I’m really curious if they can turn the investments into competitive process nodes. My understanding is that semiconductor technology has a very wide moat.
the moat is wide if the market was free. However, when it becomes a matter of national security, the economic viability becomes a far lower priority. China is obviously going to get there, just a matter of time.
Sure. But sanctions are fundamentally a tool to incur costs. China doesn't have an unlimited budget. If chips becomes a priority, something else will lose some funding, be it military or e. g. other industry subsidies.
Sure. Opportunity cost is there, I am sure China would much prefer to freely buy Western equipment. However, in case of escalating export controls, it clearly makes sense to further invest in domestic capacity. The 'opportunity gain' is more jobs for Chinese workers, more inward investment that would otherwise have gone into foreign countries.
There were intense arguments regarding whether to buy or to research in China. The "buying is better" party won and hence China lost ~30 years on chips R&D. But the embargo snapped right on the faces of the "buying is better" guys and leaving China no choice but to bite the bullet. So what those Chinese pioneers wanted but failed to achieve has now firmly implemented by the embargo...
US policy reflexive and unreflective when it comes to China.
Export controls on simply redirect investment inward to domestic R&D and subsequent production capacity. Effectively, this is defunding US and US-controlled companies, who otherwise would have hoovered up Chinese money, fed into its own R&D and maintained the lead on Chinese companies.
The policy doesn't even succeed on its own terms. But no iteration, no reflection
It's again the same opportunity cost, though. China has to invest a lot of money just get access at scale to the same class of chips as the rest of the world. That money could be used for actual innovation instead.
> The policy doesn't even succeed on its own terms.
The policy doesn't succeed only if you limit your thinking on the chip industry and ignore the overall strategic context. Reducing China's access to latest & greatest is only the proximate reason for the export controls, with the overall strategic competition being the ultimate reason. It's simply a mean to an end.
As you said in your previous post, China would likely prefer to continue buying western chips, because being forced to develop their own will not improve their strategic posture, at least in the next years/decades.
Indeed, China preferred buying from external sources as merchants won the debate on whether to buy or to research and it's indeed cheaper in short term.
Dependency on critical parts from external could be the only viable solution for smaller countries, but for countries like China is a intolerable risk to national security and has to be addressed at highest priority. The embargo just demonstrated how bad it could be, and it actually can be much worse in different contexts. So, obviously R&D is the only option left on the table. Cost is no longer a problem.
The reason behind is that US lost its confidence to compete. So if it cannot compete, it might be easier to remove the competitors. Such move would work on smaller countries such as Japan etc. But China is another story.
China does not have a choice, does it? The funny thing is that, whatever the west tried to prevent China from acquiring, in the end China managed to crack it and eventually made a better version.
Feels like somehwere between not paying 4000% nvidia premium, and spamming gigawatts of cheap renewables to power data centres might be a competitive business plan if they get 12nm tools out in time. Strategic bonus of not sending 100s of billions to trillions to US for IP fees.
It is quite an exciting era to be alive in - both because of the escalating conflicts between nuclear powers but also because we're welcoming another billion+ humans into living in an advanced industrial society. Hard to believe that 1970s China has come this far. Hopefully India follows close behind.
China is already very advanced, I’d say that when it comes to reasonably large countries (so ignoring city-states) it is one of the most tech/industrially advanced countries out there, if not the most advanced.
For example the US might still have some advances in tech but basic stuff like speed/rail systems are just not up to par, while countries like Japan or Germany might still be ahead of China in some specialized industrial stuff but their tech/IT feels like it’s a geological era behind China’s.
The next billion people that might get industrialized now live in Africa, but the situation is a little bit more complex there.
It's "easy" to go from nothing to 'the latest'. It's not easy to go from 'established' to 'the latest'. Ignoring the way China tramples over its peoples' rights, it was largely agrarian society. It could put factories, train lines, and roads anywhere it wants, build bridges and dams anywhere too.
Now? London spent over 40 years planning The Elizabeth Line before the first shovel was put in the ground. HS2 our second true high speed line look 20 years in planning, and they're still squabbling. Upgrading the country from an existing phone network of copper cables around since the 1900s will have taken 30 years to go fully fibre.
It might be interesting to imagine if China modernized in the 70s, how it might be now.
There's some truth to this, but in my opinion especially the line about not respecting their citizens rights is a cop out. In China there are plenty of silly situations like building a highway around a house, because the person didn't want to sell. The difference is that they then just build around it, instead of incessantly discussing back and forth for decades on different approaches. Many western countries have in effect neutered their ability to move through a) lack of long-term accountability in public administration and b) a motivated minority having greater influence than the silent majority.
