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Businesses China Technology

America's Chipmakers Go To War vs. China (axios.com) 168

Chinese raids of U.S. intellectual property have helped China build a solid high-tech economy. But the U.S. semiconductor industry is still far ahead -- and China is desperate to catch up. From a report: Semiconductor manufacturers are fighting to protect IP from the Chinese, fearing that, without coherent action from the Trump administration, Beijing could bulldoze their industries. Three weeks ago, Micron and South Korean chipmakers Samsung and SK Hynix all reported that the Chinese government had launched antitrust probes into their firms, and accused them of setting artificially high prices for memory chips. American companies and the U.S. government have long been suspicious about the link between China's anti-monopoly policies and its industrial goals. "They want access to the intellectual property. They need us to teach them how to do it. Once they have the industry, they want to push us out," an industry source familiar with China's investigation into Micron tells Axios. The price hikes, the source says, are largely due to a boom in demand for memory chips in everything from smartphones to autonomous vehicles. China's investigation is "a clear indication that they're not ready to make [semiconductors] work," says the source. The New York Times has a story which also details the lawsuit of how a Fujian govt-backed chipmaker allegedly stole secrets from Micron. Then Micron got sued for patent infringement in Fujian.

Or as the Times reporter describes it, "This is how you lose a major tech company. First, a Beijing-backed buyout offer. Then friendly Chinese partnership proposals. Then the tech gets stolen. Then when you file a complaint in court, you get hit with investigations in China, your biggest market."
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America's Chipmakers Go To War vs. China

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  • by xxxJonBoyxxx ( 565205 ) on Friday June 22, 2018 @09:49AM (#56828410)
    >> Once they have the industry, they want to push us out

    This is news? I remember visiting a couple of mid-to-high tech companies doing business in China ten years ago and every company was structured the same way: the one or two foreigners running the plant and the hundreds or thousands of local Chinese doing everything.

    If chipmakers don't like the way China works...why not try building elsewhere instead of whining about industry protections aimed at a specific country (that screw up things for lots of other people)?
    • Re: (Score:3, Insightful)

      by Anonymous Coward

      Reminds me of that old saying about "lying down with dogs, waking up with fleas". Just what exactly did they expect to happen? Also we're not much better with companies buying off other companies employees.

    • by AHuxley ( 892839 ) on Friday June 22, 2018 @10:09AM (#56828554) Journal
      The US gov like it that way going back to the 1970's when the USA split China from close deals with the Soviet Union.
      For that to work China got a lot of US tech for free. US brands got invited into China. Low tax, low wages. Production lines that could make a profit with every generation of tech.
      The only trick was the USA would have to transfer the tech production methods so the new factories in China could make the most profit.
      To share everything the US brand had created with a local partner in a Communist nation.
      No tech transfer, no production line. The US brands opted to invest in 1970-80's China rather that much more secure and pro US nations with the same wages.
      Now China understands the US tech it wants to export everything under its own Communist brands at full price to the world.
      • Comment removed (Score:5, Insightful)

        by account_deleted ( 4530225 ) on Friday June 22, 2018 @11:25AM (#56828990)
        Comment removed based on user account deletion
        • My first reference (to date myself) for the obsessive behavior of Japanese photographers is Caddyshack and their heady presence was led by a fully aware Rodney Dangerfield in his audacity to taunt and diminish propertied snobbery.
      • The US gov like it that way going back to the 1970's when the USA split China from close deals with the Soviet Union. For that to work China got a lot of US tech for free. US brands got invited into China. Low tax, low wages. Production lines that could make a profit with every generation of tech. The only trick was the USA would have to transfer the tech production methods so the new factories in China could make the most profit. To share everything the US brand had created with a local partner in a Communist nation. No tech transfer, no production line. The US brands opted to invest in 1970-80's China rather that much more secure and pro US nations with the same wages. Now China understands the US tech it wants to export everything under its own Communist brands at full price to the world.

        That these forced technology transfers hasn't been fought is a complete failure, and treason, of our government. Firing squads for all involved, including tho WTO.

      • by HornWumpus ( 783565 ) on Friday June 22, 2018 @12:51PM (#56829524)

        The average Chinese contract manufacturer makes about a 1% profit selling to the west. They more or less have to cheat and sell additional production in China which gets exported 'informally'.

        Full price for cheap knockoffs is already in the market, the Chinese are way behind in moving up the value curve. By this number of years the Japanese already owned the world camera market and were starting to own the car market.

