
China Plans $47B Fund to Boost Its Semiconductor Industry - yazr
https://www.wsj.com/articles/china-plans-47-billion-fund-to-boost-its-semiconductor-industry-1525434907
======
gkanai
China should have done this 5-8 years ago. It took the blocking of ZTE and
Huawei in the US for China to realize that they don't have the fabrication
capabilities for the chips that they need (the most advanced chips are all
US/JP/KR/TW built.) And no one wants to sell China that fab capability- so
China will have to build/use corporate espionage to make it themselves.

Even though it seemed expensive at the time, Masayoshi Son was smart to buy
ARM.

~~~
netheril96
China does have invested a large amount of money in semiconductor businesses
over the years, of which 47B is just another. It makes some progress, such as
the self-made SW26010 processors in Sunway TaihuLight, the current top one
supercomputer in the world. But progress is hard for reasons other than money:

* Late comers to the semiconductor industry can barely follow the trends, let alone lead. But if one cannot lead, it cannot survive in a free market. No one is going to buy a chip 3~5 years behind the latest technology when he/she has better choices.

* Compatibility issues. China cannot grow its chip with x86 instruction set, at least not the latest one, for patent issues. That further reduces the possibility of commercial success of its own chips.

* Semiconductor industry is now past its prime, the profit and salaries lower than the nascent Internet companies. Even in the US, plenty of EE students are jumping ship. In China, EE talents are doubly drained, by both American semiconductor industry, and by the local software industry.

* The Wassenaar Arrangement bans the export of many high end equipments necessary for chip making to China. While all the other countries/regions can specialize in one part of the semiconductor industry, China has to do _all_ of them by itself, since it has no external help.

* The world politics dictate that Chinese firms are never going to buy ARM. They have the cash and the willingness, but western countries simply won't approve such buyout.

~~~
dis-sys
> The Wassenaar Arrangement bans the export of many high end equipments
> necessary for chip making to China. While all the other countries/regions
> can specialize in one part of the semiconductor industry, China has to do
> all of them by itself, since it has no external help.

Forcing your enemy to invest heavily in such key sectors is pretty stupid.
Eventually, one way or another, Chinese will master the state-of-the-art. A
few good examples here - LCD industry, weapons.

It also worth pointing out that the existence of the Wassenaar Arrangement
relies solely on the fact that the US is the biggest economic and military
power in the world. Not sure how long the US can continue to maintain it.

~~~
SkyMarshal
_> Forcing your enemy to invest heavily in such key sectors is pretty stupid._

Generally this makes sense, but not in China’s case where they require all
foreign ventures to team with a Chinese company who then steals the foreign
partner’s IP. No way a Western semiconductor company could set up a fab in
China without creating a competitor 5-10yrs later using their own IP against
them.

Thus the Wassenaar Arrangement makes sense, it prevents any Western
semiconductor company from gaining a short term advantage over its competitors
by leveraging Chinese cost efficiencies, incentivizing all of them to self-
destructively follow suit.

~~~
sangnoir
> Generally this makes sense, but not in China’s case where they require all
> foreign ventures to team with a Chinese company who then steals the foreign
> partner’s IP

China is also capable of figuring things out from first principles, or
espionage from non-partners. An example of this was the decision by the US to
exclude China from the ISS - they built a couple on their own (no partners)
and will be there after the ISS de-orbits or privatizes.

------
mtw
I'm still wondering why there should be an economic, political or commercial
conflict between China and the rest of the world esp. US. Such conflicts are
wasteful with when we all should work together on common goals - space
exploration, fighting against diseases, climate change etc.

~~~
madengr
Maybe communism vs freedom?

~~~
robbiep
That’s a false dichotomy. China is ostensibly commmunist but free market is
alive and well (with heavy doses of state directed influence, but so as in
other western countries, witness the military industrial complex)

A truer dichotomy would be between a rigid semi-dictatorship and quasi-
democracy... given that even China has token democracy at some levels despite
now essentially having a rubber stamped dictator, and many western states are
a long way from true democracy - the voting system in the US hardly allows
representative democracy and special interest groups are adept at manipulating
voting blocs very effectively, and is 2 party democracy really democracy?
Other countries do better jobs (ie Australia’s preferential voting, germany’s
Proportional representation) but you can argue that till the cows come home

~~~
madengr
The USA, with all it’s faults, is still based on the Constitution and Bill of
Rights. China is based on communism with democide of 10’s of millions.

Can I buy a porn magazine, a bag of weed, and assault rifle in China? Hell,
the party chairman is now chairman for life.

~~~
robbiep
You can certainly buy the first 2, and is the third really a benefit to any
civilised society? I say this as a gun owner

~~~
madengr
It’s a benefit to a free society.

