Semiconductor Manufacturing International Corp (SMIC, 中芯) has likely advanced its production technology by two generations, defying US sanctions intended to halt the rise of China’s largest chipmaker.
The Shanghai-based manufacturer is shipping bitcoin-mining semiconductors built using 7 nanometer technology, industry watcher TechInsights wrote in a blog post on Tuesday.
That would be well ahead of SMIC’s established 14 nanometer technology, a measure of fabrication complexity in which narrower transistor widths help produce faster and more efficient chips.
Since late 2020, the US has barred the unlicensed sale to the Chinese firm of equipment that can be used to fabricate semiconductors of 10 nanometers and beyond, infuriating Beijing.
Now, there’s a question if they can scale, but this is still a huge step. This means that they are ahead of Europe and the US, and behind only Taiwan and Korea. This is also sooner than almost all experts predicted: China did what Western technologists thought could not be done so quickly.
This speed, as I have noted in previous articles, is not that surprising; the technological lead always moves to the country which holds the world’s manufacturing floor. When Britain fell behind the US, it took about 30 years for them to lose their tech lead, but lose it they did. The same will happen with the US and Britain, but likely faster for obvious reasons like jets, the internet, and so on.
To put it simply, when you are right there with the factory floor, your innovation cycles are far faster, or in modern-speak, you iterate more quickly. You also have more practical experience with what actually works.
The “ban semi-equipment and semi-sales” to China card was a card, like the freezing of Russian foreign reserves, that you only get to play once at a great power. China is more than happy to subsidize chip manufacturers to learn how to make this tech domestically, and they are also crashing other key techs they’re behind in (like aviation), because it’s clear if the West would put a ban on semis, they’ll do it to anything or everything else.
China’s Job #1, and Xi has stated this publicly, is to make it so that they can’t be choked out by the US (the “West” is mealy-mouthed; the US makes the decisions, and the EU, Japan, and so on just do what they’re told, with occasional exceptions). Making Russia a locked-in junior ally with the sanctions regime made it so that China couldn’t be choked out on natural resources, and making it clear that crippling sanctions are on the board caused China to scramble to close the deficiency.
Unlike with choking out Japan over oil before WWII (which is why the Japanese felt they had to attack the US), however, the partial sanctions on China were not crippling, because unlike pre-WWII, the US is not the world’s primary industrial power, and it has its own dependencies on Chinese trade.
In realpolitik terms, because this is the case, sanctions should have been all at once, followed by war (I’m not for this, I’m massively against it, not least because of the issue of nukes). Half-assing it just gave China time to decouple its key dependencies and, as noted above, the anti-Russia sanctions were a gift from heaven to China.
The game continues, and if it were not for climate change, all the smart money would be on China as the pre-eminent world power within 20 years, probably sooner. As it is, a lot will depend on variables that humans have chosen not to control and soon will lack the ability to significantly control.
Willy
Also, I suspect that in China factory floor innovations are rewarded better than in the States. There they’ll give you a promotion. Here, they’ll find a reason to fire you because you’ve been an upstart rebel threat to the boss, when you should’ve known better and donated all your ideas to that boss.
Plus there there’s that brave new innovative culture fire, like what was seen in the States during the go-tech 80’s. And less advanced corporate trickle-down corruption, I suppose, where the MBAs don’t even care about product quality anymore, just profit by any means necessary.
As a gigger I’d worked in both cultures, the innovative startup and the crony corporate derelict. Very different experiences those two. One team-work-exciting, the other lord-of-the-flies-paranoid. Maybe when automation hits China enough to impact workers, they’ll be getting theirs too.
Astrid
This is at least 20 years in the making. I have a Mainlander friend who worked for Texas Instruments in chip fabrication and was headhunted right after the dot.com bubble bursted. I remember talking about SMIC as a new government project that we all kinda dismissed as another Chinese white elephant (just like high speed rail, haha, I backpacked through China around 2000 on slow multiday train trips that were literally 50% tunnels in mountainous stretches). I helped translate some Chinese patents and academic publications from 15 years and thinking that they were terrible. In short I bought the Western liberal line about the Chinese being only good for cheap knockoffs and copying, joke’s on me.
When we talk about migration out at this point in the West, at least amongst the upper income strata, a lot will be the ethnic Chinese, Indians, and Russian technologists (including second generation) being welcomed back home. 40 years of war against labor already took out the body of American industry, this coming emigration wave (fueled by xenophobia against “adversary”) may well decapitate the head.
Climate change, pestilence, resource depletion, and collapse of a frankly insane unipolar order are certainly unpredictable factors for our future. Still, the odds of survival seem much better for peoples who are able to decisively win an economic/military war with one hand tied behind their back or maintain zero Covid, than whatever Western societies just lived through in the 3 or 30 years.
