Some interesting news in the semiconductor wars:
BREAKING: Netherlands firm ASML's stocks have been falling since China's Huawei unveiled a new patent in Extreme Ultraviolet Lithography, confirming the worst fears of the firm's executives who have opposed US restrictions (Motley Fool).
— SGM World News (@SGMWorldnews) December 31, 2022
Now, ASML had indeed opposed US restrictions. They said explicitly that in the case of sanctions, China would learn how to make the machines themselves.
Europe’s technological lead is being destroyed by following US policies. Energy intensive firms are fleeing Europe because US energy prices are much lower (this is due to sanctions on Russia and the sabotage of the Nord Stream pipelines) and following US sanctions on China means that China just learns how to make what Europe supplies them now.
It’s sort of rocket science, actually. As you may remember, the US banned China from the International Space Station, so China just built its own and now looks likely to have a base on the moon before the US.
Woops.
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China, to repeat myself, is the world manufacturing floor. Mercedes moved their auto-design center to China. When the US took the lead over the UK in manufacturing, the UK retained its tech lead for about 20 years, but it did lose it.
Repeated sanctions on any area where the West has the lead, whether space, aerospace, semis or anything else only provide a perfect complete tariff to a country with millions of engineers and scientists and more manufacturing capacity than any other country in the world. They speed up, not slow down, the day when China will both have the tech lead and the manufacturing base.
Back in the late 90s and the early 2000s I warned, repeatedly, against transferring the manufacturing floor to China. That was the decision point, that was when it could have been stopped.
Sanctions against key points only make sense if you’re going to either go to war or move massively back to industrial policy, and the West is not going to do either of those things. I’m not sure a full move to industrial policy would even work, but it’s certainly what should be done. However, it could only be done if you were willing to crash real-estate and securities prices by about two-thirds, because the cost-structure matters.
What Europe should be doing is aligning itself with the rising power, China, or remaining a neutral bloc and negotiation places where they will keep the tech lead with China, as part of specialization. China wants trading partners and they see benefits in not having to rush every tech sector out of fear of sanctions. The US is both going down and fundamentally, at a policy level, willing to feast on Europe to slow its decline. Euro elites though they were part of a trans-Atlantic elite, but they only sort of were. When push comes to shove, American elites will let Euro elites swing. Generations of dominance have created an American elite willing to almost anything, or perhaps even anything, to retain dominance.
Europe has hitched itself to the wrong ship, and trusted the wrong nation, thinking that being a satrapy is the same as being an equal ally, and they have joined a cold war that will hurt them more than help them.
They will pay the price.
different clue
America will become at best a “lower-middle-income” nation over the next couple of decades. Some Americans will adapt to that emerging reality gracefully and others will react to it ungracefully.
One of the most valuable survival skills the graceful adapters will have is to credibly simulate in public the look of ungraceful unhappy poverty. Graceful adapters really don’t want to be “visited” by spiteful vengeful ungraceful maladaptives.
The Clintonites, Obamazoids and Republicans in power will keep America stuck in the Global Free Trade Order long enough for America to fall through floor after floor after floor. America was never anything but a colony and a profit extraction opportunity to them . . . especially to the Clintonites and the Obamazoids.
Oh well . . . hopefully myself and fellow readers will begin posting more hardship survival information over to the “surviving hard times” thread which I suspect still exists even if it is no longer being hoisted forward weekly because of lack of use and interest for the moment by the readers.
Willy
I realize that for the sake of brevity we speak of national groups as “China”, “US”, and “Europe”. But we all know that it really comes down to which elite concentration of power gets to swing things in mostly their direction, thereby dominating the prevailing economies, cultures, hopes and fears for everybody else at whatever level in those regions.
For some reason Youtube suddenly sent me videos about the fall of Rome, mostly describing what life was like during the waning days. Turns out, this “fall” wasn’t days but a very slow slide which lasted for centuries. I hadn’t known that it was possible for a citizen to be born, live, grow old, and die in a fairly secure and peaceful Rome full of grand constructions, after that infamous AD 410 sacking. They just had to do so in a culture where the economic ground was fertile for only the 1%. It’s easy to see how these conditions would affect the psychology of the 99%. I mean, if I was an impoverished Roman citizen when that next sacking came around, I might’ve been willing to give those invaders a whirl at running things.
George
Well done then Ian. The consequences for losing a trade war become apparent.
https://techstory.in/taiwan-chipmakers-hint-at-decoupling-from-the-us/
This was written a while back and most people countered with ASML superiority at the time and gave it the brush, but the obvious detachment from the west sentiment in this article mimics reality.
Ché Pasa
From a realistic perspective, China should be able to grow, create, and build anything its society needs. I suspect the Politburo made a calculated decision to let the most vulnerable of the People… expire now and soon rather than wait for the baked in demographic collapse predicted for the end of the century. By… lowering… the population — mostly of the vulnerable not the vigorous — the Chinese leadership sees a chance to get ahead of the Future. It may not work, but I think they believe it’s worth the risk.
Meanwhile, European rulership appears more and more eager to commit suicide — or rather, to commit the European society as a whole to suicide.
Why?
The march into the Abyss is quite horrible to watch, but it’s happened repeatedly in Europe, over and over again; there seems no way to prevent it. A cultural imperative? I’ve seen a number of relatively recent studies of early-ish European society/”civilization” (“It would be a good idea.”) that describe ancient wars over who knew what, declines and reversions, and cultural through-lines to essentially the present. Somehow, the European mind was captivated by disastrous beliefs and leaders from practically the beginning.
Chinese weren’t wrong to consider Europeans to be Outer Barbarians.
ejf
“When the US took the lead over the US in manufacturing, the UK retained its tech lead for about 20 years, but it did lose it.”
should be??:
“When the US took the lead over the UK in manufacturing, the UK retained its tech lead for about 20 years, but it did lose it.”
StewartM
Ian, you once spoke of how China was used by American elites to win their internal competition with their poors, at the cost of eventually losing their international status.
Now it seems American elites are going to loot their fellow allies. Eventually, they’ll turn on each other when everything not nailed down is looted.
This is the eventual result of elevating a capitalist class, unable to create or invent or do anything useful, into the top decision makers. They are doing the only thing they know how to do. The whole history of capitalist (from the enclosure movement onwards) is profiteering based on being able to declare something that was once someone else’s, or everyone’s, into *theirs only*.
anon
Racism is a hell of a drug and white people/nations have shown time and again that they are willing to cut their nose to spite their face when it comes to domestic and foreign policy that benefits people if color. Europe will willingly go down with a sinking ship than align with an Asian powerhouse. Oh well. I have zero sympathy except for the fact that my children will have to suffer the consequences in the USA.
Feral Finster
The problem is that Euroelites cannot imagine anything other than an Atlanticist orientation. It’s just Not The Done Thing, any more than a Europolitician would stand up in the middle of a High Papal Mass and loudly demand that the person who just farted identify himself.
If you’ve ever lived in Europe, for better or worse, Europeans are much more aligned and sensitive to The Done Thing, the opinions and beliefs that All Right Thinking People Share. You don’t question these things, lest you appear gauche. Americans, again, for better or worse, tend to ask “does it work? can I make a buck off of it?” whether you look right is at most of secondary concern.