~~~
robbiep
Because all of those (western) countries where you can’t buy an assault rifle
are such despotic hell holes? It’s a benefit to no one except the
manufacturers, the merchants and the people who patch the injured up. And as
someone who patches the injured up, I’d prefer not to

~~~
madengr
WWII Europe had plenty of dictators, and will probably be a caliphate by the
end of this century. I’ll keep my freedom and guns.

~~~
tryme78
log off, idiot

~~~
dang
We've banned this account.

------
ausjke
great, I guess money talks. on the other hand, US is lagging in STEM
advancements from k-12 all the way up these decades, only competition can
correct the sloppiness.

many of the chip designers in USA are not native citizens, which again says,
our education system needs a revamp.

~~~
kwaboi
the US does not have a shortage of STEM workers, the problem is our physics
graduates are working web development jobs where thousands of companies are
implementing the same CRUD application

~~~
stale2002
I guess that means that physics isn't that valuable then, and we have an
oversupply of physics people.

It turns out that the market believes that building CRUD apps is more valuable
and useful to society than whatever it is physics researchers do.

You are right that we don't have a Stem shortage. Instead we have a Technology
shortage, and way too many people are going into these other fields that
aren't actually very useful.

~~~
ausjke
this is very concerning, I'm actually encouraging my kids to physics (or
chemistry, or biology, or math, i.e. STEM), as I feel so few kids are taking
on those majors.

on the other hand, more and more are learning programming these days, I recall
after 2008(or 2000) some CS departments lost nearly 50% enrollment because
coding jobs were saturated then, that may happen again.

still, the "safe" way will be good at coding while specializing in some STEM
fields(including chip design, which is mostly software tool usage these days).
Wall street is another way out, but I don't like it and won't recommend it to
kids.

~~~
netzone
Probably the safest field to get into would be everyday things, especially
plumbing. There's no automating that, pipes will always break and new (and
old) buildings will always need to manage complex plumbing systems.

~~~
Can_Not
I wouldn't be surprised if some black swan breakthrough in automated
assembly/modularization/mobility of housing in less than 30 years halves the
availability of manual plumbing work so that when your children just get 1 to
10 years into that career there is a sudden plummet of pay, possibly combined
with an influx of workers coming in from previously wrecked markets.

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kristianov
Let's just hope China will not take back Taiwan to get the state-of-the-art
fabs there.

~~~
rangibaby
I think we would have bigger things than fabs to worry about if China decided
to take over Taiwan

~~~
baybal2
Even a nuclear war will be by far a less ruinous event to the civilisation as
a whole, than destruction of 10 biggest fab complexes.

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jorblumesea
I really hope this spurs US investment in a similar route. A cold war can be
dangerous but also fantastic for R&D.

~~~
adventured
The US and most of Europe do not use comparable approaches to such investments
vs China. It will not spur investment in a similar route, the US and Europe
will follow a different superior approach.

The US is investing $47 billion into semiconductors: it's being directed by
individual corporations rather than command & control style as in China.
Intel's R&D budget alone is ~$13 billion every year.

Over the decades the US approach produced: the Internet, Bell Labs, Lucent,
Xerox, Motorola, Intel, Fairchild, Cisco, HP, Texas Instruments, AMD, nVidia,
Apple, Analog Devices, Micron, Qualcomm, Applied Materials, EMC, IBM, Sun, and
a lot more. It's also in part responsible for ARM, which was partially founded
by Apple and VLSI.

What has China's approach produced after their truly vast investments spanning
30+ years? Other than endless copy-cat technology. We'll see if their approach
can actually lead to the kind of extraordinary innovation the US has been
demonstrating for the last 70 years non-stop in tech.

"Why Can’t China Make Semiconductors?"

[https://www.bloomberg.com/view/articles/2018-04-29/why-
can-t...](https://www.bloomberg.com/view/articles/2018-04-29/why-can-t-china-
make-semiconductors-jglgice5)

~~~
thedailymail
Two years ago PRC Premier Li Kiang was publicly complaining that China could
not produce a good ballpoint pen, citing weakness in precision manufacturing.
That can't be good for a semiconductor fab.

[http://www.ejinsight.com/20160121-what-ball-pen-tells-us-
abo...](http://www.ejinsight.com/20160121-what-ball-pen-tells-us-about-china-
s-manufacturing-weakness/)

~~~
imtringued
The explanation given in your article is that the chinese government doesn't
invest into "ball pen" ball manufacturing.

>The root cause of China’s backwardness in some of the key industrial
technologies lies in the fact that state-run and private manufacturers are
unwilling to invest in research and development because,

This HN submission about the exact opposite: china is investing into
semiconductors. Therefore it's not possible to draw conclusions from the
article you linked.

~~~
thedailymail
That's not entirely accurate. The article says that "state-run and private
manufacturers are unwilling to invest in research and development because, in
most cases, it won’t bring profits and extra market share, owing to the lack
of protection for intellectual property and rampant plagiarism by other
competitors" – i.e., it is not just a public funding problem.

