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Biden to sign order to build 'China-free' tech supply chain (nikkei.com)
147 points by fireball_blaze 55 days ago | hide | past | favorite | 67 comments



In addition to improving national security, with any luck this would have an effect of opening the door for stronger foreign policy against the CCP's human rights violations. It is so, so far past time the world stopped kissing the ring for the sake of our manufacturing dependency.


That assumes CCP isn't doing anything.

The reality is soon China will reach a point where they will be completely independent from the rest of the world. There is currently very little they can't produce for themselves and, ironically, it is mostly semiconductors.


They are reliant on importing iron ore to sustain them at current rates. They would need to scale back everything in order to remove that reliance. In all the actions they've taken against Australia of late it's telling that they haven't touched that commodity.


Iron ore is the only significant natural resource import of China but my understanding is the only reason they buy it from Australia is cost. China actually also produces iron ore but not at levels to sustain their demand.

Also, China has recently started supplementing their iron ore supply by buying it from african countries, which will be much harder to convince to follow a potential embargo.

Iron ore is available almost everywhere in the world but with varying difficulty of extracting. If you know geography, iron ore is a sediment in an ancient ocean which means most of the planet is covered with a band of the ore at varying depths.


Good little rabbit hole to go down periodically:

https://www.usgs.gov/centers/nmic/iron-ore-statistics-and-in...


> The reality is soon China will reach a point where they will be completely independent from the rest of the world.

There is a word for industrial, political and financial independence from the rest of the world - "sanctioned".

Unless China were an entity far and away superior in every sense than every other country in the world (i.e. unless they were a Star Trek level culture living in our current world), striving for complete trade independence becomes a negative for their economic progress.

China lacks many of the natural resources it must use to continue to grow. It must trade with the rest of the world to continue to grow; but the inverse is not true. The world DOES NOT need to trade with China.


Well, people like you cause wars.

China is a huge economy, soon to overtake US. No, they don't lack natural resources. What they do lack is knowledge in some key areas (semiconductors) but they seem to be capable enough to just steal whatever they need.

What you seem to be forgetting is that US owes at least 1 trillion dollars to China and that overall, China holds over 2 trillion dollars in external debt.

More than that, US needs even more debt and there aren't many places at the moment where you can get a loan of the size that US needs.

Even more than that, US is currently incapable of producing much of the stuff they need and buying it from elsewhere (EU?) would cost a lot more.

I am pretty sure it would be US that would be critically wounded by the sanctions.

US companies are as much reliant on being able to offshore their work to China as Chinese companies getting that work from US.

The difference is, that these Chinese companies are able to produce stuff on their own vs most US based companies having no production capabilities of their own.


The point I made was that no nation should seek economic independence as it is equivalent to applying a sanction against yourself. This is true for everyone, not just China, not just the US. Now obviously you are upset about something, because you've launched into an attack that has NOTHING to do with this point.

> Well, people like you cause wars.

Doubtful. I tend to see the world as something more than a zero-sum game. I also don't run a country and have very little chance of ever doing so, let alone leading one to war.

Also, in a world awash with cash, where bonds can be issued with a negative yield, and still find buyers, and where central banks can issue arbitrarily large sums of currency, this following comment is just plain confusing;

> More than that, US needs even more debt and there aren't many places at the moment where you can get a loan of the size that US needs.


> There is currently very little they can't produce for themselves

You forgot food


An uneducated guess: If they're importing, it's probably because it's cheaper. I'm sure they have the land and technical capabilities to produce mass amounts of food.


China imports a lot of food but hey, they have 1.4B people. They already produce most of the food on their own and that "lots of food" is just foreign products for more variety. It is not critical in any way. Most people don't buy those anyway.


This was considered a GOP talking point not 3 months ago


At no point was enhancing the US’ end-to-end ability to manufacture modern semiconductors at scale a Republican issue - the closest it got was “China is bad” and a few poorly placed sanctions. This action attacks the problem from opposite side.


Trump's unwillingness to roll over for the CCP might be the only thing about him that I supported, though even then he executed on it in about the most hamfisted ways possible. He just butted heads with Xi, and honestly, China has more raw economic momentum than we do, and I don't really think a sanctions-war is a winning strategy right now.

What Biden's doing is much smarter; he's patching up one of our biggest actual weaknesses which made the sanctions stalemate extra painful. It sounds like he's also prioritizing getting the rest of our allies in on it (instead of fracturing our ties with them), which is a great thing to be doing. In some ways I think Europe/Japan/Korea/Australia are going to decide which of us will be the next superpower. If we go all isolationist, and Europe gets cozy with China as a result, the contest is over.

Strategy and preparation are better than bluster and Twitter-insults.


> China has more raw economic momentum than we do

They also have a demographic problem: their boomers are retiring. Also they have crazy debt to gdp and they are 80% reliant on mideast oil. If iran goes to war with saudi arabia they are efffffed, even with belt and road, because that's three economic catastrophes converging.


I don't know if I'd call it an unwillingness to roll over, or simply political theatre. Here are some quotes from [0]

>“He then, stunningly, turned the conversation to the coming U.S. presidential election, alluding to China’s economic capability to affect the ongoing campaigns, pleading with Xi to ensure he’d win,”

>“Trump said that Xi should go ahead with building the camps, which Trump thought was exactly the right thing to do.”

>Bolton says he was so alarmed by Trump’s determination to do favors for autocrats such as Erdogan and Xi that he scheduled a meeting with Attorney General William P. Barr in 2019 to discuss the president’s behavior. Bolton writes that Barr agreed he also was worried about the appearances created by Trump’s behavior.

[0] https://www.washingtonpost.com/politics/trump-asked-chinas-x...


Maybe "unwillingness to roll over" was over-embellishing it a bit. He's a combative person who gets into conflict with others easily, and it just so happened that this time it was appropriate (while it lasted). I never meant to suggest he was doing it out of principle, though I can see how my phrasing might have come off that way.


Biden was VP for 8 years while China manipulated our markets. Created scam IPOs. Engaged in state funded corporate espionage. Manipulated currency. Stole IP.

So give me a break with Biden is "much smarter'. It would take a fool to not do what they did. But the problem is much broader then just tech. The government cares about tech because this directly relates to defense.

The Trump strategy was basically to try to cut as much foreign investment into China and stop investment from coming out of China. It wasn't necessarily stupid.

The Biden strategy is essentially an arms race Cold War 2.0 and its not a bad idea but to say it "much smarter" demonstrates a bias which show you are not thinking of the double edged sword and implication of the Biden strategy.


I remember the campaign ads suggesting Biden would sell us out to China (or something), but I don't remember any factual basis for pushing that narrative.


Where were you for the four years of "trade war" and Pompeo calling out China about Xinjiang?


Well, go ahead, don't be vague, don't leave us hanging.


It should be clear by now that China is a single-point-of-failure for many industries globally. This is a step in the right direction, and I hope other countries follow suit.


Sounds like decent rhetoric to not get into the geopolitical aspects of this fight. Just write it off as diversifying the supply chain and then cut your biggest problem supplier out because they are not good for business.


European nations have signed a commitment to invest up to $145bn in local design and production of processors and semiconductors. https://www.eenewseurope.com/news/145bn-boost-europes-semico...


Picking Taiwan is a brilliant strategical choice.


I'm not so sure about that. If chairman Xi decides to invade or blockade Taiwan you have a supply chain problem.


On the other hand, if Xi decides to blockade Taiwan then he can't pretend that it won't hurt the US, so it will be seen as an act of aggression. Of course, the US may grumble and let China take it... or it may not. That prospect should give any wannabe Taiwan taker a pause.

Japan ostensibly started the Pacific War to secure its oil supply. Supply chains are serious business.


Taiwan exists as a country because of the US’ refusal to let them take it.


That was a major reason for much of the caucus campaigns from the Germans and to occupy much of SE Europe. Germany didn't have much oil supplies but elsewhere did. So why not invade them?


