
Chip wars: China, America and silicon supremacy - sbuccini
https://www.economist.com/leaders/2018/12/01/chip-wars-china-america-and-silicon-supremacy
======
40acres
Full disclosure, I work for Intel.

We have a fabrication plant in Chengdu, it's public knowledge that this fab is
helping to manufacture products built on the latest process technology. As
I've come to learn more about China's tactics when dealing with foreign
companies it's become of great concern to me what this plant means for our
future. I don't think it would be far-fetched to assume that some very
protected and valuable IP has leeched through our doors and into China's
hands. In all honestly I really can't fathom how the American government let
this deal occur.

EDIT: To add more information [which is all public knowledge so if you're
reading this Intel folks don't track me down! :)] its a packaging / assembly
plant working on CoffeLake, which is 14nm++, CPUs are NOT fabbed there as
Congress forbids it. My concern is more about the ability for the Chinese to
potentially reverse engineer these products at assembly and derive IP. Also..
our packaging technology is pretty advanced so I'm concerned with even having
an assembly plant there as well.

~~~
vokep
From people I've talked to who do manufacturing in China...if you aren't
literally watching every single employee, every single moment, your IP is
being stolen.

~~~
setquk
I’ve considered leveraging this in electronic manufacturing. Send design off
to be cheaply fabricated, wait for it to appear on aliexpress as a clone with
all BOM cost optimisation done free. Buy bulk lots and resell in local
country. Bingo!

~~~
moflome
I agree. Doing this now for 5G "mesh" based BTLE devices which I hope will
drop dramatically in price. Working out low-cost PMIC, crystal and passive
component compatibilities for US based chipsets is a bit of a regulatory
issue, but the "clones" iterate so fast I expect them to have complete designs
available by mid-2019 and hope to make the money on the software / data.

~~~
setquk
Interesting. I suppose your value add could be EMC, packaging, support and
infrastructure on that.

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jerf
"America has legitimate concerns about the national-security implications of
being dependent on Chinese chips and vulnerable to Chinese hacking."

I've lately been having this fantasy, or day dream perhaps, where China or the
US declares war on the other. The world cowers in fear at the impending
catastrophic conflict, yet as the hours drag on, it becomes clear that nothing
is happening. It turns out that the only net effect of the declaration of war
is that 10 minutes later, every piece of military equipment either country has
was bricked by the other's hackers and both militaries are now more-or-less
sitting on their butts, twiddling their thumbs.

In which case the victory goes to Russia, I suppose.

~~~
jamesjyu
Cixin Liu (of Three Body Problem fame) has a new novel called Ball Lightning
that talks about this exactly. Not a great book in terms of character
development or plot, but is chock full of intriguing military + technology
scenarios. Worth a read.

~~~
notSupplied
Fantastic read. The scale of the problem escalates so suddenly, I always love
how ambitious the scope of his stories are.

~~~
sfgunn
He makes me not care about character development, the science is so
titillating on its own.

------
11thEarlOfMar
I've personally observed this 'war' from a couple of angles. First is in the
process equipment required to fabricate the chips. China has endeavored to
create its own chip equipment industry, the way that Japan did in the 80s and
Korea did in the 90s. I was personally involved in development of 3 product
lines by a Chinese capital equipment firm, that have been in development for
10 years. They were a customer for our system component. To kick start the
effort, they paid expert, targeted process consultants from the US. To date,
none of the 3 have cracked into volume shipments to the fabricators. Ten years
in, both Japan and Korea had built equipment that could at least compete
domestically. In Japan's case, internationally. The Chinese progress was
stifled by ineffective engineering management that ultimately drove our
program manager to resign.

Recently, I visited Korea and was told that Chinese semiconductor companies
are recruiting semiconductor process engineers from Korea, paying them 3-5x
their Korean salary under 5 year contracts, effectively buying out their
career. This could be an effective approach to garner the technical expertise
needed, but I wonder whether it will simply repeat the outcome of the
equipment effort: Experts were brought in and paid well for their knowledge,
but it could not be realized due to business cultural or management style
constraints.

This is my personal and obviously limited experience, but in the end,
fabricating semiconductors is a multidisciplinary endeavor of great
complexity. Success depends equally on commitment, pragmatism and effective
collaboration, as it does on technical excellence. That is the price of entry
to leading edge technical achievement and I'm not sure the Chinese industrial
firms are there yet.

~~~
fspeech
You need customers who use your equipment to close the product improvement
cycle. Both Japan and South Korea have (or had) competitive chip manufacturers
who could help their domestic suppliers improve. Chinese equipment makers
don't have such luxury. Their potential fab customers are hobbled by US export
control and are surviving on thin margins. So they couldn't or at least
haven't been able to get into the positive feedback loop.

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NicoJuicy
I'll repeat it again, my solution would be: Support for Made in India 2025.

Greed won't disappear, but you can shift the balance to a more western
friendly country.

They are already destroying a lot of countries. They borrow money to them, so
the Chinese can build their infrastructure. But there are almost no locals
involved, so all the artificial inflation goes to China. The belt is just an
excuse for colonizing the world ( or at least the harbors, strategic airports
that they themselves have built, see Sri Lanka, they are the first to comply).