Ian Welsh
I’m old enough to remember when “made in Japan” meant “cheap junk” and when it changed, so the China thing surprises me less, though it’s happening a bit faster than I expected.
Soredemos
Japan and China both made ‘cheap junk’ a short term goal, while also investing in a longer term objective of eventually upping the quality.
Veronica
You’re absolutely right, but haven’t they been willing to do this in every “essential” field since 1979? I’m pretty sure Ha Joon Chang wrote a few books on it, and got a few shiny medals to boot.
More importantly, isn’t state of the art — especially in military and industrial applications — moving to a combination of biological computers for long term storage and quantum computers for everything else?
Chiron
China is building a national water grid, sponge cities to control flooding, they probably foul got further like Tokyo gigantic water control.
Ian Welsh
Yeah, but as best I can tell China is one of the world leaders in quantum computing.
Astrid
They have. Looking back 20 years, they all looked like a bunch of ill conceived scatterbrained vanity projects that would never get off the ground, but obviously enough of them did! That’s the thing with China, assumptions and observations that are older than 2 years don’t reflect anything about the current society anymore. I was there right before COVID (November 2019) but I’m pretty sure EVERYTHING has changed since then. My prior trip, in 2016, had everyone’s still using cash for everything. 3 years later and everyone used their phones for everything.
I still think China has a pretty toxic workplace culture, probably almost as bad as South Korea, though the government is at least trying to push back on the 996 culture. Right now, people who have urban real estate or suburban land have FU money. It’s as of a high proportion of the urban population are essentially trust fund babies, with the ensuing societal pluses and minuses. But better that than destitution for the lower 3 quintile.
someofparts
This afternoon, Yves Smith at NC put up a post about how hard this country is for old people. She said she wants to leave the country. Now Astrid has me realizing that the brightest young Asians and Russians living here may be heading back to the East.
Everybody I have been close to in my life lives around here but, bless their hearts, all of them are extravagantly ignorant about this country. Staying here seems dangerous, but I’m also not sure if I would be able to manage anywhere else.
With me everything hinges on continuing to get Social Security. If that gets cut my chances of surviving here, where friends/relations would help a bit, seems higher than it would be if I were living out of the country among strangers when it happened.
StewartM
Soredemos
Japan and China both made ‘cheap junk’ a short term goal, while also investing in a longer term objective of eventually upping the quality.
I would put it differently.
In Asia, a ‘successful company’ makes excellent products that delight its customers. That has always been the goal; it just took a while for them to get there.
In the US, and now in the EU, a “successful company” makes boatloads of money for the stockholders (thank you, Milton Friedman) even if it means screwing customers, employees, communities, and its own long-term future in the process. Witness Jack
BelchWelch.The first strategy takes a while, but as Emerson said, if you make a better mousetrap people will beat a path to your door, even if it’s in the woods. The second strategy ends up burning down the house in order to heat it.
VietnamVet
The WaPo posted a excerpts of Ali Wyne’s book — “America’s Great-Power Opportunity: Revitalizing U.S. Foreign Policy to Meet the Challenges of Strategic Competition”. Although “Interstate competition is a characteristic of world affairs,” it does not need to become “a blueprint for foreign policy.” It will be impossible for the United States and China to mitigate pandemic disease, slow climate change, contain macroeconomic instability and manage other transnational challenges without maintaining a baseline of cooperation. Where the Cold War ended conclusively, neither Washington nor Beijing will be able to achieve a decisive victory over the other; they will have to cohabitate in perpetuity”.
Europe to maintain its current industry requires Russia’s natural gas. It was cut off. Restored but flow has now been cut down to 20% — insufficient to keep the economy running or for winter heating. Russia is pulling out the International Space Station. Likely, they will decommission the propulsion modules that keep it is position. Boeing has yet to fly astronauts in its space capsule to the station, let alone, design and build the replacement thruster components, ASAP, to keep it in space. Nancy Pelosi wants to rub Taipei in Xi’s nose.
The posts and comments on the old-fashion inter-tubes are getting dire for very good reasons. Westerns rulers are incapable of admitting that this is a multi-polar world once again. Corporate/State propaganda is off in “La La Land”.