For politicians it is usually prudent to just kick controversial stuff down the road a couple of years for the next person to pick up. While something the Elizabeth line is greatly beneficial to London as a whole, it is annoying for neighbors, at least while being built, and for the majority EL isn't a deciding factor for election, for those neighbors it might be.
Rail systems are not "basic", they are a superfluous technology for the US. There's simply no use-case for them outside of several population clusters.
Instead the US has the interstate freeway system that is unparalleled anywhere else in the world in size and capacity.
The US freeway (and highway) system is great because it's consistent across the entire US. I don't know any other comparable road system of that size.
E.g. German Autobahns are arguably better than Interstates, but the entire Germany could fit inside Oregon and a bit of Nevada. And nearby Polish roads are nowhere near as nice as Autobahns.
The bit caveat here is that most of the progress has been in a few areas along the coast. A majority of Chinese are still very poor and not really seeing the benefit of this technology.
Even the wealthiest provinces of China have lower GDP/capita than countries like Japan and Taiwan.
Can you point out anything specific where China is ahead in tech/IT? Are you sure your perspective is up to date?
From a European perspective there was a point where I was impressed how China was ahead in mobile payment. And I was impressed by Taiwans NFC payment tags. But today the QR code payment system seems quaint and outdated, and the mobile and NFC payment system we have seem as good if not better.
There's two kinds of technological progress: in depth and in breadth.
A country advances in depth by pouring lots of resources into very expensive facilities the likes of which might only exist a few times on Earth in order to make breakthroughs at the frontier of knowledge. I guess a "chip equipment R&D center" counts in this category.
A country advances in breadth by diffusing technology so widely it affects the life of basically everyone. When people talk about "welcoming another billion+ humans into living in an advanced industrial society" I think this is what they're imagining.
Advances in depth get easier with a larger population, because it increases the total resources available for megaprojects. Advances in breadth get harder because so many more people need to be covered.
I think comparisons that put China technologically ahead of Western industrialized nations are confusing depth for breadth.
For example, the International Federation of Robotics has a ranking of countries by ratio of robots to manufacturing workers https://ifr.org/ifr-press-releases/news/global-robotics-race... where China is in fifth place after Korea, Singapore, Germany and Japan. But then down below, they say that China has "a huge workforce of roughly 38 million people in the manufacturing industry" – in a country of more than a billion people, that number is clearly off by an order of magnitude. I guess they're excluding a lot of low-tech manufacturing that employs the vast majority of workers. So the comparison is only relevant for a small sliver of the population.
But while Huawei's compensation package is generous, its working culture can be challenging, according to chip industry managers.
"Working with them is brutal. It's not 996 -- meaning working from 9 a.m. to 9 p.m., six days a week. ... It will literally be 007 -- from midnight to midnight, seven days a week. No days off at all," one Chinese chip engineer told Nikkei Asia. "The contract will be for three years, [but] the majority of people can't survive till renewal."
The whole setup is out of this world: A vilified Chinese company at war with the full American empire. Its leader mumbling military clichees like "surround the cities from the country side". Its headquarters being a Disney-land of copied classical European architecture. And at the same time it is delivering breakthroughs that two years ago would have been thought to be impossible.
In that working culture it is often okay to sleep (at work, at your desk) for 2-4 hours. It is brutal, but people are willing to do it, so it persists.
I get both you and your parent's PoV but you gotta be aware that the people working on the first iPhone and Android were also working basically 24/7 up until the launch, and Apple even moved them into hotels next to the office so they wouldn't have to commute.
Similarly, China is also now in a race of rapid technologization to catch up or surpass the US competitors and you don't get there by working only 40h/week.
US big tech success proved that for the right amount of money clearly enough skilled people would work brutal schedules, so I also see no problem if this work relationship is consensual and agreed by both parties and can be terminated at any time if it's not bearable for the workers, especially since those skilled tech workers have plenty of other options for working lax schedules for less money if they wish so.
But if they voluntarily choose the brutal schedules for the money, it's their call and why should I or other parties have a say in this?
1) There's a huge difference between a temporary 'crunch' (as in the examples you gave) and a prevailing company culture; organising a company such that the (unwritten?) expectation is of '007' working just shouldn't be an acceptable model.
