increasingly tough approach toward Hong Kong. China’s Communist Party -- which claims democratically run Taiwan as part of its territory -- has steadily increased its diplomatic and military pressure on Taiwan. In recent weeks, the People’s Liberation Army has stepped up incursions into the air-defense-identification zone around the island.

The land-attack missiles in particular “will improve the recipient’s capability to meet current and future threats as it provides all-weather, day and night, precision attack capabilities against both moving and stationary targets,” State said.

The U.S. has sought to push back on the Chinese pressure. Two senior U.S. officials, including Undersecretary of State Keith Krach, have visited Taiwan since August in a show of support.

Secretary of State Michael Pompeo said in an Oct. 9 interview on the Hugh Hewitt show that the “administration has been relentless in the work that we have done to make sure that the understandings that we’ve had between ourselves and China as they relate to Taiwan are delivered upon.”

“We are going to make sure that we live up to all of the obligations we have to Taiwan,” Pompeo added.


Apple’s Shifting Supply Chain Creates Boomtowns in Rural Vietnam

  • Global electronics factories are transforming rural region
  • Bac Giang citizens who couldn’t buy meat now plan for college
Workers make their way to the factories in Van Trung Industrial Park in Bac Giang Province.
Workers make their way to the factories in Van Trung Industrial Park in Bac Giang Province. Photographer: Linh Pham/Bloomberg

Not long ago Vietnam’s Bac Giang province was one of the nation’s poorest regions, known for producing rice, lychees and poultry dubbed “running chicken.” That was before the global tech supply chain shifted its way.

Now officials in the rural area north of Hanoi host representatives from Apple Inc. and Hon Hai Precision Industry Co. The growth in foreign investment is almost doubling every year -- even during the coronavirus pandemic -- and the province forecasts the value of exports this year will reach $11 billion, a tenfold leap in six years. Residents have swapped loud, dirty motorbikes for new Honda two-wheelers while others drive Toyota SUVs and Mercedes sedans on freshly paved roads.

“Life is heaven now and it’s thanks to the factories,” said Nguyen Van Lanh, 64. His family, which once couldn’t afford to buy meat, runs boarding rooms for workers built with their factory salary savings. One relative with a loan business for plant employees drives a red Mercedes-Benz.

The boom in Bac Giang highlights how the shift in the world’s supply chains is touching regions previously left behind. Vietnam’s ability to attract more sophisticated manufacturing is accelerating with rising Chinese labor costs, the U.S.-China trade war and logistics vulnerabilities amid the epidemic, which the nation’s Communist leaders have so far successfully curtailed.

Shifting Sands

During the decades after the Vietnam War as the country opened its borders to foreign investors and trade, Bac Giang remained poor. Its 2010 per capita income was $650, about half that of the nation overall, according to government statistics. The region’s flood-prone plains produced low-yielding crops, so its residents looked for factory jobs some 1,700 kilometers from home in the south. Now the province is experiencing its first boom as per capita income is forecast at $3,000 this year.

Manufacturers are knocking on the doors of Vietnam’s northern provinces and committing billions of dollars to set up operations, including Samsung Electronics Co., where it is producing about half its smartphones. Apple assembly partner Pegatron Corp. plans to invest $1 billion in the northern port city of Haiphong, local media reported, following moves to Vietnam of other suppliers for the Cupertino, California company. Apple recently posted Vietnam job openings, including for a mechanical quality engineer, and managers for supply chain operations and government relations.

Vietnam’s success, though, is creating a swelling trade surplus with the U.S., its largest export market, reaching $34.8 billion by July. Driven in part by device shipments, the imbalance triggered tariff threats. U.S. Trade Representative Robert Lighthizer announced an investigation into Vietnam’s currency policy earlier this month.

For now, investments from electronics suppliers continue pouring in as other sectors struggle amid the pandemic. The country’s tourism revenue has been slashed by about 50% and garment and other factories are laying off tens of thousands of workers as exports in the trade-dependent economy stall. Economic growth is forecast to slow to 2%-3% in 2020 from last year’s 7.02%, though the government expects a recovery to 6%-7% between 2021 and 2025.

Global Electronics Factories are Transforming the Vietnam's Rural Region of Bac Giang Province
Construction of a new hotel in Viet Yen district. Photographer: Linh Pham/Bloomberg

Vietnam’s low costs, political stability, investor-friendly policies, improving infrastructure and state-backed efforts to promote tech startups make the country appealing, said Gene Tyndall, a supply chain expert at Atlanta-based eMATE Consulting.

