Monday, September 4, 2023

Raimondo given a Bronx cheer in China

A shorter version was posted in Asia Times. While US Commerce Secretary, Gina Raimondo, was visiting Beijing, she witnessed a spontaneous celebration among the Chinese people. The gleeful outburst had nothing to do with her meetings with the Chinese leaders, but was a raucous cheer for the reemergence of Huawei’s smart phone business. By disclosing the availability of a new smart phone, Mate 60 pro, on the company website, Huawei quietly let their customers in China know that Huawei has re-entered the mobile phone business. Word on Mate 60 pro spread like wild fire on China’s social media. Even though Huawei provided virtually no background information on their new phone, the initial allotment was sold out on the first day. Visitors to the website can see that Huawei’s smart phone is priced slightly less than Apple iPhone 14 with functionality similar to the 14. The one notable difference is that the speed of Huawei’s phone is faster and meets the specification of a 5G able smart phone. Third parties immediately took apart the Mate 60 pro and reported that there was no evidence of any US technology inside the phone. The phone is driven by Kirin 9000S chip, a chip designed and made in China and uses Harmony OS, Huawei’s own operating system. There are many other fine technical differences between Huawei’s latest smart phone and its competitors. The essential point to me is that Huawei is back after three years in the wilderness. Since 2019, the US began to levy a series of sanctions on the company denying it access to advanced chip designs and the availability of Taiwan Semiconductor to make the chips for them. Each successive restriction was designed to strangle Huawei out of the smart phone business. Bronx cheer for Raimondo In a way, Huawei’s action did have to do with Raimondo. The company moved up the unveiling of Mate 60 pro to coincide with her visit. To most of China’s netizens, it was Huawei’s way for calling her and the Biden’s administration’s attention that no obstruction imposed by the US will keep Huawei down for long. They have not disclosed how they achieve the necessary technological advances, but one thing is clear. The company could not have made all the advances without partners in China and without creating a domestic supply chain, from design software, semiconductor fabrication to essential chemicals and materials. What Huawei has accomplished will ripple through China’s semiconductor industry. Huawei’s experience will facilitate and encourage others to follow. China’s self-sufficiency in semiconductors will only increase. Heretofore, China represents almost one-third of the world’s market for semiconductors. Before the US mounted the trade war, it was more convenient for China to buy than to make their own. Now that they are forced to go on their own, China is, consequently, not importing as much, and total import is declining by double digits annually. American’s shortsighted strategy to de-couple from China will devastate the revenue of leading US providers of advance chips such as Nvidia and Qualcomm and chip making equipment companies such as Applied Material and Lam Research. These companies will see their comparative advantages dry up on the vine. In the near term, they are not allowed to sell to China. In the long term, China will not need to buy from them. Washington’s policy makers failed to appreciate that China is no technological slouch. When pushed against a wall, China will back their national interest with the needed funds and talent to overcome any obstacle. In October 1964, China detonated its first atomic bomb and less than three years later the hydrogen bomb, a faster sequence of milestones than any other country. These efforts were led by an all-Chinese team of scientists, some were returnees trained in the west but otherwise received no input from the US or USSR, the only members of the nuclear club at the time. More recently in 2020, China launched an unmanned spacecraft to Mars, and became the first nation to carry out an orbiting, landing and sending a rover to the Martian surface in the same mission; success on its first try. That’s an impressive demonstration of their confidence and their competence. Technical leapfrog is another way China also resorts to a strategy of making advances by technological leapfrog. For example, China has been hopelessly behind the West in automobiles based on gasoline fired combustion engine. Therefore, more than 10 years ago, China set a stepwise national target for adopting the electric vehicles. Now, they are the world’s leading maker and exporter of EVs and batteries for the EV as well. Same could happen in semiconductors. China is investing heavily in research and development of alternate, non-silicon substrate material for semiconductors. When they succeed, they will assume the leadership of the next generation of semiconductor chips. It is understood that China’s navy is closing the gap with the US navy. Their shipbuilding capacity is many times larger than the US (more than 200 times according to US Navy) and they are building successive generations of warships in tandem and not in sequence. In other words, even before the current ship has been launched, the shipyard is already building the next model, each with higher displacement and more firepower than the last. Apparently, they don’t need sea trials and shakedown cruises to know they are doing the right thing. China has successfully test fired their hypersonic missiles at speeds more than ten times the speed of sound, while the US has not. When these missiles are installed in their ships, their deadly range will vastly exceed the US. It's time for Washington to realize and accept the fact that efforts to suppressing China is a waste of our national priority and damaging to our national interest. We will rue the day when our insistence on making China our adversary become a reality.