2) I think you're conflating two different issues, deliberately or not. Fundamentally, yes, I agree that individuals should have a free choice over how they spend their time and their physical capital in return for money; and further, in this case, given we're taking about educated and sought-after workers, some of the arguments that apply to treatment of lower-paid workers don't apply. However, the issue is to what extent one views it as moral that a company is organised, implicity or explicity, along these lines: as the argument often goes, if you can't run your company profitably or effectively without resorting to such measures, you need to rethink your fundamentals.
3) And here, of course, it's probably not about scraping by in a low-margin sector, given it's R&D and they're apparently offering double the market rate: it's just about an pre-existing toxic company culture. And given what we know about people's output not scaling linearly with extreme hours worked, it doesn't even make rational sense. In theory, they could pay lower (but still attractive) salaries, hire 50% more people, work them less hard, and (all else being equal) probably be even more productive.
Some small fraction of people are perfectly fine working 12 hours a week a day 7 days a week 50 weeks a year, they can do this with the same amount of strain that the median person experiences in regular 8 hours a day, 40 hour weeks.
>probably not about scraping by in a low-margin sector,
TBF Huawei known for shit work culture for past 15 years. Half of which was because they were rapidly expanding global foot print, other half was in survival mode after sanctions. IMO their fundementals were correctly calibrated, first to get as far as they did in as little time as it took, second to survive sanctions that would have killed lesser companies. It's been cycling between opportunity to crisis to opportunity. They're not at position to settle/slow down yet, not if they want to get back to where they were, and beyond.
>we know about people's output not scaling linearly
Brooks law also states throwing more people at problems don't lead to solutions faster. Besides, East Asian culture is all about squeezing that juice 100% harder to be 20% better than competitors. Also simply not enough supply of skilled talent to hire. SK/JP/TW because they're near peak highskill labour force + demography decline. PRC because they didn't developed talent in semi until recently. Rumors of SMIC being pissed at Huawei for poaching their top talent last few years. There's limited pool of the best, only thing to do is pay them well, crunch them hard, for essentially manhattan project tier effort.
The US is trying to take Huawei out. And trying to strangle China's technological development and cripple their military options. In the face of that, outrageous hours become an acceptable model. Especially if the workers are agreeing to it voluntarily and are compenstaed fairly for the horrible conditions. Although if I personally were managing the situation I'd be aiming for an 8-8-8 shift schedule where everyone gets lots of rest since I expect that would be more productive. Not to mention 8 is fundamentally more auspicious than 12.
China got to where they are by working very hard. They'll likely keep working very hard until it obviously stops working. Haven't talked to anyone in China, but I'm guessing "work hard, get rich" is a message they understand very well at this point both in the pro- and con-.
Huawei is in state of existential crisis. If they (China) don't have a breakthrough in chip manufacturing in 2-5 years, Huawei as the company will be finished and along with China's plan to be independent of Western world. So, think of this as their Manhattan project, not sexy or romantic, but necessary.
China rarely if ever bets on one horse. This is one of the reasons the west struggles to understand why China isn't collapsing. It's not Soviet style command economy with a single organisational structure in control over one sector. China even has multiple competing state-owned investment banks, and in most fields they have competing both state owned and private companies (note: I'm not assuming there aren't cases where this competition is heavily rigged or biased; the point is not to imply it is a free market, but that it is not the Soviet model).
With respect to Huawei, if Huawei goes, Huawei goes, and little else changes other than that the government might need to prop up some of their supply chain.
China might find itself struggling to gain full independence on the top end, but they have a range of separately operating foundry companies (SMIC, YMTC, Wingtech, Hua Hong), chip production equipment Manufacturers (Maura, JCET), and a multitude of chip design companies. China can afford a number of these - and Huawei - to fail and still have other bets.
I agree with you that the overall "project" is their Manhattan project in a sense, but that does not mean all, or even many, of the companies need to survive - they'll let individual ones fail if they don't feel like they're pulling their weight, and instead fund new/other options.
In other words: This might be "necessary" for Huawei, because Huawei wants to survive. But it's not necessary for China for Huawei to survive. Ironically that might be part of the reason for the pressure - they know there's no guarantee they'd be bailed out.
The incompetence of Russian communists has given people the impression that only capitalism works, but the reality is that the Russian communists were simply too stupid and too hatred driven by their ideology. The simple truth is, it doesn't matter how you organize your economy, as long as it produces what people need and want. Economists see the failure of central planning as evidence that government meddling can never improve the economy, which they then project onto the next closest thing (e.g. China's market economy with extremely severe government intervention) and then they act surprised that it works. Winners are chosen by their performance and luck, not by (western or eastern) ideology.
The US handed China economic power and now is upset about it. In a tantrum we're now forcing them to develop some of the most advanced technology in the world. In both cases it seems to be a result of underestimating them. Elites thinking everyone else is just labor.