    • I would feel sorry for a small company who just doesn't have the resources to fully understand what is the cost of doing business in china. And got excited by the low price in partitioning. But for the big companies, with a lot to loose if they don't realize that there isn't a separation between business in government in china, and IP will be acquired if deemed necessary for national self interest.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      Like Solar. Anybody who built their own plants lost due to Chinese subsidies and building too cheap for anybody else to compete.

      What You Sow, So Shall You Reap.

    • by imgod2u ( 812837 )

      IIRC, most semiconductors are not manufactured in China. The two biggest fab locations are either Taiwan (technically not China by Western standards) or the US...

      • Taiwan is not part of the PRC, by anybodies standards.

        Yes the Chinese are butthurt about this. Too bad for them.

        Taiwan has chemical and biological weapons. The situation isn't going to change anytime soon.

        Perhaps after the next revolution on the mainland. When they realize they've been taken for chumps and all the assets they worked 30 years for are worth much much less than they paid for them.

        • Taiwan has chemical and biological weapons.
          I doubt that. Officially no developed country still has them, we have treaties against that since 30 years.

          • While I suspect that Taiwan does NOT have bio-chem weapons, most nations around the globe do in fact have these. They are very cheap to make, effective, and most of all, untraceable if you know what you are doing. If fact, if you really know what you are doing, you can point the path at another nation.
          • Right, and Israel doesn't have nukes...

      • I think South Korea is also in the top 3 with Samsung and Hynix.

  • by Anonymous Coward

    And just how much of this IP drain was due to outsourcing?

    • by Anonymous Coward

      Only about roughly 100%

  • by Dallas May ( 4891515 ) on Friday June 22, 2018 @09:53AM (#56828446)

    This is capitalism's Achilles Heel. Businesses are run on short term thinking. Sure your trade secrets are going to get stolen and they are going to use your tech to kick you out of there market in two years, but don't you want to do business in China today? Selling in the Chinese market will increase your stock price next quarter.

    Nevertheless, in the long term (multigenerational term), it doesn't matter, they are going to figure it out for themselves one way or the other anyway.

    • by sinij ( 911942 ) on Friday June 22, 2018 @10:14AM (#56828578)

      Nevertheless, in the long term (multigenerational term), it doesn't matter, they are going to figure it out for themselves one way or the other anyway.

      This is nonsense. It does matter in the long term. In one scenario they are generations behind and keep paying West for innovation that is invented there, and in other scenario they stole all the tech and compete with West, only without having to pay amortization for the cost of innovation.

      • by sinij ( 911942 ) on Friday June 22, 2018 @10:17AM (#56828606)
        Look at this way, if Tech X takes 1Bil to develop and 0.5Bil to set up facilities to produce, Western firm has to recoup 1.5Bil and Chinese firm has to recoup 0.5Bil. Consequently, selling the same Tech X Chinese firms can undercut Western firms by a great deal. This is not because of cheaper labor, but because IP is essentially free to Chinese.
        • Make it free in the rest of the world also.
          IP is outdated anyway.
          Abolish patents.

          • by sinij ( 911942 )
            You can't abolish patents, as that will stop a lot of innovation. That is, you will have competition on efficiencies, but no competition on features and technologies. In a world without patents our PCs would be running 8086 chips made on 4nm fabs sold at 1$ a dozen.
            • The primitive form of 'patent' is called a 'secret'.

              Eliminating patents doesn't eliminate innovation, it eliminates innovations falling into public domain on a set schedule.

            • by Jeremi ( 14640 )

              In a world without patents our PCs would be running 8086 chips made on 4nm fabs sold at 1$ a dozen.

              Imagine a Beowulf cluster made out of those!

        • by Anonymous Coward

          The only problem with your idea is that China easily has 1Bil. People and Dollars. If you try to exclude them they will be just as capable as you eventually(/in a short time if they spy a bit), and their market will still be blocked from you, and bigger than yours. So they will also have better scale.

          Or the simplistic version, Made in China 2025, They will spend hundreds of billions on it anyway and beat you, so you may as well make some profit while you can.

          • The only problem with your idea is that China easily has 1Bil. People and Dollars. If you try to exclude them they will be just as capable as you eventually(/in a short time if they spy a bit), and their market will still be blocked from you, and bigger than yours. So they will also have better scale.

            Or the simplistic version, Made in China 2025, They will spend hundreds of billions on it anyway and beat you, so you may as well make some profit while you can.

            China has absolutely terrible demographics and that one billion old people will be a mill stone around their necks. Waiting them out is exactly the right move. Moreover you're mischaracterizing this. They aren't excluded, just not able to steal hard won technology.