I think a lot of those countries that built a dam with Chinese money forget
that maintenance costs a lot also. Reference: FIFA football stadiums

Ps. Feel free to share your concern

~~~
KSS42
They are adopting the USA's playbook.

See
[https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit...](https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man)

According to Perkins, his role at Main was to convince leaders of
underdeveloped countries to accept substantial development loans for large
construction and engineering projects that would primarily help the richest
families and local elites, rather than the poor, while making sure that these
projects were contracted to U.S. companies. Later these loans would give the
U.S. political influence and access to natural resources for U.S. companies

India would do the same if it had the capital resources.

~~~
NicoJuicy
The USA playbook is only 30% of China's, they are literally bankrupting them
off everything.

\+ There is a difference, companies can have PR issues now without just paying
off some key figures ( internet). Not saying that it's not possible, but it
should be ( and is) harder than the pre & internet age.

China hasn't got that problem, because they control their internet. And trying
to control yours ( free internet through satellites)

------
Animats
This is a big deal. The US already lost its consumer electronics industry.
China's plan for 2025 is to have no dependence on foreign sources in certain
technology areas, including semiconductors. Who will buy from Intel then?

Someday Foxconn will figure out how to do without Apple in phones.

~~~
tynpeddler
I'm always fascinated by all the economists who write articles detailing the
cost of protectionism to the American economy but I've never seen an article
discussing how much Chinese economic policy costs them. Maybe I'm reading the
wrong journals.

~~~
RobertoG
Protectionism is only bad when you have the upper hand.

The way to develop a powerful industry is protectionism. When you have
achieved it, the way to avoid others develop powerful industries is free
trade.

It was not by way of free trade that the USA, Germany or Japan developed.

~~~
pzone
The costs of protectionism are typically diffuse and difficult to pinpoint.
They take the form of higher prices and reduced choice.

Here's one example. Chinese consumers use Alibaba, not Amazon. They use QQ,
not Twitter. They use Baidu, not Google. In all of those cases, the foreign
brands are higher quality products.

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kappi
Story that all chinese technology is stolen is not true. They have lot of
talent and hardworking folks in cutting edge technology. Vast majority of
employees in US chip companies doing cutting edge technology are also Chinese.
Most of US engineers chase easy money in web technology etc. Same concern was
raised by Peter Theil about VC investing not in hard tech. Ycombinator is also
classic example of investing tons of money in only short term tech. Most of
silicon tech needs 5-7 years or even more.

~~~
NicoJuicy
You are Chinese? Raw guess.

But the entire setup of China is made for stealing tech from companies who
invest there, this doesn't mean anyone isn't hardworking or hasn't got any
talent. I know Chinese are hardworking.

Also, hardware needs a lot of capital in Western countries, workers are
expensive.

Starting for yourselve ( with software) and gradually growing is a lot
"easier" if you aren't rich.

~~~
dang
> You are Chinese?

Do not go down that road, please.

~~~
casefields
Oh please. The Chinese always sprout up to defend and pretend, that the
unsavory aspect of Chinese industrial espionage is American/western
propaganda. Happens all over the place on the Internet.

~~~
dang
We have a lot of experience with this, and I can tell you what is far more
common: people projecting manipulation and astroturfing onto legit users who
in fact are merely expressing an opposing point of view. Hauling out this
accusation without evidence is poisonous to discussion. That's why the site
guidelines ask you not to post such insinuations. Please read and follow them
from now on:
[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

Following the site guidelines also means not using flamewar tropes like "Oh
please", and refraining from nationalistic flamewar in general. "The Chinese
always sprout up" is a pretty gross thing to see here.

------
doctorpangloss
When your industrial based depends on cheap labor, like in China, it's always
possible to compete by legislating wages down. You can solve your economic
woes with a stroke of a pen.

But people have to live shittily.

When your industrial base depends on IP, like in the US, it's very challenging
to defend secrets, especially in a free society. Competing on IP alone is very
risky. You have to spend exorbitant amounts of money on security.

But at least I can live wherever I want, freely vote for who represents me,
don't get sent to prison camps to make living space for the ethnic majority,
have pretty clean air and water, aspire to treat the downtrodden humanely,
treat people who aren't my blood relatives humanely, trust my social systems,
travel freely, say whatever I want, and do something with my life other than
engineering, making money or achieving subsistence survival. The investment in
human capital, that makes American labor so expensive, makes it durably
valuable regardless of technology, government or foreign relations.

Wait isn't that supposed to be the tradeoffs part?