Cows, Factories

In the heart of Bac Giang, where cows still roam the streets, a six-lane thoroughfare now replaces a one-lane road. Almost two dozen industrial parks for factories are proposed as pile drivers and cranes dot the landscape. The local economy expanded by 10.9% in the first nine months of 2020 from a year earlier compared with 2.12% growth for the entire country during the same period.

“We are living the changing of the global supply chain,” said Nguyen Dai Luong, deputy chairman of the People’s Committee in Viet Yen district, where four of the province’s five operating industrial parks are located. The pace of manufacturers moving to Bac Giang has surged since 2016 as companies poured $3.8 billion into the province, a fourfold increase from the previous four years.

The government is building a river port for transporting parts and, at Apple’s request, provided land for workers’ housing near the 16-hectare complex of Luxshare Precision Industry Co., the world’s biggest manufacturer of AirPods, Luong said.

Global Electronics Factories are Transforming the Vietnam's Rural Region of Bac Giang Province
Workers make their way to the Luxshare ICT factory in Van Trung Industrial Park, Viet Yen district. Photographer: Linh Pham/Bloomberg

Bac Giang has nearly full employment, with residents of nearby provinces rushing in to chase the electronics gold rush at companies such as Luxshare. The Chinese company will hire 20,000 workers in the last four months of the year, bringing the total to 47,000 in his district, Luong said. The company employs 12,000 elsewhere in the province, he said.

Higher Salaries

Electronics assembly line workers can earn an after-tax salary of about $5,500 a year, including overtime and bonuses, more than the nation’s average annual salary of less than $3,000, Luong said.

Nguyen Thi Ha, 22, mixed concrete for a construction company before joining an assembly line making 10 million dong ($431) a month. “I used to earn about half of that working under the sun and sometimes in the rain,” said Ha, who declined to identify her Taiwanese employer.

Factory workers pack restaurants like Lao Chu Quan, downing pitchers of beer, plates of pork cooked on an outdoor rotisserie and fresh fish hot pot. “They spend freely,” said Nguyen Thi Ly, the 26-year-old manager whose family owns a Mazda automobile and five new motorbikes after having “almost nothing” before the factories came. “Our lives have changed, amazingly.”

Global Electronics Factories are Transforming the Vietnam's Rural Region of Bac Giang Province
Restaurants and services for factory workers on a street near Van Trung Industrial Park. Photographer: Linh Pham/Bloomberg

The sudden growth comes with a cost: Electronics assembly lines are high-pressured. Hoang Phuong Duy, 30, participated in a brief September labor strike at Luxshare that was triggered by a change in overtime pay calculation, leading to tense standoffs between workers and supervisors who don’t speak Vietnamese.

Duy said the company quickly resolved the dispute to the workers’ satisfaction. “It’s very hard working on assembly lines,” he added. “We always have to be very fast with an intense concentration while working long hours.”

Vietnam’s challenge going forward is to ensure that education improves so the country can avoid the “middle-income trap” once factories leave as costs eventually rise and pivot to a high-skilled economy, said Scott Rozelle, a Stanford University development economist.

A high-quality education for future generations is the dream of Bac Giang residents such as boarding house owner Lanh, who as a child harvested rice from a “basket boat” on flooded fields where factories now rise up.

“We hardly had anything to eat and clothes to wear,” he said of his childhood. Gazing down at his 3-month-old granddaughter, he added: “She will have plenty of food to eat and the best clothes to wear. We will send her to a university so she can have more opportunities than we ever had.”


The U.S.-China Conflict Over Chips Is About to Get Uglier

The ability to make semiconductors for everything from artificial intelligence to smartphones has become a national security issue, and the U.S. election won’t change that.

Twelve inch silicon wafers being manufactured at a TSMC facility in Taiwan.
Twelve inch silicon wafers being manufactured at a TSMC facility in Taiwan. Source: Taiwan Semiconductor Maufacturing Co. Ltd.

On a scorching hot day in late August, representatives of Taiwan’s government and industry crowded into the clinical cool of a state-of-the-art semiconductor facility for a symbolic moment in the global tech conflict.

They were attending the opening ceremony for a training center built by Dutch company ASML Holding at a cost of about $16 million, small change for an industry used to spending $10 billion or more on a single advanced manufacturing plant.

The real value of the site in the southern city of Tainan is strategic: It’s one of just two such facilities outside the Netherlands capable of training semiconductor engineers to fabricate cutting-edge chips on ASML machines. Fellow U.S. ally South Korea hosts the other — and Washington is working hard to ensure China never acquires the same technology.  

relates to The U.S.-China Conflict Over Chips Is About to Get Uglier
Taiwan Semiconductor Manufacturing Co. is the world's largest contract chipmaker.Source: Taiwan Semiconductor Maufacturing Co. Ltd.

