US starts to panic about the chip crisis it did so much to create
It turns out that when governments muck about with markets there are sometimes unintended consequences.
Earlier this week we reported on a global chip shortage brought about, in part, by unilateral US action designed to prevent Chinese companies getting hold of semiconductors containing American intellectual property. Quite reasonably, Chinese companies such as Huawei them tried to stockpile as many of these chips as they could before the bans came into force. That, in turn, prompted everyone else to stockpile too, in case supply ran out.
And that’s exactly what seems to be happening now, a phenomenon exacerbated by further increased demand on the presumption that we’ll be allowed to leave the house some time this year. With pretty much everything having some kind of chip embedded these days, that’s obviously a problem, one governments are being forced to address.
Reuters reports that the Biden administration is “currently identifying potential chokepoints in the supply chain and actively working alongside key stakeholders in industry and with our trading partners to do more now.” That’s nice, but it’s not clear what they can do, at least in the short term.
It seems one of the main reasons this has become political in the US is not simply because of Biden’s executive order frenzy apparently designed to erase Trump from history, but because it’s starting to hit the bottom lines of some of its biggest companies. Hardest hit seems to be the automotive sector, with GM openly lamenting its declining profits.
This is probably why Europe is starting to sweat too, with Bloomberg reporting EU plans to build an advanced chip fab (presumably in France or Germany). That role was supposed to be fulfilled by GlobalFoundries, but it’s an indictment of how that project has stalled that it’s barely mentioned in the Bloomberg piece.
That the US is being forced to act in this way must be a source of immense schadenfreude for China. In today’s highly globalised economy it’s impossible to control the effects of mucking about with one bit of it. While Biden had no part in imposing the unilateral sanctions, their unintended consequences are now his problem and an early reminder of the limits of rule by executive decree.
What the US can do is to lift the sanctions against Chinese companies, like Huawei and SMIC, to allow the Dutch ASML to deliver the EUV machines that were ordered by the Chinese chip manufacturers. That’s one course of the action.
The other course of action can be trying to keep the sanctions against China which will inevitably lead to development of a supply chain that is not under the US control. Within a few years the current chip shortage will be resolved, one way or another.
Lifting sanctions against China is not an option neither is it the solution. China will use the chips for attacking (military, if you want) programs to destabilize Taiwan and the shoot US with their own F..k..g weapon. From lessons from Covid-19 we now know how good the Chinese are in cover-up.
You don’t wage a war without losing something. And to all those who say that the US started this, there is a book published in 1999 from 2 Chinese PLA colonels called “unrestricted warfare” – the Chinese have been following it to the letter and it can be seen everywhere. Warfare in everything except open conflict. To tie it to the context of the article above, China has a clear strategy for dominance in semiconductors, it is part of “Made in China 2025” and it involves subverting and replicating the other major fabs – TSMC, Samsung and others. They have been poaching their staff and stealing their IP for years. Either we give in and accept that the CCP will pour enough resources in to assure them victory or we fight. And it looks like we have opted to fight. That means all sorts of difficulties in the short term.
To the U.S. Administration, this is called karma !!
Lift the sanctios we want to upgrade our Hauewei phones trump was just jealousy
So China becomes top dog at chip making. That just consumes huge amounts of money and can leave the makers some way behind the ball when technology moves on. But making them is only half the game, the other half is selling them and if China does what the USA has done it will be their turn to cut off their nose to spite their face. And China will have to make and sell what customers want. Then, of course, the real money is not made by those that make the chips, or even the systems that use them. That is made in the software and services that run on them. One family of processors can run a million different types of application – in fact the industry prays it does so that they can reduce the number of redesigns needed and gives a chance to amortise out the multi-billion dollar fab plants and make a bit of profit. Sadly the UK Government did as it was told a year ago and banned Huawei. We could have been a year down the road on a new class of real 5G/AI/ML applications and services that would have been finishing their trials and moving into production environments about now.
the power that controls semiconductors controls the digital heartland. and the power that controls taiwan controls semiconductors. i could be wrong there though. im no mackinder.
“While Biden had to part in imposing the unilateral sanction”
I think you mean had ” no ” part …
Thanks, corrected.
Lesson No, 1 , if you’re going to stop trade with someone for something, you make sure you have another supplier.
Lesson No 2. covid will be round for a while, it has stopped production and transportation of many things, this is why you NEVER deal with just one country.company , you NEVER put all your eggs in one basket, and hopefully covid19 will make all governments and businesses think twice about no backup.
I mean,m we have redundancy in our networks so if one path fails we can route around them, the same should apply in everything.
Australia’s telecom industry learned hard with covid lockdowns since they cheapskates and outsource helpdesks to third world countries, the problems that caused them when those countries locked down, drew mass criticism, so much they are now bringing those jobs back to Australia, all of them, however it will take them up to 2 years — funny, they got rid of those jobs almost overnight but it will take them 2 years to get them back *cough*