~~~
40acres
Great response dude. I'm so concerned because China is moving up the economic
ladder when it comes to production. China is no longer a place where the
British own the land and the people make T-shirts. These guys are stepping it
up, China is making phones.. cars.. they have their eyes set on aerospace,
they are building islands in the sea and infrastructure on other continents.
Look at what China is about to do to Africa, seems downright colonial. China
has taken blue collar jobs in America. Are they now about to start making
microprocessors? We have one of America's greatest sources of IP generating
talent (Google) ready to risk it all and re-invest in the country, China is
about to become an equal power. We don't seem to be prepared.

~~~
kaveh_h
What is China doing to Africa? And how is that any different than what US does
to any other region in the world. Even though America is a democracy it has
not really promoted democracy overseas. Apart from earlier itself being
involved in wars now instead many bad foreign leaders are supported by US
politicians and leaders. Allies which have been behaving badly for long time.

US greatest talent is (perhaps was) it’s ability to attract the talent of the
world and creating great value out of it. This happened primarily during and
after the world wars was as many nations were becoming more hostile places and
American open culture and values became a refuge for many. US will only truly
lose it’s leadership position when it gives up on moral leadership.

~~~
surferbayarea
"attract the talent"...this is no longer the case. I talk to 50+ (new) senior
engineers/month (for the past 6 years) and there has been a serious mind shift
in the last couple years. I now hear things like "hasn't immigration become
impossible to the US" and with increasing remote work, people are happy/prefer
working from their home countries (better tax structures, they actually make
more money). While this won't hurt US in the short term, the next generation
of top startups might not be in Silicon Valley.

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_cs2017_
From a global perspective (rather than US- or China-specific), what exactly is
the cost of IP theft? Obviously, the reduced incentives to do R&D (if you
cannot monetize it as well, you'll invest less). That by itself could be
pretty devastating.

On the other hand, what are the advantages of IP theft? One that I can see is
that it creates more competition. I don't know if it helps much in the long
run though: if the competitors are just copying the leader, it's probably not
adding any value.

Any other pros and cons?

~~~
zanny
The more general cost is if your country ignores IP while another doesn't you
have an immense competitive advantage if the country you are "stealing" from
can't in some way punish you economically for it.

I'm personally an IP abolitionist but can recognize that China is abusing its
position here. It doesn't hurt the US nearly as much as it does Southeast
Asia, India, Japan, Korea etc that by and large obey US IP law. That was in
part what the TPP was meant to enshrine in more formalized, consistent, and
persistent terms - the Asian nations agree to obey US IP imperialism while the
US gives them advantageous trade opportunities over China. A large degree of
why it was so heinous was because of how biased it was in favor of the US
because of how desperately the countries surrounding China wanted a
competitive edge over their ability to ignore US IP.

In many ways Trumps China tariffs are giving a lot of these nations what they
wanted without getting anything in return from them.

~~~
_cs2017_
I agree that IP theft hurts countries that don't partake in it.

However, I was asking about the effect on the world as a whole. Taking some
wealth from one country and giving it to another isn't directly changing the
amount of wealth in the world. But some second order effects may come into
play that do change the global wealth.

~~~
pzone
The reduced incentive for innovation from US firms hurts global wealth just as
much whether the IP copycats are in the US or if they're in China.

------
xvilka
A bit of unrelated, but since it is important for chips development posting it
here. There is an initiative [1] to make FPGA/ASIC design tooling more
universal and interconnected with sharing the LLVM-like low level intermediate
representation (HDL), which is more powerful than Verilog or VHDL. At this
point many people see FIRRTL[2][3] as a viable candidate for this position,
with some enhancements.

[1]
[https://github.com/SymbiFlow/ideas/issues/19](https://github.com/SymbiFlow/ideas/issues/19)

[2]
[https://bar.eecs.berkeley.edu/projects/firrtl.html](https://bar.eecs.berkeley.edu/projects/firrtl.html)

[3]
[https://github.com/freechipsproject/FIRRTL](https://github.com/freechipsproject/FIRRTL)

------
halhod
HN may be interested in the longer briefing that this editorial is based on -
[https://www.economist.com/briefing/2018/12/01/the-
semiconduc...](https://www.economist.com/briefing/2018/12/01/the-
semiconductor-industry-and-the-power-of-globalisation)

------
jshowa3
For all the comments I see about China stealing IP, just remember, IP can be
stolen anywhere, even in America.

We have a couple production plants in China. I haven't seen any concrete
evidence that the employees are stealing IP. And if they are, they do a poor
job of reproducing it because they're almost never as good as the real thing.

Not to say it doesn't happen, but I just find it humorous that a lot of buzz
is around China precisely because most manufacturing is from there and not
other nations. There's also a lot of claims in reports, but no hard proof.

There's also no examination of the victims practices or its done very poorly.
Not practicing good IP protection like obfuscation in your code, encryption,
anti-tamper mechanisms which, from my experience, many American companies
don't practice, is just asking for trouble. They may be doing this, but its
never mentioned in news articles.

Of course, given enough time and resources, most things can be cracked.
However, that's no excuse to make it easy.

~~~
ciupicri
The last part sounds like blaming the victims.

~~~
LMYahooTFY
Pointing out something a victim can do to secure themselves isn't "blaming the
victim".

------
known
Reverse engineering may not work always

    
    
        When the LS 400 was disassembled for engineering analysis, Cadillac engineers concluded that the vehicle could not be built using existing GM methods
    

[https://en.wikipedia.org/wiki/Lexus_LS#Industrial_significan...](https://en.wikipedia.org/wiki/Lexus_LS#Industrial_significance)

------
wangii
Hardworking, ambitious, and honesty: you can have only two. now pick.