Nah. If chairman xi invades or blockades taiwan, then chairman xi has a supply problem. Who's going to send a ship into a war zone? China has no other access to trade over oceans besides the seas that surround taiwan. The rest of the world will rebalance.


Anywhere in the south china sea is not a great strategic choice. Apart from mainland China itself this will be the first area of the world where China will reach military parity with the US. The US has a lot more firepower but that's deployed globally.


What is valuable is not just developing relations with countries in the South China Sea like Taiwan, but also encouraging many allies to do so as well so that it's far more politically risky for China to mess with Taiwan and others in the South China Sea. Right now, Beijing thinks it can get away with anything. The situation needs to materially change so Beijing only alienates itself if it acts aggressively.


Xi Jinping is an even more powerful existential motivator for Taiwan's "Ready! Aye Ready! " attitude to whatever the US desires.

In any case, it's long past time that the US wake up to the fact that the wholesale handover of manufacturing capability to China has put the US in a position of strategic weakness. It's like a pre WWII handover of aircraft manufacturing capability to Hitler.

As for chips, who really knows what secret doors are being put into Chinese chips - not to say that the CIA is not up to the same game.


These headlines don't mean anything whatsoever until Biden and Congress show up with a briefcase full of money. This isn't an expensive problem to solve.

TSMC's 3nm fab (slated to open next year) was estimated to cost just under $20B [0] back in 2018 when the project began. To put that number in perspective, Apple has spent $528B [1] on share buybacks and dividends in the past decade.

I surmise that a Taiwan-centric military conflict would cost the US far more than either of those two figures.

In light of the recent storms in Texas, a federally run power plant that serves only semiconductor fabs could be built in Austin TX as a first step.

[0] https://www.taiwannews.com.tw/en/news/3600724

[1] https://s2.q4cdn.com/470004039/files/doc_financials/2021/q1/...


Unfortunately money can't be converted into chip fabs so easily. Building a chip fab requires brains, a functioning corporate culture that rewards and promotes said brains, and large scale cooperation to work towards a common goal as specified by said brains. If Intel was able to build a chip at a price that would yield profitable stream of chips, then they would have no trouble funding said chip fab. There is no shortage of investment dollars here. The US has more than enough investment capacity to do this. But Intel can't execute, and when you can't execute, the amount of money thrown at a project is irrelevant.

What's more, there are very few organizations that have both the human capital and are able to out-execute TSMC when it comes to building chip fabs, and it's almost certain than none of them are in the US, even though we have our own printing press that can generate as many dollars as are needed, yet it still wont be enough paper to deal with the brain-organization gap.

Real things are built with real resources, such as organizational capacity, organizational talent, intelligence, solidarity, focus, tenacity, and long term thinking. You can run the printing presses all day long, and you're not going to get a world-competitive chip fab if you lack these. But if you have them, the funding issues will take care of themselves, as investors will beat down the door to lend you money, which is what happened when Noyce first announced he was starting his own company.


You can pontificate all you want about money alone being insufficient, but mine isn't a comment about printing money, nor about Intel.

Long term semiconductor capital expenditure won't give fruit for several years, and reliance on foreign production binds us into disadvantageous geopolitical power projection games. Companies are cautious in laying out the funds because they want to be certain of demand and efficient with their resources. They don't particularly care about the externalities. A government has power and scale that makes that job easier, and an incentive to establish better long term solutions that may cost more than the short-term greedy solution. In contrast, corporations have shorter time horizons, less risk tolerance, and a greater incentive to seek the greedy solution.

You get brains when you hire them. You get foundry tooling when you buy it. For the specific problem of building a manufacturing ecosystem around semiconductor fabrication, both are widely available.

Executive orders about China's influence upon the semiconductor supply chain are just lip service unless and until eleven or more zeroes are included somewhere in the package. It's not a PR problem. As you correctly point out, someone actually has to roll up their sleeves and build lots of shit. That doesn't happen for free, and it takes coordination and risk that almost no corporation can pull off unilaterally.

We have an incredibly sophisticated defense industrial apparatus for the same reason.

