Yangtze Memory Technologies Co (YMTC) factory in Wuhan, China. (Source: Nikkei Asian) Rise of the chip manufacturing business Once a month, senior executives from Yangtze Memory Technologies Co (YMTC) fly to Beijing for a series of meetings with China’s top economic regulators. They focused on the company’s efforts in developing some of the world’s most advanced computer memory chips. Headquartered in downtown Wuhan, YMTC is considered a pioneer in efforts to create the domestic semiconductor industry. YMTC has mass-produced state-of-the-art 64-layer and 128-layer NAND flash memory chips, which are used in almost every electronic device from smartphones to servers to cars. These things help YMTC compete with big players in the industry such as Micron Technology of the US or Samsung Electronics of Korea. Equipment used to make high-end computer chips is mostly imported in the US. Some chip design and manufacturing processes such as etching, ion implantation, electrochemical deposition, design software… are all in the hands of American companies. To manufacture without using American technology is a big challenge for a new company that has been operating since 2016 like YMTC and also represents China’s great ambition in the field of semiconductor industry development. especially after the economic sanctions that the US imposed on China. However, the dizzying rise of YMTC has shown China’s strength in the chip industry. The business started in 2016 and within four years has mass-produced some of the most advanced 3D NAND flash memory chips in the world. The Beijing government also recognizes the importance of developing the semiconductor industry and makes efforts to support these companies. “Competition for chips is increasing as all major economies, not just China, have realized the importance of chips,” said Roger Sheng, a chip analyst at consulting firm Gartner. Semiconductors”. Currently, YMTC, is still in the “target” of the US government. But under the guidance of the Beijing government, they have conducted a review of the supply chain, looking for local component suppliers, or non-US suppliers, to gradually eliminate the country’s dependence on technology. Based in the city of Wuhan, YMTC’s efforts did not stop even when the SARS-CoV-2 virus causing the Covid-19 pandemic wreaked havoc last spring. According to sources familiar with the matter, after Wuhan reopened in April 2021, YMTC mobilized hundreds of engineers stationed inside the production campus, working three shifts a day with the aim of overhauling all production processes and replace as many foreign imported components as possible. Efforts to localize production The effort to localize chip production is an opportunity for a new generation of Chinese chipmakers like YMTC. Chinese President Xi Jinping said in remarks published in January 2021: “We must strengthen self-innovation and make breakthroughs in some core technologies as soon as possible.” According to the Nikkei Asian , plans to end dependence on the US have long been carried out by China and massively invested by the state, but progress is still very slow. For example, the plan to self-produce semiconductors has a target of 70% by 2025. But of the total revenue in 2020, China’s semiconductor manufacturing enterprises account for only 5.9% of sales. domestic products, while foreign companies with headquarters in China account for the rest of sales in the country. According to the Magazine China Stocks , while the threat of sanctions from the US has always lingered, the source of state aid, with subsidies and investments from local governments and the private sector has amounted to at least 170 billion USD since Since 2014 has helped chip manufacturing enterprises to localize production efforts. In addition, orders from domestic technology giants such as Xiaomi, Oppo, Vivo and Lenovo are also the reason their production is guaranteed. The US sanctions are a wake-up call for China’s semiconductor industry. (Source: Nikkei Asian) In fact, the trade war with the US and its sanctions against technology giant Huawei have given the Chinese government an opportunity to decouple from the world’s largest economy. – something they’ve always wanted. The US sanctions seem to have removed the main obstacle for domestic consumers, who always prefer to use chips from foreign suppliers. The manager of a chip maker in China told the site Nikkei Asian : “In the past, domestic chipmakers used only the manufacturing equipment that all the world’s leading chipmakers such as Samsung and Intel use in their production lines. Who wants to use and try new products without being sure of the quality of the production?” However, when sanctions from the US appeared, Chinese manufacturers considered alternatives, and domestically produced chip products were a reasonable choice. The manager emphasized: “It also means that domestic enterprises have really had the opportunity to test and upgrade their products – the goal that the whole country is aiming for.” Roger Sheng, a semiconductor analyst at Research Gartner, found that the US-China tensions confirmed the view that it was necessary to localize production. Now, the whole country agrees that building a semiconductor industry is possible and increasing self-reliance is a top priority. Unbreakable bond? Despite China’s considerable efforts, not many experts believe that the country’s chip sector will be completely separate from the US. The world’s two largest economies are still linked, dependent on each other and also two large semiconductor markets. According to a January report by the Brookings Institution, Chinese businesses account for at least 25% of the sales of most US chip businesses, and not everyone wants to break out of the market altogether. Chad Bown, an expert at the Peterson Institute for