The Western Empire and the EU became neoliberal free-trade regimes and dismantled the sovereign, democratic, nation states. North American and Europe are at war but with governments that are unable to fight it, let alone, sign an armistice and build a DMZ between Ukraine and Russia in order to save themselves from a depression, dust bowl heat domes, and a frozen winter, at best, or nuclear war & climate change (possible human extinction events), at worse.
someofparts
I read something yesterday that is changing my internalized map of the political world. It seems that Putin considers Lenin a traitor and Soviet communism a massive mistake that wrecked the nation.
https://gordonhahn.com/2022/07/21/putins-decommunization-of-ukraine/
“Putin has no love lost for Lenin and his communist experiment, especially the aspect of the latter that ignored indeed denigrated Russian nationality and bourgeois patriotism in service of the global socialist revolution to which Lenin was solely dedicated. Lenin was famous for condemning ‘Russian chauvinism’”
“historian Richard Pipes noted that Lenin hardly knew Russia, especially after having spent nearly two decades in European exile before his German-sponsored return in April 1917”
“Putin is especially repulsed by Lenin’s collusion and treason in cooperating with and receiving financial and logistical support form the Central Powers in order to foment revolution and then organize the October coup while Russia was besieged during a failing war effort.”
So Putin is not a Communist or a Capitalist. He is a patriot. Russian well-being is what he cares about.
Now that this new information is shifting my conceptual framing away from the meaningless Communist/Capitalist duality, another picture of our modern dilemma is suggesting itself to me. Maybe the real duality is between Rabid Ideology and Humane Realism or even, if you will, Ideology vs. Patriotism.
When I frame things that way I begin to see possible continuity between the travails of Russian under rabid Communist ideology and our own accelerating destruction under the tender mercies of rabid Capitalist ideology.
I’m going to keep test driving this new way of understanding things and figure out, going forward, if the distinction is useful or silly.
Astrid
China’s reputation for “cheap junk” is in large part driven by US corporate practices of planned obsolescence engineering. At least for white goods, it’s typically not harder to put together a durable overbuilt item from a production standpoint, it just requires pricer components and more rigorous QA up the supply chain. Getting bad “made in China” goods was always a choice by the typically US based seller, who choose to go with lowest price and bad QA.
QA was a huge problem domestically 10-20 years ago, due to lack of enforcement and a lemon market. “Faux drugs”, “gutter oil”, detergents in breakfast foods, birth control for farmed crabs, and pesticides on veggies were huge concerns for people I knew. People would pay multiples just to buy “for export” and imported goods. It even manifested in less harmful ways. For example, until about 10 years ago, t-shirts with bad English (grammar or spelling) seemed more common than most, even though everyone born after 1976 would have had to learn English inn school. Another oddity was that every time I went there during the summer, there would be the hot new melon varieties for that summer. The reason was that farmers were cheap and would replant seeds saved from last summer’s hot hybrid variety, whose fruit might have a similar appearance but tastes bad. As a result, people constantly sought out that year’s hybrid melon variety so they wouldn’t be cheated by fakes.
Better regulations and social media proliferation did a lot to reign in this lemon market. Restaurants in touristy area used to be the pits but these days a restaurant has to have great ratings to survive. They still prefer Japanese appliances, German cars, and European leather goods, but there’s much less talk of “import” everything these days.
Trinity
“the technological lead always moves to the country where the world’s manufacturing floor is.”
This is so true. They’ve got the tech lead, the science lead, but also will be leading in true innovation, if they already aren’t the leader. For years I’ve been comparing the so called “digital innovations”, which is all we seem to innovate anymore, and it’s just junk. Almost all of it is junk. Has anyone else noticed that “innovation” now is synonymous with digital tech? Not with important things like roads, bridges, housing (except for the wealthiest), public transportation, better ways of doing things, better relationships with everything, etc?
Ché Pasa
Apparently,, any move toward Chinese leadership is considered an Act of War by our dauntless overlords and must be met with force — either financial or military. Any move by Russia to protect itself from the rapine of the West likewise.
From the indications, Nancy’s trip to Taipei is intended as a provocation. “See what happens.” Sanctions have proved futile in taming Beijing, ergo, the next step is war.
But they must start it, and they will do so by attacking, blockading or whatever Taiwan. Then let the fireworks begin.
I hope Xi is smarter than that. But then I hoped Putin was smarter than to invade Ukraine. But hopes were dashed, no?
We may be ruled by psychopaths everywhere. Incapable of not doing the bad thing. Careless and cruel. Leaving us, their victims, to flounder as we must.
I’ve seen so much of the pundits’ rage at China for controlling the Covid outbreaks. Fury, white hot and passionate. That seems to tick them off more than anything else. But it’s among so many other triggers. Each leading to the same outcome: China must be destroyed. Russia too, but it can wait.
anon
The CCP is significantly more competent and forward thinking than western politicians. They’ve handled Covid better than any other country in the world. I’d bet on China being able to address climate change much better than the USA when things really go south.
someofparts
Yeah, add me to the other comments here where people notice that as the quality of production and QA in China keeps improving, the quality of produced goods and infrastructure domestically continues to decline. My experiences at work also line up with what others here have described, as good work is has come to be punished instead of rewarded.