(BTW...Not all spending results in money creation. You can tax, issue bonds, or just recover the cost from the productivity of the project. The idea of "printing money" isn't necessarily relevant to capital projects that return revenue, although I suppose it is always a backstop.)


Intel has been spending about 14B/year on long term capex and another 14 B/year on R&D.

It doesn't seem to have gotten them a whole lot.

https://www.macrotrends.net/stocks/charts/INTC/intel/researc...

You may be able to buy an old chip fab, but you can't just buy organizational capacity and the ability effectively run an R&D department.

US spending on R&D has been increasing steadily, the private sector funds 600B/year https://fas.org/sgp/crs/misc/R44307.pdf

There has been no slowdown in either public or private R&D spending.

The world is literally filled with the carcasses of failed R&D projects when nations that tried to develop industries but failed to do so due to deficits in organizational skill, excess corruption, lack of human capital, and ineffective business practices. Meanwhile tiny Taiwan went from a nation that produced shoddy toys and bicycles to a world power. You can't buy solidarity, unity, or human capital.

As for our defense industrial complex, I would say that real innovation there, too, has substantially slowed down compared to the 50s-60s. Look at how quickly we obtain supersonic flight or nuclearized the navy, and how much slower progress has been since. Similarly innovation per real dollar spent has dramatically fallen in the medical field, too. Software is the main area where the US remains a leader, but outside of that it's slim pickings, even as we spend more money on R&D than ever before.


> It doesn't seem to have gotten them a whole lot

Intel has majority market share in datacenter and client computing. I learned in a professional setting that you can't ever judge the quality of a semiconductor company based on its price action because the vast majority of the money deployed on Wall Street lags the technology because technologists are rarely the ones expressing discretionary views on the stock.

> The world is literally filled with the carcasses of failed R&D projects when nations that tried to develop industries

This is a bad take. The largest pure play foundry makes up essentially half of its host economy, and there's a difference between building factories/ports/plants and doing research. Even failed research is a step forward but that's not what we're talking about here. There's no geographic reason why Taiwan should be the epicenter of semi fabrication, in fact there's a political and economic disincentive for it.

You have this assumption that there's somehow a shortage of human capital in the semiconductor space but that's just not true. The present bottleneck comes from the fact that demand has grown beyond what the industry can facilitate, and capex outlay is a risk that takes time to bear fruit.

I disagree with your view of defense innovation, but I suppose we can't know because all of the juiciest recent developments are probably a secret anyway. But think of your ten favorite technologies and try to determine whether they were affected by defense spending. Here's an example: there'd be no Uber without GPS, and no GPS without the defense industry.


Relying on Taiwan is akin to putting all your eggs in one basket. There is too much in one region of the world where a totalitarian regime with a sordid human rights record has a significant military presence and threatens Taiwan with regularity.

What happens when China rolls over Taiwan? Will the US support its ally as per treaty or will it turn a blind eye? What will the EU do? So far the world seems content to issue only proclamations against their treatment of the Uighur and the world is deafeningly silent about Hong Kong anymore.

The only way to protect the supply chain is to make more world wide that it currently is and Africa and South and Central America are ripe for bringing up their standard of living as well as the rights of their populations.


> What happens when China rolls over Taiwan?

The US can't even keep Venezuela and Cuba in line. The concept that the US would use direct military confrontation to stop China from simply taking Taiwan is very unlikely in my opinion. Short of granting them statehood, Taiwan and its push for total freedom from China will crumble eventually. Our policy should be to buy time, clone what Taiwanese infrastructure we need, and offer a path to US citizenship to current Taiwanese residents and their children.

The approach now should just be to build infrastructure in the Americas and invite Taiwanese companies to bring over their institutional knowledge and partake. Taiwan doesn't have to be our flash point versus China. There is so much potential for advancement in the Western hemisphere, yet we sink all our resources into unwinnable bullshit because we're afraid of taking an Asia-Pacific L in pursuit of a greater American W.


My thoughts exactly. Look at what happened to Europe in the 30s. Germany just started occupying places left and right. Even when they occupied Poland they still did nothing but defend.


The US can't even keep Venezuela and Cuba in line.

What do you mean by “in line”? Those countries are little more than nuisances in global geopolitics. If either of them seriously threatened US interests or key allies they would be rolled over as quickly as Iraq was in GW1.


> What will the EU do?

They'll be gravely concerned. What did they do about the Karabah conflict? Not much. President Macron tried to talk them out of it when everybody else sat and watched helplessly, but it was already too late and Russia had to step in creating yet another Transnistria type of region. Germany has a conflict of interest in dealing with China because their economy depends on selling cars to the Chinese. And all of them already got their hands full with the pandemic. This is arguably the best time in the last 60 years for China to roll over Taiwan. The US will get involved, sure. Maybe Japan too but I'm not so sure about that now that Mr. Abe has resigned.


Isn't TSMC building a plant in Arizona? And Samsung's plant in Texas too?


US should be ready to do for Taiwan what the UK did for Hong Kong, move their best and brightest to US with Visas and path to citizenship if China were to ever take over.


If it happens, it will be quick. And there are vast numbers of very valuable Taiwanese people.

Setting aside the moral difference that the UK fundamentally had no reason to be governing part of China (except the legacy of their empire), whereas Taiwan arguably has every right to govern itself, I don’t think this would provide much relief if China decides to pounce.


I think it would be a good thing to do so since then we have much more motivation to protect Taiwan at all costs. China trying to roll over Taiwan would be akin to attacking us.


America has no choice but to defend Taiwan with the full weight of their resources, because losing Taiwan means they've lost access to the most important resource in the world. Chips are more important than anything. America has nothing without them.


The fabs would be a write off in any prolonged conflict. So they're not actually a good reason to defend Taiwan.

I think America would defend them anyway out of a sense of righteousness and pride. They wouldn't let China give them a black eye like that without hitting back. But could they actually prevail in the region? I'm not sure about that.


You are half right. The US will have to defend Taiwan otherwise we are done as a world power. Taiwan is not a push over. Any invasion would be seen way ahead of time. The Taiwan military is pretty dug in from the beaches to the mountains. They just need to make it painful enough and long enough for the US to bring its military might on target. Taiwan itself has the missile power to reach Shanghai and Beijing, and I have no doubt they would use it.


A traditional invasion may happen but is unlikely. China is already flying military planes into Taiwan airspace regularly. The goal is to wear them down, create unsustainable costs, and expand its regional hegemony to the area whereby any/all conflict over Taiwan is strategically already won by China. They’ll likely wait them out or make it painful enough that people ask for it.


Well no. They are flying into the ADIF zone and being driven off. If they crossed into the the 12 mile limit of the main island they would be shot down. China knows that. The fact is the military is really good at doing the same thing over and over again everyday. Any really escalation would result in the US actively placing support in Taiwan. China is playing a dangerous game. Their action all over the world and at home are going to drive the world into supporting more contact not less with Taiwan. Xi Jinping is not playing a very Chinese game. He is pushing too hard on every front because he is impatient. Long term this is going to break.


Purposely and repeatedly flying military aircraft to generate a military response is my main point. Thank you for clarifying where they have been flying.

In my discussions with Taiwanese people they’ve cited these provocations as a cost, problem, threat, etc.

Would they be shot down? That remains to be seen. The U.S. is not in a great position to support Taiwan. The overwhelming majority of U.S. military tech is for projecting power, not cost effectively defending.


The is not much a difference in this case. Boots on the ground are required to hold on to anything. Any transport of troops and materials between the mainland and Taiwan exist in a very large shooting gallery. It is not clear that China could maintain long term air superiority in the area. They have a very small (but growing) Navy. The US sub fleet would sink most of it quite quickly. The US fleet is very vulnerable to ground based missiles and would take a pounding but longer term the US has the force projection to win. In order for China to win this Taiwan has to fall in 5 days, after that it becomes a war of attrition and technology and the US is better equipped today to fight that. It is not clear that will stay the same long term. In the Korean War the US planes would not chase Chinese planes over the border. That policy would not fly here as all the military fields close to Taiwan would be hit quickly no matter what because the material threat to the US Navy requires it. Chinese pride and feeling of years of rage at how the western powers treated them in the past is the only issue here. There is no reason beyond that for China to press on this as the status quo has been fine for 50 years however for the US it would mean the fall of our position in the world and the fall of the dollar which would bankrupt the US. The west has no choice but to defend Taiwan or see an end to our very way of life.