It goes on to state that the government has invested in "a RMB$60 million
program four years ago to facilitate the research and development of strategic
industrial materials such as high-quality steel so as to reduce the country’s
reliance on foreign imports, because it is not only an industrial issue but
also a national security concern." And then note that, "four years have
passed, and the program seems to have achieved nothing."

Clearly there have been some very successful funding initiatives in China, but
clearly others have not panned out. I think it's fair to say that time will
tell whether the semiconductor investment pays off.

------
neonate
[http://archive.is/QxejC](http://archive.is/QxejC)

------
justinzollars
I think the way this will play out as there will be another contest of Great
Powers is that the United States will in turn decide soon to compete and pour
billions more into technology. This will continue to be a great time to work
in Silicon Valley.

~~~
RobLach
I wish I shared your optimism. I'm observing current government policy not
being particularly forward thinking, e.g. massively subsidizing the coal
industry.

~~~
justinzollars
Think in the long term. China calls its contest with the United States "a
marathon race" [1]. Soon Trump will be out of office and this problem will
still be with us. This will be the greatest contest American has ever faced.

[1] The China Dream: Great Power Thinking and Strategic Posture in the Post-
American Era

~~~
jk2323
I don't buy it. Be patience.

I am not worried about the strength of China at all. It comes with too many
weaknesses. What worries me is the weakness of Europe, but not the strength of
China.

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baybal2
Compare it to nearly same sized sum of Chinese solar RnD state funds.

Back a decade ago, they were ready to dish out few million bucks to anybody
who just had word "solar" in their company name.

I don't see how it will be different this time.

~~~
sanxiyn
It worked, didn't it? All the top solar module companies are in China, except
Hanwha from Korea.

~~~
npunt
Different markets.

China brute-forced building cheap solar panels and flooded the market with
them, and the markets generally prefer cheap panels to expensive ones. It's
the kind of market China has historically excelled in - high volume, labor &
environment intensive, relatively low tech.

Semiconductors are way more complex and the markets prefer the latest and
greatest for a variety of reasons. Also (afaik) while fixed costs continue to
grow at each new process node, variable costs for a given chip on each new
node I believe are lower due to being able to produce more in a given wafer,
so that further makes markets like the latest.

~~~
sanxiyn
Now now... photovoltaics is "low tech". Really?

Samsung's style is somewhat similar to China, and Samsung cracked world
semiconductor market twice: DRAM and NAND flash. I don't see why China can't
replicate that.

~~~
oh-kumudo
Well, South Korea is an ally to US. At least US is not actively preventing and
adding blockers for South Korea to gaining influence in the semi-conductor
industry. For China, US is quite hostile and vigilant towards its development,
which is not something to be happy about.

~~~
sanxiyn
At least at the beginning, Chinese semiconductor industry does not need US
market. Domestic market is large enough.

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crb002
Obama screwed the US by stopping Intel MIC sales to China. That forced them to
roll up their sleeves and bootstrap their own semiconductor industry.

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thotaway
How is this not an illegal state subsidy? The WTO is a joke.

~~~
asdsa5325
Why would it be?

~~~
tim333
Depends on what they charge to lend it. If it's 0% interest, no collateral
then that could be seen as a subsidy.

~~~
sanxiyn
It's an investment, not a loan.

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ghostcluster
China's Debt to GDP ratio is 3 to 1

[https://www.bloomberg.com/news/articles/2018-02-08/sizing-
up...](https://www.bloomberg.com/news/articles/2018-02-08/sizing-up-china-s-
debt-bubble-bloomberg-economics)

~~~
tim333
On the graph in the article that about the same as the US and less than the
UK, France or Canada.

~~~
ghostcluster
And no one is worrying about the debt loads of the United States, UK, and
Italy?

Unlike the US, the demographics of their population are a big problem, as
their working age population peaked in 2016 and is now in decline. Maintaining
a growth in GDP with an aging shrinking workforce will be a challenge.

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sitkack
I think the Soviet Union would still exist if they had their own modern
semiconductor manufacturing. They had everything they needed (education, math
culture) around semiconductors to make this successful. China absolutely needs
their own fabs.

~~~
cameldrv
East Germany had a fairly credible semiconductor industry. At the end of the
Cold War, they were producing 1mbit DRAMs, about three years behind the West.
This plant was shut down as uncompetitive during reunification, but the legacy
of the industry lives on with a lot of semiconductor companies having
operations in Dresden because they had access to inexpensive highly
specialized and skilled labor.

~~~
mepian
Stasi's spies helped a lot, as told in Macrackis' book on the East German
intelligence service:
[https://books.google.com/books?id=LLZJk4FrqwwC](https://books.google.com/books?id=LLZJk4FrqwwC)

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singlewind
I think the end goal is not really develop their own chip. It is not economic
to do all the research again. They just want to have some important patent and
so they can avoid punishment from US government.

