Kioxia warns of potential cost of US chip policy over China

Attempts to reorganize supply chains to cut out China and foil its attempts to build a high-tech chip industry will be costly and may simply cause the Middle Kingdom to redouble its efforts, says memory maker Kioxia. The warning came in an interview [paywalled] with the Financial Times by Lorenzo Flores, vice-chair of Kioxia, …

[The Man Who Fell To Earth]

Threshold

Once a country's industry is at a level where it is really limited by capital, not know how, sanctions just cause it to focus on putting capital into the sector. Kioxia is correct, China may have an intermediate slow down in it's semiconductor sector, but if it's government decides to throw money at it, not only will it still get to where it wants, but it will develop all the competing supporting technologies like mask aligners. It's not like they don't know the Physics. And once they develop their own support technology, those support tech companies will compete on a global stage. Long term, a loosing strategy.

[Anonymous Coward]

Re: Threshold

So in the end it depends if the "West" will protect their own "support technologies" or buy the massively subsidized but good enough CCP ones.

As it happens, US sanctioning of Western exports is apparently politically easy compared sanctioning cheap imports from China. As was reported by El Reg recently US federal and state entities are still buying Huwei despite instructions not to do so.

Also, Japan and Germany, who WERE the last holdouts exporting more than importing to China, are both now net importers. As long as every major country is in the trade balance red zone with respect to China, China will have the resources to invest in new products and dump them at cut price.

The US has imposed 25% import taxes on a range of Chinese products, and combined with the China COVID slowdown, has increased demand for labor in the US and raised actual minimum wages far beyond $15 in every urban US area. Of course, made in USA costs more! Duh! Inflation. But instead of welcoming it, the Fed is now trying the choke the economy.

In short, there is no top down plan within the US about what a long term healthy non-China-dependent economy should look like. Exports are sanctioned because high tech exporters are a weak lobby compared to importers (think Amazon, Walmart), and because of the visible short term return of seeing China struggle with those sanctions.

Also, the West is not cohesive. Despite Germany now being a net China importer, Germany's Sholtz has declined Macron's suggestion to visit China together, let alone coordinate with the US. And within the US Musk has announced that Taiwan should become a special administrative region of China (nice Tesla factory and market you got there!).

On the other hand, China has the opposite problem - an over centralized power in Xi surrounded by weak "Yes" men - guaranteed to prevent bad news from rising up, and therefore adapting to reality. You can count on that arrogance being replicated all the way down the power pyramid, and interfering with decisions within the semiconductor industry.

It's like watching two awful football (interpret "football" as you wish) teams in a match - it's not inspiring and not very entertaining. You know that match might turn into a knock down brawl at any moment.

[Pascal Monett]

Re: an over centralized power in Xi surrounded by weak "Yes" men

I'm guessing you could replace Xi by Putin and that sentence would pretty much apply as well.

[Lordrobot]

Re: Threshold

Thanks for the socialist dogma. Better learn some economics. Milton Friedman who you would hate if you actually ever heard of him. The greatest Chicago School Economist in history. But not as famous as your Karl Marx. As for this question. If China wants to subsidize products that you can then buy for less money, how does that harm you the consumer? It doesn't.

To perceive harm you have to invent the idea that labour is a form of social welfare and you the consumer should subsidize inefficient labour by paying more for inferior non-competitive products as some kind of save the UNION Labour scheme. Pathetic reasoning.

Then you go off in this Communist rant. The Gov of China is a form of Capitalism, it runs very much like a corporation. At corporations, your personal voice is unimportant unless it translates into more profits or more efficiency. In the US and UK you have representative gov by elected idiots. None of those people are smart. Trump was a moron and Biden is a career dummy.

In China, anyone can apply to work for the government and as in Xi's case, has to rise through the ranks to achieve competency. Meanwhile, what are the issues you face in Murica and the UK? You spend to much, you save nothing, You are worried about transgender sports and bathrooms, gender reassignment surgery, abortion, All kinds of dumb issues and you know nothing about economics other than your Marxist pablum. Name for me any successful socialist economy. Protectionism is the pillar of Marxism. Look at Chavez's history in Venezuela.

This article is spot on economically. Trump lost his trade war. The balance of Trade has tripled. But the balance of trade has little to do with buying stuff. