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V11: US Chip Production Recovery, Huawei Fallout, Tightening Tech Controls and FARA

  • Semiconductor manufacturers are investing massive amounts in expanding capacity using state subsidies. The US is at the highest chip trade surplus in the past ten years, while China is experiencing the worst trade deficit of all time.

  • Honor the Huawei spinout is back online and competing. After the US export controls in 2019, Huawei sold Honor to a Shenzhen SOE so that it could continue to operate with US technology. After being #6 in the Chinese market in Q1 2021, it climbed to #3 in Q3. US security agencies are now considering whether to blacklist Honor from trading with US firms and technology.

  • Huawei reportedly conserved chips for its Telecoms business but, market share is declining to ZTE, Ericsson, Cisco and Samsung. Huawei losing network market share appears to be a demand issue caused by slowing investment in China and Emerging Markets coupled with restrictions in Western, Advanced Asian and European markets.

  • The US effort to protect domestic industries and bar foreign militaries from using US technology is targeting five sectors: artificial intelligence, quantum computing, biotechnology, semiconductors and autonomous systems. In some form or another, politicians, think tanks and national security experts have identified a similar range of technologies.

  • The US recently banned a range of companies from using US technology to develop quantum technology for foreign militaries. This includes Chinas leading quantum technology team at the University of Science and Technology of China (USTC).

  • The DOJ is considering whether to tighten the commercial exemption in the Foreign Agents Registration Act (FARA), so that activity that indirectly promotes the public or political interests of a foreign government cannot be exempt from FARA. In the context of the US and China, a private activity that indirectly promotes the interests of the CCP could be a broad range of activities from foreign exchange, capital formation, technology development or manufacturing expansion.

  • It's becoming common knowledge that Taiwan, threatened by mainland China, underpins the global technology economy. If Taiwanese semiconductor fabs got damaged in an invasion, that would trigger a widespread industrial depression that would make Covid disruptions seem minuscule. US officials are increasingly making it clear that the need to defend Taiwan is explicit.

  • FDI between China with Taiwan and the US froze over in 2020.

  • DRAM spot prices have been falling while inventories are rising, signalling a turn in the chip shortage.

  • PC demand has flattened off at a higher base after the lockdown demand. Smartphone shipments have returned to pre-pandemic levels.

Full document at the link below.

Zen on Tech Newsletter V11 - Dec 2021
Download PDF • 2.09MB

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