Keeping an eye on Communist, Totalitarian China, and its influence both globally, and we as Canadians. I have come to the opinion that we are rarely privy to truth regarding the real goal, the agenda of Red China, and it's implications for Canada [and North America as a whole]. No more can we rely on our media as more and more information on China is actively being swept under the carpet - not for consumption.
Wednesday, May 22, 2019
Huawei’s U.S. Restrictions Expose a High-Tech Achilles’ Heel for China
Huawei’s U.S. Restrictions Expose a High-Tech Achilles’ Heel for China
China is heavily reliant on imported computer chips, despite efforts to develop its own semiconductor industry.
May 21 2019
A Huawei store in Beijing. The Chinese telecommunication giant’s chief executive said the company had stockpiled computer chips for emergencies like the trade restrictions announced last week by the United States.CreditCreditLam Yik Fei for The New York Times
BEIJING — For all of China’s efforts to become a global force in high technology rivaling the United States, it has mostly failed to produce top-flight contenders in one crucial area: the industry that gave Silicon Valley its name.
Last year, China imported more than $300 billion worth of computer chips, the backbone of all digital products. That is more than it spent on crude oil from abroad.
Washington has now turned China’s reliance on American microchips against Huawei, the Chinese telecommunications giant that the Trump administration has labeled a national security threat. The Commerce Department last week restricted American firms from selling components and technology to the company, essentially cutting Huawei off from Google software, Qualcomm chips and more.
The department said Monday that it would allow Huawei to continue doing business with American suppliers for 90 days to prevent disruption to mobile networks that use the company’s equipment. Yet Washington’s move still strikes at a national soft spot for China that has weighed on the minds of the country’s leaders for decades.
Desperate to reduce the dependence on imports, the authorities in China have pledged tens of billions of dollars to help foster homegrown chip champions. The country’s dreams of semiconductor hegemony have added to the trade tensions with the United States, which wants Beijing to scale back what it considers unfair government support for Chinese firms.
Washington has found reason to directly punish one state-backed chip maker, Fujian Jinhua Integrated Circuit Company. After Micron Technology, an American rival, accused the Chinese company of pilfering chip designs, the Commerce Department blocked it from buying American components.
The fruits of China’s chip drive have been mixed at best. Chinese firms’ market share remains modest in most areas of semiconductor production. Nearly all of the most complex chips must still be imported. Several Chinese state-backed makers of memory chips, which store data, have announced big production plans. But the global market for such chips is currently saturated, suggesting grim prospects for turning a profit.
On the whole, government support has helped the Chinese industry, said Gu Wenjun, chief analyst at ICwise, a semiconductor market research firm in Shanghai. “But now that the market has become overheated and fickle, the negative effects are increasingly apparent,” he said.
Local governments in China “don’t understand the industry,” Mr. Gu said. They are merely using up resources that private companies know how to spend more effectively, he added.
China’s role as the world’s leading assembler of electronics, and its vast consumer market for electronics, has convinced some observers that given enough time, the country would inevitably attract or foster the knowledge for producing advanced chips. If China could catch up in making toys and then in producing cellphones, the thinking goes, then why not in semiconductors someday?
For now, surviving without American chips promises to be the ultimate test for Huawei, despite the company’s recent strides in developing its own processors.
In an interview with Chinese media on Tuesday, Huawei’s founder and chief executive, Ren Zhengfei, said that in “peaceful times,” half of Huawei’s chips came from American companies, and the other half it developed itself. Huawei has stockpiled chips for emergencies like this, Mr. Ren said.
But the company could never entirely reject American technology, he said. Even members of his own family, he said, are iPhone users.
“We will not recklessly get rid of American chips,” Mr. Ren said. “We need to grow together.”
Beijing’s angst over foreign semiconductors has a long pedigree.
As Japan, South Korea and Taiwan emerged with formidable chip industries in the 1980s and ’90s, China experimented with various forms of state planning to develop its own abilities. In 2014, Beijing set a goal of becoming a global leader in all segments of the chip industry by 2030, and national and local government semiconductor investment funds began springing up across the country.
The results of those efforts are hard to spot, however, in the innards of leading Chinese tech companies’ products.
To crack open one of Huawei’s smartphones or cellular base stations is to see the extent to which advanced technology is a truly globalized endeavor, even as Beijing and Washington have come to distrust each other’s tech providers.
In Huawei’s new P30 Pro flagship phone, for example, American firms supply a number of key components, including parts that help process the radio signals that carry calls and data through the air, according to an analysis by System Plus Consulting, a research firm in France.
The P30 Pro’s memory chips are from Micron and the Japanese company Toshiba. The camera technology is from Sony of Japan. The processor, the brains of the phone, was developed by Huawei itself.
Huawei’s semiconductor division, HiSilicon, has surprised industry observers with the progress it has made in developing processors and baseband chips, which connect phones to data networks. Yet even HiSilicon may be affected by the Commerce Department’s restriction. Many of the leading providers of chip design software are American.
For other kinds of components, Huawei should not have much trouble finding non-American substitutes if it is fully cut off from American suppliers. In memory chips, for instance, Micron is a leading global supplier, but so are Samsung and SK Hynix of South Korea.
In general, the more advanced the silicon, the more likely it is that Huawei will have to compromise on quality to avoid American providers like Broadcom, which supplies specialized chips for Huawei’s data centers, and Nvidia, which makes high-end graphics processors for Huawei’s laptops.
The company’s options may also be limited when it comes to the critical components that help smartphones process radio signals. American companies, including Skyworks and Qorvo, lead the market for these “radio frequency” parts, which are technologically demanding to produce.
“It’s just very difficult unless this is your bread and butter,” Liam K. Griffin, Skyworks’s president and chief executive, said on a conference call this month with analysts. “We have years and years of experience here working with this.”