As the U.S.-China confrontation takes root, the ability to craft chips for everything from artificial intelligence and data centers to autonomous cars and smartphones has become an issue of national security, injecting government into business decisions over where to manufacture chips and to whom to sell them. Those tensions could kick into overdrive as Communist Party leaders set a five-year plan that includes developing China’s domestic technology industry, notably its chip capabilities.

Semiconductors made from silicon wafers mounted with billions of microscopic transistors are the basic component of modern digital life and the building blocks of innovation for the future. They are arguably one of the world’s most important industries, with sales of $412 billion last year; scale that up to the electronics industry that depends on chips, and it’s worth some $5.2 trillion globally, according to German manufacturers.

relates to The U.S.-China Conflict Over Chips Is About to Get Uglier
Semiconductors are the basic component of modern digital life and the building blocks of innovation for the future. Source: Taiwan Semiconductor Manufacturing Co. Ltd.

Politics is roiling that business model, sparking a drive for more autonomy from the U.S. to China, Europe and Japan. 

“We’re in a new world where governments are more concerned about the security of their digital infrastructure and the resiliency of their supply chains,” said Jimmy Goodrich, vice president of global policy with the Washington-based Semiconductor Industry Association. “The techno-nationalist trends gaining traction in multiple capitals around the world are a challenge to the semiconductor industry.”

At once highly globalized and yet concentrated in the hands of a few countries, the industry has choke points that the U.S. under the presidency of Donald Trump has sought to exploit in order to thwart China’s plans to become a world leader in chip production.

Semiconductor Production

The industry is divided into three main areas, though businesses are integrating other specializations to centralize their supply chain

Washington says Beijing can only achieve that goal through state subvention at the expense of U.S. industry, while furthering Communist Party access to high-tech tools for surveillance and repression. China rejects the allegations, accusing the U.S. of hypocrisy and acting out of political motivation.

For both sides, Taiwan, which is responsible for some 70% of chips manufactured to order,  is the new front line.

Beijing is increasingly hostile toward Taiwan, a democratically governed island it regards as a renegade province. Taiwan Semiconductor Manufacturing Co.’s status as the world’s largest contract chipmaker — a trend taking over the industry — the go-to supplier for Apple Inc. and the focus of next-generation chip-making, adds another dimension to China’s enmity, and to its standoff with the U.S.

Taiwan China
A Taiwanese Air Force F-16 follows a Chinese Army Air Force H-6 bomber as it passes near Taiwan in February. Beijing has become increasingly hostile toward Taiwan.Source: Republic of China Ministry of National Defense via AP

TSMC has become “turf that all geopolitical players want to secure,” founder Morris Chang said in November.

Just a couple of kilometers from the new training center, cranes dot a massive construction site where TSMC is building “fabs” in which it will manufacture the most advanced chips in the world — chips that are no longer available to China’s Huawei Technologies due to U.S. export controls. Huawei used to be TSMC’s second-largest customer, accounting for 14% of sales; those shipments stopped in September.

The White House has also imposed export restrictions on China’s largest chipmaker, Semiconductor Manufacturing International Corp., having already squashed Fujian Jinhua Integrated Circuit Co., once among Beijing’s biggest hopes to climb the chip ladder. The U.S. is also reaching out to key players at home and abroad to ask them to reconsider their relations with China.  

U.S. President Donald Trump And China President Xi Jinping Deliver Press Statement
President Trump, left, and President Xi Jinping, in Beijing, in 2017. The White House has imposed export restrictions on China's largest chipmaker SMIC. Photographer: Qilai Shen/Bloomberg

China’s intentions are so alarming to America because chips can be dual-use items with military applications, according to a former official familiar with the U.S. administration’s efforts. “They are the fundamental basis of our qualitative military advantage, from missiles to radars to submarines,” the official said.

After decades when the industry was encouraged to go global, Trump is attempting to reel it back home. The CHIPS for America Act introduced to Congress in June aims to set up incentives to support semiconductor manufacturing and research in the U.S.

One executive at a Chinese semiconductor company, asking not to be named due to commercial and political sensitivities, said three of its deals had been aborted because of concerns raised by the Committee on Foreign Investment in the U.S., or CFIUS, which reviews the national security implications of transactions. Germany has also been effectively cut off, making any deals very difficult, the person said.

China “firmly opposes the unjustified suppression” of its companies by the U.S. “under the weakest pretext of national security,” and will continue to defend them, Foreign Ministry spokesman Wang Wenbin told reporters in late September.

