State subsidies will allow Chinese firms to eat everyone's lunch
Like they did in solar, steel, etc. By the time governments & the WTO react, the demise of non-Chinese NAND & DRAM manufacturing will be a fait accompli.
Industry researchers have reported that three players in China are currently building flash and memory fabs and appear to be working to make China self-sufficient in NAND and DRAM. A TrendForce report titled "Breakdown Analysis of China's Semiconductor Industry", explains these players are backed by industry and state funds. …
"By the time governments & the WTO react, the demise of non-Chinese NAND & DRAM manufacturing will be a fait accompli."
I won't be so sure about that. 20 years ago (steel) and 10 years ago (solar) China was one of the lowest-cost destinations possible, so abit of subsidy went a long way in being able to undercut competitors. Now that standard of living (and cost) in China has moved from rock bottom to below average, a lot of low-cost producers have moved / are moving to lower cost countries eg Vietnam, Bangladesh, Phillippines etc. Of course these lower-cost countries have no or limited semiconductor expertise, but it's not out of the questio that US or Taiwanese manufacturers could set up shop in other countries in SE Asia, or even, if circumstances permit, Africa.
Japan almost put Intel out of business in the early '80's by dumping RAM on US markets. (Intel was originally a RAM company.) All that happened when Japan had a high standard of living. It was the subsidies, not a low standard of living, that allowed that to happen. The same is true of prior Chinese dumping - the government subsidies allowed them to sell for below their true (un-subsidized) COGS. The standard of living is irrelevant.
I read the above post that the standard of living was related to the local demand for the products (or the products that contained them). With a step up in the standard of living (or more pointedly the ratio improving between wages and the cost of essentials) the local demand for non-essential-to-life products grows markedly.
This post has been deleted by its author
"Japan almost put Intel out of business in the early '80's by dumping RAM on US markets".
That, of course, is the standard story as always, in reality Japan was just better at it with a higher yield per wafer, if I remember the expression right.
There is a very interesting book about Intel, the name is "Inside Intel": Andy Grove and the Rise of the World's Most Powerful Chip Company by Tim Jackson.
Lots of interesting stuff for us old enough to remember.
The question about subsidies is interesting too. On the other hand international trade and agreements try to keep it fair, (like within the EU too), but on the other hand everybody would like its government to support domestic industry and the country. Remember how many wanted the UK government to do something regarding ARM when a Japanese company bought it.
Regarding the USA I suppose some Americans tend to forget that the worlds largest company, the US Army, is a state subsidized company helping lots of other companies in the same manner too, like say Boeing. Only the Chinese can compete at a similar level today.
the proverbial crap is already hitting the fan regarding the 'dumping' of solar tech. I've heard ads on the radio regarding tariffs next year on imported solar stuff, "get it done now before the price goes up", that kind of thing.
(this was apparently done before, during the Obaka administration, and Trump recently adjusted the tariff amount, but not as much as some people wanted, nor so much that the industry is harmed).
As long as China subsidizes its state-owned business [don't anyone be fooled; it's heavy socialism with a communist influence over there, so "state-owned" is as good of a description as any] and pay their employees 'slave wages' to make things, they'll always undercut EVERYONE on price. So a little bit of protectionism is acually a GOOD thing in this case. Because the NEXT step is to destroy all other competing manufacturers, like the 'Robber Barons' of the late 19th and early 20th century were doing, by making it economically IMPOSSIBLE to compete.
Still there are other problems with domestic production of solar panels, environmental regulations being one of them [these could be made more 'common sense' to alleviate THAT problem].
So there are things that can be done, things that should NOT be done, etc. but we cannot IGNORE that China is engaging in "unfair business practices" in a lot of ways.
You can't blame them entirely, but you shouldn't make it EASY for them to do it, either.
Draw up a list of everything essential and necessary to China's military. If they can't already source each domestically it is a priority for them to develop the manufacturing base to do so. In doing that, most everything essential to domestic civilian consumption follows also, and keeps the public quiet.
Whatever else it may resemble, this is a command economy directed to become independent of all international entanglements. Then, no one will be able to interfere in future developments as there will be no levers to use against them. This is economic strategy motivated by strict nationalism.