International Economics, said the US President Joe Biden’s approach to China was still unclear. On the one hand, the US expects China to buy more chips as promised in recent trade talks but also continues to restrict China’s use of US technologies. Since 2018 to date, a total of 162 Chinese entities have been sanctioned by the Trump Administration. In April 2021, the US Department of Commerce also added seven Chinese “supercomputer” entities to the economic blacklist, to restrict these businesses from using US technology. In reality, it is still difficult to completely decouple the supply of semiconductors, which involve thousands of suppliers from around the world and have been closely intertwined for decades. China may try to reduce its dependence on the United States, but without American sources of technology, it is unlikely to accelerate its technological progress. But Miin Wu, founder and president of Macronix International, a leading memory chip maker in Taiwan (China) that serves Apple, Sony and Nintendo, stressed: “In the short term, due to geopolitical uncertainties China’s technological development may be slowed down. However, in the long run, China will certainly hope to build a competitive semiconductor industry.” (according to Nikkei Asia)

The US-China technology war The US and China are currently engaged in a full-blown technology war. The war began under the Trump administration and is continuing under President Joe Biden. In fact, Mr. Biden viewed US competition with China as an important front since he took office. The tech war began as a trade dispute, but quickly turned into a war for leadership in core technologies like 5G, artificial intelligence (AI), and semiconductors. With a long history of development, the US remains the global technology leader for decades, but that position is currently being challenged by China. After Washington began blocking Chinese access to core US-controlled technologies such as semiconductors, Beijing doubled down on its efforts to “de-America” ​​in its supply chain. The global pandemic contributed to tensions between the two countries, prompting President Biden to issue an executive order to review the US supply chain for core products such as chips, batteries, rare earths and supplies. medical. Proposed bills to significantly increase US investment and R&D spending in core technology have also received bipartisan support in Washington. The US-China technology war – a conflict that does not seem to have ended so far. What caused the tech war? On May 19, 2015, the Chinese government announced the “Made in China 2025” plan to promote the country’s manufacturing industry within the next 10 years. Analysts point to the “Made in China 2025” strategy, Beijing’s 10-year plan to transform the country from a “manufacturing giant to a world manufacturing power” that sparked the technological war. . After taking power in the White House, Donald Trump focused his efforts to prevent China from becoming the global technology leader. A series of events from sanctions imposed on Chinese telecommunications giant ZTE for disguising its role in selling US technology to Iran, accusing China of stealing American intellectual property and Concerns about Huawei’s dominance in 5G have turned into an extensive tech war that has won bipartisan support in the US. What is the difference between trade war and technology war? The US-China trade war began on July 6, 2018, when US President Donald Trump imposed 25% tariffs on $ 34 billion of Chinese imports, citing the need to “rebalance. equals “America’s growing trade deficit with China. Other taxes have been applied in 2018 and 2019. However, the trade war was soon overshadowed by the tech war that the U.S. fears that China is using unfair means, including state power and stealing intellectual property, to gain is targeted to become a global leader in core technologies such as AI, semiconductors and 5G. Did the US really separate factories from China? In the decades after China joined the World Trade Organization in 2001, the US and Chinese economies became intertwined. China is a factory that manufactures low-cost American goods, from computers to stuffed toys. President Donald Trump’s “America First” policy and the US-China trade war have sparked calls for the US to reduce its dependence on China-based supply chains. Initially, withdrawing from China was rejected as impractical because of the cheap labor force and the large Chinese market that American companies could not ignore. However, a form of seclusion has received the support of the US administration, even from technology leaders such as former Google CEO Eric Schmidt saying that “splitting” will benefit the United States. . The concept of “split” existed in the internet space when Facebook and Google were not allowed to operate social networks and search engines in China, while the US also banned or restricted the presence of media. Chinese social media like TikTok and WeChat in the US. The global pandemic highlights the world’s reliance on China for important medical supplies such as masks and also spurs calls to bring supply chains back to the United States. In February, President Joe Biden signed an executive order calling for a review of product supply chains critical to chips, batteries, pharmaceutical ingredients and rare earth minerals. What is China doing to improve the influence of US actions? China attaches special importance to its own technology development, especially the chip. Although China initially imposed tariffs in retaliation, the top leaders’ call to action was technology self-sufficiency. In 2018, President Xi Jinping said “China must persist in the path of self-reliance in the context of increasing unilateralism and protectionism in the current world”. After Huawei was blocked from buying US chips and