For my money, Michael Hudson is the guy who understands why all of this is happening. Unless it is kept on a tight leash by a powerful government, interest bearing debt will always lead a nation into dystopian fascist oligarchy. I think things went off the rails in this country right after the Civil War, when JP Morgan privatized control of our national currency and the emergence of public demagoguery stopped the original Populist movement in its tracks.
someofparts
On the rise of China/decline of the West topic, this can be added to the evidence for Western decline. The scale of criminality of display here is gut-wrenching.
https://twitter.com/PBC174/status/1551545770251370497?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1551545770251370497%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.theautomaticearth.com%2F2022%2F07%2Fdebt-rattle-july-27-2022%2F
Astrid
I think there’s plenty of evidence now that the RF government made a risky gamble that paid off. Their losses in men and materials appear moderate and sustainable (and arguably helpful in battle testing their men and gears), their economy is holding up very well, and now the whole country is aligned on turning their backs away from Europe and towards autarchy and Eurasia. Leaving aside the morality arguments on each side and not even looking into the West’s desired alternative of breaking up Russia for another round of 1990s style exploration, this SMO and sanctions regime is strengthening Russia for now.
The Chinese are currently not nearly as well prepared as the Russians for a full on confrontation and divorce from the West, but they know it’s coming and 2022 tells them it’s probably inevitable. They should appear careful and measured, for domestic reasons and to ensure that they don’t alienate non-Western countries, but they may have calculated that it’s worthwhile to call the Western bluff and deal with the consequences now. From my observations, China’s attachment to Taiwan isn’t based on feelings of ownership or fraternity, it’s based on legitimacy and security. I’ve never personally met anyone in China who goes on about Taiwan, the way that some westerners I know goes on (ignorantly) about Hong Kong and Tibet. Mostly there’s some disgust for the DPP’s revisionism on the Japanese occupation and anti-Mainlander sentiments. But otherwise plenty of them have vacationed in Taiwan and came back unimpressed.
A US controlled “independent” Taiwan is simply not acceptable, but almost anything else could be. Whatever self identified Taiwanese feel about the mainland and the CPC, they should investigate the fates of all the peoples that the US “helped liberate” in the last 50 years.
China is not an autarchy, but it’s pretty prepared for Western sanctions as is. They have about 18 months of food stored. They have a relatively high amount of discretion on energy use since much of it is used on construction and manufacturing for export. Those can be stopped for 12-18 months while waiting for Russian energy to comes on.
90+% of the population own their homes and the carrying costs tends to be very low compared to their market value (generally no property tax and communal management fees tend to be only a few hundred RMB). Relatively high saving and the government can marshall resources to provide a floor on personal finances. A country that got through the 1959-62 famine and the Cultural Revolution in one piece has a fair chance at getting through a debt overhang or Western sanctions.
someofparts
From a report on a gathering of ranking U.S. security personnel in Aspen, the thinking seems to be that they should attack Iran. The Israelis are saying this should be done sooner rather than later. I’m guessing that the RF display of military prowess in Ukraine is understood to be reassuring to Iran. This may be the place to look for the next war theater between RF/Iran and the collective West.
I’m also watching what is happening in Azerbaijan. It is one of five countries with coastlines on the Caspian. They have all signed an agreement not to allow any foreign military presence in their countries. Meanwhile it looks like the Europeans and now Americans are trying to persuade them to allow transport of oil through/out of their country. I’m guessing the Western entreaties there will be as ineffective as the American and French supplications of the Saudis, but we shall see.
Astrid
A Reddit comment reminded me of something that probably gets overlooked in the West. China apparently provides a lot of scholarship to students from Africa and elsewhere in the global South. A lot of those kinds of students studied in the US and England through the 1980s, but these days I’m aware of very few such scholarships and international students are paying very high full fare to study at the undergraduate level, which basically limits access to American education to the economic top 0.1% of foreign countries. Sure, that reverses for graduate education where the US still leads, but by then much of the foundational thought patterns have been established and those students will always be foreign.
So the Chinese are gaining an important element of soft power that’s probably completely off of Western radars.
Lex
To add to Astrid’s last comment, in 99/00 when I was studying in Russia there were a huge number of Chinese and African students (westerners were few and Americans fewer). 20 years ago is just right for some of the fruition of relationships we’re seeing now. China doing so now – I assume Russia still is too – will have a similar long term effect.
Also thank you for the perspective on China.