China — the world’s biggest semiconductor market, accounting for more than 50% of all chips sold — isn’t standing by as its high-tech ambitions are kneecapped. That outsized demand means many major deals need Beijing’s sign-off: Qualcomm gave up its pursuit of NXP Semiconductors in 2018 after failing to win approval from China.

China’s five-year plan for the chip industry will lend it the same strategic importance Beijing gave to its atomic bomb program. What's more, a law passed Oct. 17 may allow China to hit back at the U.S., with speculation that it could prompt export controls on rare earths used in chip production.

Still, the rolling restrictions imposed by Trump haven’t just hit China’s chip capabilities but are upending the entire industry. And there’s scant sign of a climbdown, whoever wins the U.S. election in November.   

US President Barack Obama looks at his r
President Obama handles an Intel wafer while touring a facility at Intel Corp. in Hillsboro, Oregon, in 2011. The Obama administration first acted on the threat from China.Photographer: Saul Loeb/AFP via Getty Images

Citing the need to promote “digital sovereignty,” the European Commission is exploring a 30 billion-euro ($35 billion) drive to raise Europe’s share of the world chip market to 20%, from less than 10% now.  

Japan is also looking to bolster its domestic capacity. At least one Japanese delegation traveled to Taiwan in May and June this year in the hope of convincing TSMC to invest in Japan, a person with knowledge of the visit said. But TSMC announced in May that it was building a $12 billion facility in Arizona, and the company declined to receive any foreign visitors seeking to woo it, said another person familiar with the company’s thinking. Both asked not to be named discussing corporate strategy.

Meanwhile South Korea, home to Samsung, the No. 1 memory chipmaker, is striving for more self-reliance after Japan imposed export curbs last year on chemicals used in semiconductor manufacture during a flare-up in the countries’ tensions over Japan’s wartime past.

While the U.S. remains dominant with giants like Intel Corp and Qualcomm and a virtual monopoly on the software essential to chip design, “there’s no region in the world that can proclaim strategic autonomy in semiconductors,” said Jan-Peter Kleinhans, director of the Technology and Geopolitics project at Berlin-based think tank Stiftung Neue Verantwortung. “Take out any of these players and the value chain falls down.”

Chip Industry Choke Points

The industry’s biggest companies are siloed in just a few countries

Source: Bloomberg data

Note: Samsung revenue figures are for its semiconductor segment.

In January, days before Trump signed an initial trade deal with China, Secretary of State Michael Pompeo sat down for dinner with around 30 CEOs in Silicon Valley. He was the guest of Keith Krach, a 30-year veteran of the tech scene who was appointed undersecretary for economic growth in June 2019.

Pompeo had a message for them: China’s Communist Party “is a threat to your companies because they don’t want to compete, they want to put you out of business,” Krach recalled him saying, he told a virtual conference of the German Marshall Fund of the United States on Sept. 29.

Taiwan US
From left: Keith Krach, Taiwanese president Tsai Ing-wen, and TSMC founder Morris Chang inside Tsai’s presidential residence in Taipei in September.Source: Taiwan Presidential Office

Trump may have weaponized the semiconductor value chain, but it was the Obama administration that first acted on the threat posed by China, unveiling a semiconductor strategy in January 2017 as one of its last acts. Trump picked up the baton, but the nature of the supply chain means that others are in the U.S. line of sight.

Israel — a high-tech R&D hub where Intel is the largest private employer — exported semiconductors worth about $2.1 billion last year, with about half going to China, data compiled by UN Comtrade shows.

That closeness to China risks becoming a liability. Zvika Orron, a partner at Israel’s Viola Ventures who leads semiconductor investing, said there’s a hesitancy on the Israeli side to look to China because of worry that Chinese funding could imperil future U.S. deals. Carice Witte, founder of the SIGNAL nonprofit focused on Israel-China ties, said the U.S. is bound to “start asking more questions.”

The U.K. is another pinch point thanks to Arm Ltd., whose instruction set — the basic code that allows chips to communicate with software — underlies everything from smartphones to the world’s fastest supercomputer. Arm currently sells to China, but the company’s takeover by Nvidia Corp puts that business in doubt. If the $40 billion deal wins regulatory approval, Arm would fall under American jurisdiction and become even more subject to U.S. export controls.  

Applied Materials 300mm Wafer Manufacturing Plant
A technician monitors the manufacture of silicon wafers in Silicon Valley. After decades when the industry was encouraged to go global, Trump is attempting to reel it back home.Photographer: David Paul Morris/Bloomberg

While the U.K. government has yet to show its hand, it allowed the sale of Arm to Softbank of Japan in 2016, so wouldn’t normally be expected to intervene now. But the newly strategic nature of the industry has prompted lawmakers to call for a review of the deal’s implications. Here too there are concerns at being caught between the U.S. and China.