China’s largest semiconductor maker SMIC was restricted from buying U.S. technology for alleged association with the Chinese military, Beijing has intensified its focus on achieves semiconductor self-sufficiency. The Chinese government has supported the domestic chip industry with favorable policies, from tax breaks to state subsidies to promote the rapid development of the semiconductor industry. Technology is also a major focus for China in its 14th Five-Year Plan (2021-2025) announced in March, calling for the promotion of new digital industries, including AI, data. large, blockchain and cloud computing, along with expanding the use of 5G to many other industries such as smart transportation and logistics. Why is the US specifically targeting Huawei with trade sanctions? Washington’s interest in Huawei dates back to the early 2000s on suspicions that the Chinese company has close ties with the Beijing government. Years later, Huawei’s rise as the global leader in 5G technology rang alarm bells in Washington. One of the first public moves against the Chinese company came in January 2018 when US lawmakers pressured US telecom giant AT&T to withdraw from the phone distribution agreement. smart Huawei for US consumers. Seven months after AT&T’s decision, Washington barred government agencies from buying equipment and services from the Chinese company. When Huawei was placed on the US Commerce Department’s Blacklist in 2019, Google suspended some of its business with Huawei that involved transferring hardware or software products, except for protected products. by open source license. This is another “slap” on the Chinese technology corporation. For the Chinese government, Huawei is pride and a testament to the strength and potential of the Chinese people. Within three decades, since being founded in 1987 by Ren Zhengfei, Huawei has made some “miraculous” developments. From a company focusing on manufacturing phone switches, Huawei has become one of the largest private companies in the world, a leader in areas such as telecommunications equipment, smartphones, and electricity. cloud computing. What impact do the sanctions have on Huawei? Initially, the sanctions didn’t seem to affect Huawei much, which reported record sales of 858.8 billion yuan in 2019, up 19.1 percent year-on-year. Huawei also quickly revealed a self-developed operating system called HarmonyOS to replace Google Android. However, after Washington expanded the scope of sanctions in May 2020, requiring foreign chipmakers to use US technology, including TSMC and Taiwan’s MediaTek, to apply for a license to sell chips. for Huawei, the Chinese telecom giant appears to be in a slump again. The biggest impact is on Huawei’s smartphone operations. Due to a lack of high-end semiconductors, Huawei had to sell its Honor smartphone business to a newly formed conglomerate comprising more than 30 dealers and carriers. In the first quarter of 2021, Huawei was “kicked” out of the top 5 largest smartphone companies in the world in terms of sales. As stockpiles of smartphone components are declining and Honor’s business is over, Huawei will face even more pressure in the smartphone business. Many Chinese tech companies have caught up with the US Popular Chinese applications run the risk of being banned in the US. Image: The Economic Times. In October 2019, the US Commerce Department added 28 other Chinese companies to the trade blacklist about Beijing’s alleged human rights violations of the Uighurs. In May 2020, more than 20 Chinese government organizations and companies, including software technology giant Qihoo 360, were sanctioned for “assisting with procurement of items for military purposes in China. China”. The most recent US sanctions involve seven Chinese supercomputing entities blacklisted for national security concerns. Francis Lau, professor of computer science at the University of Hong Kong, said China’s supercomputers mainly use Intel, AMD and IBM CPUs. “The sanctions will certainly have a significant effect on China’s ability to stay at the top of supercomputers, since most of the components in its supercomputers today are US-made. Although it will be.” There are alternatives from other countries like Japan and South Korea, but the American component is still the best, ”said Professor Lau. Will the tech war be any different under the Biden administration? US President Joe Biden holds a semiconductor chip when he speaks before signing the executive order to address the global shortage of semiconductor chips in the White House. Photo: REUTERS In short, no. After Donald Trump’s tenure, President Biden continued to put pressure on Chinese technology and especially on Huawei’s case. In March, the US Commerce Department further restricted the products US companies can sell to Huawei, with clearer bans on the export of components such as semiconductors, antennas, and batteries. can be used in Huawei 5G equipment. A day later, the US Federal Communications Commission designated five Chinese technology companies, including Huawei, ZTE, Hytera Communications, Hikvision and Dahua, as “unacceptable risks” to security. America. As for Huawei, analysts believe that President Biden can offer a more effective policy than his predecessor in curbing Huawei’s global 5G ambitions by taking a more friendly approach to international partners in Europe and elsewhere. That could be more effective in isolating the Chinese company. In addition to sanctions on individual Chinese tech companies, President Biden has also pledged to more than double his investment in science and technology, focusing on areas like AI. and quantum computing. President Biden’s ambitious $ 2 trillion plan to improve US infrastructure includes an estimated $ 50 billion investment to help the country less reliant on chips manufactured abroad.