In the 90's a friend of mine from business school said outsource all production was the future and people in the US would just manage everything. I laughed. We've seen how engineering and manufacturing are linked. China had to learn engineering to do production better. And management? Did anyone seriously think they couldn't figure that out?
This result from cutting off fab equipment was blatantly obvious. What's less obvious is that they will do it cheaper than ASML does today by jumping straight to next generation technology.
50 comments
[ 3.7 ms ] story [ 123 ms ] threadExport controls on simply redirect investment inward to domestic R&D and subsequent production capacity. Effectively, this is defunding US and US-controlled companies, who otherwise would have hoovered up Chinese money, fed into its own R&D and maintained the lead on Chinese companies.
The policy doesn't even succeed on its own terms. But no iteration, no reflection
> The policy doesn't even succeed on its own terms.
The policy doesn't succeed only if you limit your thinking on the chip industry and ignore the overall strategic context. Reducing China's access to latest & greatest is only the proximate reason for the export controls, with the overall strategic competition being the ultimate reason. It's simply a mean to an end.
As you said in your previous post, China would likely prefer to continue buying western chips, because being forced to develop their own will not improve their strategic posture, at least in the next years/decades.
Dependency on critical parts from external could be the only viable solution for smaller countries, but for countries like China is a intolerable risk to national security and has to be addressed at highest priority. The embargo just demonstrated how bad it could be, and it actually can be much worse in different contexts. So, obviously R&D is the only option left on the table. Cost is no longer a problem.
For example the US might still have some advances in tech but basic stuff like speed/rail systems are just not up to par, while countries like Japan or Germany might still be ahead of China in some specialized industrial stuff but their tech/IT feels like it’s a geological era behind China’s.
The next billion people that might get industrialized now live in Africa, but the situation is a little bit more complex there.
Now? London spent over 40 years planning The Elizabeth Line before the first shovel was put in the ground. HS2 our second true high speed line look 20 years in planning, and they're still squabbling. Upgrading the country from an existing phone network of copper cables around since the 1900s will have taken 30 years to go fully fibre.
It might be interesting to imagine if China modernized in the 70s, how it might be now.
For politicians it is usually prudent to just kick controversial stuff down the road a couple of years for the next person to pick up. While something the Elizabeth line is greatly beneficial to London as a whole, it is annoying for neighbors, at least while being built, and for the majority EL isn't a deciding factor for election, for those neighbors it might be.
Instead the US has the interstate freeway system that is unparalleled anywhere else in the world in size and capacity.
E.g. German Autobahns are arguably better than Interstates, but the entire Germany could fit inside Oregon and a bit of Nevada. And nearby Polish roads are nowhere near as nice as Autobahns.
Even the wealthiest provinces of China have lower GDP/capita than countries like Japan and Taiwan.
Can you point out anything specific where China is ahead in tech/IT? Are you sure your perspective is up to date?
From a European perspective there was a point where I was impressed how China was ahead in mobile payment. And I was impressed by Taiwans NFC payment tags. But today the QR code payment system seems quaint and outdated, and the mobile and NFC payment system we have seem as good if not better.
A country advances in depth by pouring lots of resources into very expensive facilities the likes of which might only exist a few times on Earth in order to make breakthroughs at the frontier of knowledge. I guess a "chip equipment R&D center" counts in this category.
A country advances in breadth by diffusing technology so widely it affects the life of basically everyone. When people talk about "welcoming another billion+ humans into living in an advanced industrial society" I think this is what they're imagining.
Advances in depth get easier with a larger population, because it increases the total resources available for megaprojects. Advances in breadth get harder because so many more people need to be covered.
I think comparisons that put China technologically ahead of Western industrialized nations are confusing depth for breadth.
For example, the International Federation of Robotics has a ranking of countries by ratio of robots to manufacturing workers https://ifr.org/ifr-press-releases/news/global-robotics-race... where China is in fifth place after Korea, Singapore, Germany and Japan. But then down below, they say that China has "a huge workforce of roughly 38 million people in the manufacturing industry" – in a country of more than a billion people, that number is clearly off by an order of magnitude. I guess they're excluding a lot of low-tech manufacturing that employs the vast majority of workers. So the comparison is only relevant for a small sliver of the population.
But while Huawei's compensation package is generous, its working culture can be challenging, according to chip industry managers.