          • by sinij ( 911942 )
            West is still leading China in innovation. It is not given that Chinese could catch up to West on their own. China has more people, but they don't produce the same level of innovation on per capita, whatever the reasons are.

            The way I see it, the only way China could compete with West on innovation if we give them all the tech and provide innovation roadmap.
        • And why does that matter?

          Why are you so greedy (your example is wrong anyway) that you don't grant them the saving in costs? Why do you demand they have to spent the extra money to "develop" it?

          This is not because of cheaper labor, but because IP is essentially free to Chinese. Actually it is not ...

      • by Dallas May ( 4891515 ) on Friday June 22, 2018 @10:23AM (#56828642)

        "and in other scenario they stole all the tech and compete with West, only without having to pay amortization for the cost of innovation."

        The third, and most likely, scenario is that -over the next few generations- innovation in chip design becomes a diminishing investment, the patents expire, and microchips become commodities just like every other industry.

        Consider this: today there are not very many significant paper plate patents filed. Paper plates, while once innovative, are a commodity product. If you want, you could start your own paper plate business and try to sell your plates. But basically the only thing you would have to sell on is your brand, your product is going to be basically the same as everyone else's. It's a paper plate. Micro chips are, eventually, going to go the same way. The patents will expire and anyone who wants to make and sell microchips will be able to do so.
        It's inevitable. It's just a matter of time.

        • The simple fact that this has already happened, for low end chips. Sure, if you want some fancy x86 thing, a server chip, or a computer chip you are going to need to license a expensive design.
          But for everything else that is used? If your local manufacture plants also make computer chips, you could get anything for small electronics. Anything for anything that doesn't require a real OS: So your idea is basically true for all embedded systems, which is still quoted at "98% of microprocessors".
          Currently any m

          • "Will the trends thats true for the embedded systems ever be true for things like workstation CPUs?"

            It certainly will. Eventually. I know this because there is a limit to maximum possible processing power on a chip because we still have to make things out of atoms and molecules. That doesn't mean innovation will stop entirely. Not at all. Think of it like knives. Knives are literally the oldest human invention -actually being invented before modern humans evolved. Even still, despite being hundreds of thous

      • And why is that insightful?

        You still failed to explain: why does it matter?

    • by Anonymous Coward

      Selling into a competitive market is a good thing. Manufacturing in that market is stupid. They have trained their competition and their competition's country does not care if they steal IP. After all, it is the duty of any country to seek what is best for its citizens; without regard for the citizens of other countries. The North America and Europe are about to learn why.

    • by drnb ( 2434720 ) on Friday June 22, 2018 @11:04AM (#56828860)

      This is capitalism's Achilles Heel. Businesses are run on short term thinking.

      This is also short term US consumer thinking, a tragedy of the commons thing. Lowering your manufacturing cost is a secondary consideration, the primary consideration is getting the sale in the first place. Consumers drove jobs overseas by rewarding CEOs who outsource with sales. Consumers thought their one little purchase would not make a difference. Multiply by hundreds of millions of consumers, now multiply by many decades.

      There is also short term US/State government thinking. For example the San Francisco bay area buying Chinese steel for a recent bridge project.

      Yes managing companies for the quarterly report is bad and needs to change. But you have to have a company to manage in the first place and consumes will generally reward your competitors if you manufacture in the US and they manufacture overseas. Consumers need to change their purchasing habits and show companies they have a preference for US made goods, that is the only way that things will change.

      • by Anonymous Coward

        How can U.S. consumers buy U.S. made goods? Almost every consumer product is either made in China (or another Asian country) or has parts that were made there! For consumers to buy U.S. made goods, the U.S. made good have to be there first. I have stopped shopping at WalMart because of the drastic changes after Sam Walton died. Sam Walton wanted to sell as many products made in America as possible. After his death, his kids completely reversed that!Almost everything at WalMart is now made in Southeast

        • by drnb ( 2434720 )

          How can U.S. consumers buy U.S. made goods? Almost every consumer product is either made in China (or another Asian country) or has parts that were made there! For consumers to buy U.S. made goods, the U.S. made good have to be there first.

          Some companies still manufacture domestically. There are websites that help find them. Many websites indicate where products are made. I recall REI having a US Made filter and lots of good gear was listed when I tried it out. There is more out there than you suggest, take an extra moment to find it.

    • Yeah, and the board will crucify you for "leaving money on the table" if you take the long view and tell the chinese to fuck off.