I don't think the west will defend taiwan, but it won't matter. If china invades, their economy collapses, because no one will want to send cargo ships or oil tankers into a war zone, and industrial and ag production in china proper stops for the six months-1year of the conflict, and the population starves or riots. Probably the most the us will do punitively is to embargo china with a naval blockade. That's just as bad if not worse.

It's hard to imagine chinese leadership doesn't know this.


In 25 years, the west will forget about it. And resume trade as normal.

After all, it was the west that wanted “Free Trade” with China, so that they could shove opium down their throats.

But for some strange reason, the West is upset that the Chinese got upset, and kicked them out. And they had to turn to an alternative political model, in order to survive, so they can remove all western influence on them.


> And resume trade as normal.

In 25 years what does china's demography look like? And who is making their food (the bulk of the youth lives in the city)? It's possible that china will force it's citizens to labor as agriculturists, but that guts your export productivity.


> They have a very small (but growing) Navy.

They have the world's largest navy, and it's still growing rapidly:

https://www.dw.com/en/china-navy-vs-us-navy/a-55347120


> However, defense analysts point out that the US remains far ahead in the key metric of tonnage, meaning the US Navy operates much larger warships than China.

It looks like China only has "largest" if you go by raw ship count, which is probably misleading.


Correct. River patrol boat are counted in this.


> River patrol boat are counted in this

Really? I would expect those to be operated by the People's Armed Police, which also runs the coast guard:

https://en.wikipedia.org/wiki/Equipment_of_the_China_Coast_G...

Note that neither coast guard nor maritime militia are part of the navy, yet both have armed vessels and personnel. The coast guard in particular has larger ships than any other coast guard.

Anyway, it was hardly river patrol boats that led to this conclusion already back in 2019:

https://www.reuters.com/article/us-china-army-navy-specialre...


If Taiwan launches missiles at Shanghai or Beijing, then I’m pretty sure the Taiwanese are fcked. It’s game on at this point. And China will carpet bomb the shit out of Taiwan.

At that point, the surviving Taiwanese will wish they weren’t so stupid, and had accepted the One-China policy to begin with, instead of being the sacrificial pawns of the Americans.

And nukes.. if you want to play with nukes, then the Chinese has plenty of nukes. Who’s going to blink first and launch them? China or the United States?

We know for a fact, that the United States cowardly dropped nukes on civilian populations. Twice. So, there’s a high likelihood that they’ll be the first to launch them. But this time, China has nukes of their own too.

You’re being too emotional. Take a chill pill and relax. A shooting war between China and the United States, will result in all the major American cities turned into a nuclear wasteland. At that point, is your pride still worth it?


Not the sharpest tool in the shed are you...


Please be civil. Explain why you think this or don't comment.


Right, but that's exactly why the parent comment said putting manufacturing in Taiwan is a bad idea.


So.. you’re saying that you want to play with nukes?

And hope that your own American city doesn’t get atomized in the exchange?


The only way I see forward in the short term is "made in india 2025" ( it's not realistic, but the intent is to increase priority. A deadline soon shows the need)

It's the only country that wages can handle a long increase by capitalism ( = companies) to move production ( wages, ... )

They are more western minded.

They are with plenty of people.

---

The other way would be to ignore globalization and claim that companies would love production to higher wage countries.

( got downvoted into oblivion the previous time i mentioned my thoughts > 4 years ago. At least say where you would tweak the argument or give a better solution instead of only saying problems. If you have a better solution, great. Let's hear it and say what problem it could solve or where I'm wrong. I'm here to discuss and learn)




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