Losing a world-class technology company to the U.S. for the Department of Justice to “weaponize” is not a good place to be, according to a person with knowledge of British national security considerations. The risk, they said, is a U.K. strategic asset becomes “recognized as part of the U.S. arsenal” in its campaign against China.

Over the Taiwan Strait on mainland China, the mood at the 2020 World Semiconductor Conference in Nanjing in late August was gloomy. Chinese executives worried what the Trump administration might do next to hobble Beijing’s progress.

“The conflict remains very fluid, which makes it impossible to predict what next moves both sides are going to take,” said Huang Yan, application and sales director at Senodia Technology, a Shanghai-based chip design company that develops sensor chips for smartphones.

China is on course to import $300 billion of semiconductors for the third straight year, underscoring its dependence on U.S. technology. That’s something President Xi Jinping is determined to end.

Xi has pledged an estimated $1.4 trillion through 2025 for technologies from artificial intelligence to wireless networks. A focus of Beijing is to accelerate research into so-called third-generation semiconductors — circuits made of materials such as silicon carbide and gallium nitride, a fledgling technology where no country dominates.

Yet without silicon capabilities it will be difficult for China to build a proper semiconductor industry, said a senior TSMC official. Another person from a company involved in third-generation chip production said designing them is an art, and even poaching a team of designers won’t necessarily guarantee success.

The consensus is it won’t be easy for China to catch up, especially at the cutting-edge where TSMC and Samsung are producing chips whose circuits are measured in single-digit nanometers, or billionths of a meter. SMIC would have to double annual research spending in the next two-to-three years just to prevent its technology gap with those companies widening, says Bloomberg Intelligence analyst Charles Shum.

The tussle raises the prospect of a broader decoupling of the global industry with two distinct supply chains. As with 5G, the question then becomes one of the extent of each system: Does China’s high-tech gravity pull in Southeast Asia and parts of Europe, or is it confined to its immediate neighborhood? How many allies will side with the U.S.?

To be sure, the chip industry is still thriving, with the benchmark Philadelphia Semiconductor Index up about 30% this year. Geopolitics is now a feature of boardrooms, said the SIA’s Goodrich, but 5G and AI are likely to cause more market upheaval.

The direction of travel still worries key players. Shares of Micron Technology Inc., the largest U.S. chipmaker, fell in September after it was forced to halt shipments to Huawei, its biggest customer.

Complete decoupling would harm U.S. competitiveness and hurt China, raising the prospect of less money for R&D, slowing innovation, said Goodrich. “A world in which the U.S. and China are independent from one another is a negative outcome for everyone.”


U.S. Escalates China Tensions With Further Media Restrictions

Peter Martin
  • Six more publications are designated as ‘foreign missions’
  • Move is part of tit-for-tat between nations over media outlets
U.S. Adds Further Chinese Media Curbs
U.S. Adds Further Chinese Media Curbs

The U.S. designated six more Chinese publications as “foreign missions,” adding to the list of media outlets it describes as controlled by Beijing which must meet requirements similar to those imposed on embassies and consulates in America.

The outlets include the Economic Daily, which provides an important window into Beijing’s economic views, and the Jiefang Daily, the official publication of Shanghai’s powerful Communist Party Committee. The others -- Yicai Global, Xinmin Evening News, Social Sciences in China Press, and the Beijing Review -- are less widely known.

President Trump Meets With China's Vice Premier Liu He
Michael Pompeo Photographer: Al Drago/Bloomberg

“They are all substantially owned or effectively controlled by a foreign government,” Secretary of State Michael Pompeo said Wednesday in a briefing. “We’re not placing any restrictions on what these outlets can publish in the United States. We simply want to ensure that American people, consumers of information, can differentiate between news written by a free press and propaganda distributed by the Chinese Communist Party.”

It’s the latest tit-for-tat action in the row between the U.S. and China over media freedom. In February, the U.S. designated five Chinese media outlets “foreign missions,” including Xinhua News Agency and the China Daily. Beijing responded by expelling more than a dozen journalists from three American newspapers. The two sides are also embroiled in an ongoing dispute over journalist visas, with each delaying the renewal of each other’s press credentials.

Media freedom has long been a point of U.S.-China friction. Whereas American media companies are largely private and protected by the First Amendment, China’s news organizations are either state run or closely censored. All are overseen by the party’s Central Publicity Department. Chinese government spokespeople have repeatedly condemned the “unreasonable suppression” of the Chinese media in America.