Research Publication – China vs. USA – Clash of the Titans IV v1.5

RFM & Alavan Independent update their coverage of the USA / China political and technology war with the publication of China vs. USA – Clash of the Titans Vol IV v1.5. RFM subscribers will receive their copy via email. 

China has taken its foot off the regulatory pedal but the dire state of the economy, largely as a result of Covid zero, is going to hamper any recovery. China also continues to languish in semiconductors and not content with its superiority, the USA has decided to increase the pressure. Older semiconductors and technologies where China is doing well are now being targeted to hamper its rise. The result is likely to be the separation of the Internet into two pieces which is optimal for no one.  

• Balance of pain: The regulatory crackdown has wreaked havoc on the technology industry with big players having lost at least half of their value. The Chinese state has pulled back as it has realised that it has gone too far but there is still no confidence in a recovery.
• Covid zero: is a large factor in this lack of confidence as sudden lockdowns and restrictions are playing havoc with the Chinese economy. Fortunately, there is space for economic stimulus but without a relaxation of Covid zero, there is unlikely to be enough of a recovery to bring back belief in the Chinese technology sector.
• Semis: China has no takers: China offers the best terms to build a fab. On a purely economic basis, everyone should be building their fabs in China but there are no takers. This demonstrates how little trust exists between the West and China.
• Semis: China continues to languish: With 7/10 years of the Made in China 2025 program elapsed, China is still failing to launch. Just 6.6% of domestic semiconductor consumption is met by Chinese companies of which a tiny fraction at best is coming from the 14nm node and 0% from anything more advanced.
• Semis: The eagle swoops: There has been an 18-month lull, but the current administration is now showing its talons. In many ways, this administration has become more aggressive than the last one and is making much more use of its semiconductor dominance to slow China’s rise.
• Semis: Aggression spreads far and wide: This includes new restrictions on advanced AI chips being sold to China as well as potential restrictions on less advanced semiconductor technologies like 14nm equipment and deep ultraviolet lithography.
• Other technologies: While China really struggles in semiconductors, it is a world leader in other areas which eventually could allow it to become a challenger for global technology leadership. However, the USA is leveraging its dominance in semiconductors to slow China down in any way it can. AI is the most recent example.
• Build the wall: The result of this ideological struggle is likely to be a Balkanisation of the Internet with separate and incompatible standards for China and the rest of the world. This is bad news for everyone as the total opportunity will fall far short of its potential.