  • by Anonymous Coward
    then employ americans and dont outsource and subsidize stem subjects in education
    • then employ americans and dont outsource and subsidize stem subjects in education

      Consumers decide where things are made, not CEOs. A lower manufacturing cost is only relevant if you are getting the sale in the first place and consumers decide who gets the sale. Consumers rewarded those first CEOs that outsourced with sales, so other CEOs got the message and followed. The message: we consumers don't care where things are made we just want lower prices. Its a tragedy of the commons thing. The individual consumer thinks there one decision will have no impact. But millions are thinking the

      • Consumers decide where things are made, not CEOs. A lower manufacturing cost is only relevant if you are getting the sale in the first place and consumers decide who gets the sale. Consumers rewarded those first CEOs that outsourced with sales, so other CEOs got the message and followed. The message: we consumers don't care where things are made we just want lower prices. Its a tragedy of the commons thing. The individual consumer thinks there one decision will have no impact. But millions are thinking the same thing, let this go on for decades, we now see the result. Things will not change until **consumers** change their behavior and show a preference for US made goods.

        You're forgetting that you can simply not allow in super cheap crap. Consumers will pick from what's available, but you don't have to make it easy for it to be available.

      • by k6mfw ( 1182893 )
        No, consumers only consume. They have no say in where things are made. In fact, most don't know how to make things. Most consumers only see one day ahead, that gadget for $4.95 is just as good as the one for $29.95. CEO has a longer vision, 3 months (or one quarter).
        • by drnb ( 2434720 )

          No, consumers only consume. They have no say in where things are made. In fact, most don't know how to make things. Most consumers only see one day ahead, that gadget for $4.95 is just as good as the one for $29.95. CEO has a longer vision, 3 months (or one quarter).

          The CEO is a captive to the consumer's preference. Consumers generally do not reward those who try to manufacture domestically. The CEO does not have the control you think he does, the consumers have far more control than you think they do. Consumer decisions drive things, the longer CEO vision merely tells him to outsource like their competitor who is gaining sales. In other countries the consumers are more aware of where things are made and that contributes to economic and employment health.

          • CEO is capitvated by the laws of the free marked. If he wants to chase tomorrow and perish by not planning, he is free to do so.
            The problem arrives when the rest of the marked is not paying attention: CEO's can ride around companies in a pure stasis draft

            But you are also describing the problem indirectly, by saying
            >The CEO is a captive to the consumer's preference.
            >Consumers generally do not reward those who try to manufacture domestically
            You are basically saying that
            >The CEO can not plan ahead to

            • by drnb ( 2434720 )
              The CEO's existing supply chain does not have the 25-50% discount of Chinese based raw materials, goods and services that currency manipulations provides, nor does the CEO's existing supply chain have the cost reductions from cheap labor, reduced environmental regulations enforcement, etc.

              Yes there are a series of cascading effects of outsourcing, but that does not change the simple fact that consumer choices drive it all. Now look at Germany where consumers consider domestic manufacture far more then US
  • Many will die in the intel vs jinhua wars.

  • apple can pull out foxcon has lots of land in WI build Iphones in the usa!

    • They are referring to IC's not finished consumer products. There is a huge amount of IP related to the highest-tech integrated circuits. In many cases, such as Intel, they were able to out-accelerate many competitors because they were not only developing new designs for the processors themselves, but they were also developing cutting edge design tools and processes along with them to keep innovation moving.

      That's a huge stumbling block if you're a smaller firm just trying to jump into the ring with a big
  • trump is right the China deal is bad for the USA!

  • by iggymanz ( 596061 ) on Friday June 22, 2018 @10:25AM (#56828650)

    the tech for fab is a moving target, and we're right at the point where new tech is needed to go with any finer feature pitch. China will only be able to play catch-up

    • Comment removed based on user account deletion
    • The new hotness is doing a new revision of older processes where manufacturing with fewer masks can be (relatively) cheap, and looser design rules make churning out a design faster.

  • by Anonymous Coward

    Been in the industry for a long time and this was always an obvious end result. It's cheaper to have China do your stuff, so you give them access to all your IP and then complain when your IP makes the rounds. Tough shit. Should have paid your workers instead of giving your CEO a 10 million dollar annual salary.

    • by King_TJ ( 85913 )

      Except the problem is, the claim they should have paid their workers better doesn't tend to matter much if that CEO walked away with 10 million a year by letting things go down the tubes with all the IP stolen. He or she got a good run of highly paid years and chance are, will be in a short list considered for hire by the next big corporation.

