China’s Chip Industry Is Doomed — and Advanced Chips Rule the Military World

China’s Chip Industry Is Doomed — and Advanced Chips Rule the Military World. By Lawrence Person.

Chip-making might seem esoteric for most readers, but it is the most crucial technology or resource in modern warfare and power politics — after people, but ahead of oil, nukes, rare earths, submarines, etc.

Chips build intelligence into machines — missiles, aircraft, spacecraft, drones, autonomous submarines, gunsights for sharpshooters, artillery that doesn’t miss, night-vision, etc, etc etc.

It is said that one of the reason the Soviets gave up in the arms race of the 1980s is that their electronics were two decades behind the west and falling further behind — and they knew they couldn’t catch up.

This is a story that’s been bubbling on for a while, but it looks like the U.S. government is about to slam down export restrictions on chipmaking equipment.

The administration of US President Joe Biden next month is to broaden curbs on US exports to China of semiconductors …

The US Department of Commerce intends to publish new regulations based on restrictions communicated in letters earlier this year to three US companies — KLA Corp, Lam Research Corp and Applied Materials Inc, the people said, speaking on the condition of anonymity.

Every wafer fabrication plant in the world uses equipment from one of those three companies. Applied Materials and LAM Research (along with Tokyo Electron) have their fingers in almost all areas of chipmaking equipment, while KLA dominates the wafer inspection equipment segment. Add ASML in the Netherlands, and those five absolutely dominate the semiconductor equipment market. …

No western chip-manufacturing equipment, no advanced chips.

Min-Hua Chiang at the Heritage Foundation notes just how badly China’s domestic semiconductor industry is screwed.

According to World Trade Organization statistics, China’s trade deficit in integrated circuits and electronic components (including Hong Kong’s trade deficit) has almost doubled from the equivalent of $135 billion in 2010 to $240 billion in 2020. …

Achieving technological self-reliance is still a faraway Chinese dream. To keep its exports growing, China has no other way but to keep importing advanced chips to assemble into consumer goods with high-tech intensity (e.g., smartphones, tablets, and the like). ,,,

Less than 7% of chips produced in China were made by Chinese semiconductor companies in 2021. …

Its inferior level of technology is the main reason for China’s chip reliance on foreign firms.

It’s not like the Chinese Government isn’t trying. But like the Soviets before them, they are up against the complexity barrier, which is immune to even copious amounts of money and propaganda:

China not only spent tremendously on building chip plants and purchasing expansive equipment, but also on recruiting talent from overseas. Over the past few years, China recruited more than 3,000 skilled workers from Taiwan to work in China’s semiconductor industry.

China amassed enormous capital, talent, and foreign equipment, but the problem is with governance. Xi’s absolute authority encouraged a rush into China’s semiconductor industry. Moreover, the extraordinary integration of the public and private sectors in China has twisted industrial development toward short-term profit-making, instead of long-term accumulation of manufacturing strength and technological improvement.

Xi’s “wolf warrior” diplomacy has further overshadowed the outlook of its semiconductor industry. China’s success relies on close partnerships with various suppliers and customers in different countries across the globe. Alienating them on the geopolitical front only undermines those relationships.

More in the video:

I used to work as a high-end research engineer for KLA, and invented a patented technology for them.