If you want to sell them ivory or teak or bulk refined ores, fine. Everything else is a negative for them.
It is not just the Chinese military. In my opinion China is (and has been for many years) considering the possibility that the US economy might collapse (see the US Debt Clock for reasons). China wants to continue even if the USA collapses. This requires that it does not depend on outside high tech suppliers that may well cease trading if there is a US economic collapse.
We wonder if domestic American DRAM and NAND suppliers might start international fair trade spats if these Chinese suppliers entered the US market.
Chinese companies have been openly infringing copywrite products for decades. No companies have openly won any lawsuit against them. So why start now?
There is one rule for the rest-of-the-world and another rule for China. Once China copies a product, it's "game over".
China's industry is geared towards reverse-engineering and they are damn good at it.
RE: "Chinese companies have been openly infringing copywrite products for decades. No companies have openly won any lawsuit against them. So why start now?"
I suspect this would be tariff barriers, not copyright (or patent) lawsuits.
To be honest several other countries have started with memory chips when building up local semiconductor fabs. Including Japan in the 80s as mentioned above, South Korea, and others. Even Britain's Inmos started with DRAM and SRAM as easier to get working first before logic. So working on local DRAM/NAND capacity is not a surprise.
Whether China succeeds in hurting other suppliers depends on whether their DRAM and NAND is cheaper than the existing companies which depends on who can keep in the lead for the newest technologies.
First of all, it is no longer easy to produce state of the art DRAM.
Second, the memory chip vendors and, indeed, most semiconductor vendors, have existed in highly competitive markets for decades. They know how to cut costs to the bone. It is only in the last few years that two of the three memory chip vendors have made good money, Micron and Hynix. Samsung has made good money for much longer, but even they are now making record amounts, because the three of them control well over 90% of the market currently.
Will the Chinese have an easy time breaking into that market? The Big Three have the experience of the steel and solar sectors to reflect on and I am sure that they are already preparing to deal with the Chinese. Penny Pritzker warned Congress about Chinese infringements and ambitions last year and I know Japan has also been alert as they face the Toshiba situation. The Taiwan govt has filed several suits against former employees of semiconductor firms for theft of trade secrets. We know about these cases; we of course don't know about employees who may have been successful.
That said, my guess is that everyone who has valuable patents and processes is ready to file against the Chinese at the first sign of infringement. Of course, on the other hand, most of the large semiconductor have important plants in China and so are open to being pressured in one way or another.
At the end of the day, we may have to depend on two things to protect against the threat that China represents to the semiconductor sector: 1) China's ambition to be not only the wealthiest country in the world but also a true leader as opposed to rogue country that depends on theft for its success. That is a thin reed, to be sure, but related to that, we have 1a) International institutions that will pressure China in various ways to punish them if they do resort to theft to build their semiconductor sector.
And second, we must depend on the ingenuity of current semiconductor firms to continue to innovate and render the Chinese theft less useful, as they will in theory at least not be able to steal the latest chips that the companies invent. We know that the semiconductor sector has been incredibly inventive over the years competing against each other and against themselves ("Only the paranoid survive") and trust that this ingenuity will continue. Both the hard drive and the semiconductor firms have continually come up with new methods and products that have improved speed, reliability, capacity and productivity over the years. I don't think that any sector has ever matched their engineering genius and I doubt if the Chinese will find it easy to do so either. Certainly not for a number of years.
They are simply looking to sell DRAM and NAND for consumption within China. It won't be going into stuff made for export like iPhones and Dells, it will be going into products that are made in China, and sold in China to Chinese.
Micron, Samsung, etc. can whine all they want but the Chinese won't do anything to protect their IP for products sold within China. In a decade when they've done their own research and built up their own IP portfolio they'll be able to sell everywhere and the big guns will be forced to cross license with them. Of course, at the rate Chinese wages keep increasing, by then they might be the high cost supplier and be unable to compete...
This is how Samsung got to where they are - tech was basically stolen from Japan, they sold inside of South Korea for a while and eventually become a major player in their own right.
Biting the hand that feeds IT © 1998–2021