"Working with them is brutal. It's not 996 -- meaning working from 9 a.m. to 9 p.m., six days a week. ... It will literally be 007 -- from midnight to midnight, seven days a week. No days off at all," one Chinese chip engineer told Nikkei Asia. "The contract will be for three years, [but] the majority of people can't survive till renewal."
The whole setup is out of this world: A vilified Chinese company at war with the full American empire. Its leader mumbling military clichees like "surround the cities from the country side". Its headquarters being a Disney-land of copied classical European architecture. And at the same time it is delivering breakthroughs that two years ago would have been thought to be impossible.
Either way, I have nothing but bad wishes for their new endeavors if that's the case - this is obviously not an acceptable way to treat people.
Similarly, China is also now in a race of rapid technologization to catch up or surpass the US competitors and you don't get there by working only 40h/week.
US big tech success proved that for the right amount of money clearly enough skilled people would work brutal schedules, so I also see no problem if this work relationship is consensual and agreed by both parties and can be terminated at any time if it's not bearable for the workers, especially since those skilled tech workers have plenty of other options for working lax schedules for less money if they wish so.
But if they voluntarily choose the brutal schedules for the money, it's their call and why should I or other parties have a say in this?
1) There's a huge difference between a temporary 'crunch' (as in the examples you gave) and a prevailing company culture; organising a company such that the (unwritten?) expectation is of '007' working just shouldn't be an acceptable model.
2) I think you're conflating two different issues, deliberately or not. Fundamentally, yes, I agree that individuals should have a free choice over how they spend their time and their physical capital in return for money; and further, in this case, given we're taking about educated and sought-after workers, some of the arguments that apply to treatment of lower-paid workers don't apply. However, the issue is to what extent one views it as moral that a company is organised, implicity or explicity, along these lines: as the argument often goes, if you can't run your company profitably or effectively without resorting to such measures, you need to rethink your fundamentals.
3) And here, of course, it's probably not about scraping by in a low-margin sector, given it's R&D and they're apparently offering double the market rate: it's just about an pre-existing toxic company culture. And given what we know about people's output not scaling linearly with extreme hours worked, it doesn't even make rational sense. In theory, they could pay lower (but still attractive) salaries, hire 50% more people, work them less hard, and (all else being equal) probably be even more productive.
Do you not believe such people exist?
TBF Huawei known for shit work culture for past 15 years. Half of which was because they were rapidly expanding global foot print, other half was in survival mode after sanctions. IMO their fundementals were correctly calibrated, first to get as far as they did in as little time as it took, second to survive sanctions that would have killed lesser companies. It's been cycling between opportunity to crisis to opportunity. They're not at position to settle/slow down yet, not if they want to get back to where they were, and beyond.
>we know about people's output not scaling linearly
Brooks law also states throwing more people at problems don't lead to solutions faster. Besides, East Asian culture is all about squeezing that juice 100% harder to be 20% better than competitors. Also simply not enough supply of skilled talent to hire. SK/JP/TW because they're near peak highskill labour force + demography decline. PRC because they didn't developed talent in semi until recently. Rumors of SMIC being pissed at Huawei for poaching their top talent last few years. There's limited pool of the best, only thing to do is pay them well, crunch them hard, for essentially manhattan project tier effort.
China got to where they are by working very hard. They'll likely keep working very hard until it obviously stops working. Haven't talked to anyone in China, but I'm guessing "work hard, get rich" is a message they understand very well at this point both in the pro- and con-.
With respect to Huawei, if Huawei goes, Huawei goes, and little else changes other than that the government might need to prop up some of their supply chain.
China might find itself struggling to gain full independence on the top end, but they have a range of separately operating foundry companies (SMIC, YMTC, Wingtech, Hua Hong), chip production equipment Manufacturers (Maura, JCET), and a multitude of chip design companies. China can afford a number of these - and Huawei - to fail and still have other bets.
I agree with you that the overall "project" is their Manhattan project in a sense, but that does not mean all, or even many, of the companies need to survive - they'll let individual ones fail if they don't feel like they're pulling their weight, and instead fund new/other options.
In other words: This might be "necessary" for Huawei, because Huawei wants to survive. But it's not necessary for China for Huawei to survive. Ironically that might be part of the reason for the pressure - they know there's no guarantee they'd be bailed out.
In the 90's a friend of mine from business school said outsource all production was the future and people in the US would just manage everything. I laughed. We've seen how engineering and manufacturing are linked. China had to learn engineering to do production better. And management? Did anyone seriously think they couldn't figure that out?
This result from cutting off fab equipment was blatantly obvious. What's less obvious is that they will do it cheaper than ASML does today by jumping straight to next generation technology.