  • Step 1: Be in charge of a major corporation.
    Step 2: Outsource all the jobs overseas.
    Step 3: Cry when the third world shithole you outsourced the corporation to takes your job.
    • by AHuxley ( 892839 ) on Friday June 22, 2018 @11:04AM (#56828862) Journal
      Re 'Step 2: Outsource all the jobs overseas."
      South Korea, Thailand, the Philippines kept US secrets during the Vietnam war.
      Nations that helped and supported their friends in the USA.
      They would have welcomed and supported all and any new US high tech investment in the late 1970-90's. Low wages, low tax, secure and ready to support the USA.
      Educated, english speaking. A good working history with the US mil.
      Ireland would have done great tax deals too.
      What did the USA do? Invest in Communist China. Give secrets away for free to China with every new US factory opened.
      • by drnb ( 2434720 ) on Friday June 22, 2018 @11:27AM (#56828998)

        Re 'Step 2: Outsource all the jobs overseas." South Korea, Thailand, the Philippines kept US secrets during the Vietnam war. Nations that helped and supported their friends in the USA. They would have welcomed and supported all and any new US high tech investment in the late 1970-90's. Low wages, low tax, secure and ready to support the USA. Educated, english speaking. A good working history with the US mil. Ireland would have done great tax deals too. What did the USA do? Invest in Communist China. Give secrets away for free to China with every new US factory opened.

        That was a political choice made by Nixon/Kissenger in the 1960s. The theory was that engagement with China will liberalize them. Some opportunistic behavior was to be tolerated since it will be offset by the political rewards of a reformed Communist China. Sadly those reforms ended with the Tienaman Square Massacre in 1989 but that 1960s policy of tolerating the opportunistic, now predatory, behavior continued. Trump may be an idiot but he's somehow got it correct that our policy has to change, it has to be reciprocal, free and open and fair in both directions or in neither direction. We can't continue the unidirectional policy, that failed. The modern messenger may be wrong but message is correct.

    • by drnb ( 2434720 )

      Step 1: Be in charge of a major corporation.
      Step 2: Outsource all the jobs overseas.

      When consumers show no preference for where things are made and always reward the company with the lowest price, if you don't do step 2 there won't be a step 1 where you can make decisions. Consumers drive outsourcing, consumers decide who gets the sales, consumers rewarded those first companies that outsourced and other companies followed.

      Naively pretend its the CEOs fault and the problem won't get fixed. Consumers have to change their behavior and show a preference for US made goods. CEOs will follow t

  • As a non-American I will buy products from whoever gives the the best value for money. Right now, thanks to low wages and the ability to produce quality goods at a low price, China is winning that battle. If I buy an American product then I'm basically paying extra so some fat kid in the US with high wage expectations can have a fancier life, not to get a good product.
  • by Anonymous Coward
    Resulted in its formation of the country. USA has like the worst record when it comes to stealing..
  • by hackingbear ( 988354 ) on Friday June 22, 2018 @11:47AM (#56829134)

    I suspect Iraq still has WMDs too.

    Don't they have any real evidences to present?

    While at it, we should also suspect Huawei put backdoors in their products, just like the Chinese suspect the same about Cisco products... (oh... never mind the second one, just remember Snowden now)

    BTW another American semiconductor company -- Qualcomm -- already paid up $1 billion to settle its Chinese antitrust violation. So pay up Micron.

  • by kriston ( 7886 ) on Friday June 22, 2018 @01:15PM (#56829664) Homepage Journal

    You can't do business in China without sharing your IP with the government. Everything is fair game for them. Their supercomputers are based on MIPS technology with questionable intellectual property licensing. Now they're moving to "license" AMD x86-64 technology.

  • by Anonymous Coward

    You are not competing with a Chinese company. You are competing with China.
    Your competitor writes and enforces the laws as they wish.

  • by StikyPad ( 445176 ) on Friday June 22, 2018 @02:49PM (#56830250) Homepage

    Both of those things can be true. The Chinese probably want access to corporate secrets, but chipmakers are probably price fixing as well. They have a history of it, and itâ(TM)s the only tech sector where price/performance costs are rising rather than falling. Memory costs more than double what it did five years ago. Itâ(TM)s insane. Sure, thereâ(TM)s rising demand for memory, but thereâ(TM)s higher demand for processors as well, and you donâ(TM)t see processor prices rising. If chipmakers arenâ(TM)t colluding to keep memory prices artificially high and trying to deflect attention with stories like this, Iâ(TM)ll eat my hat. Besides, China has great espionage â" they hardly need fake investigations to get access to corporate secrets.

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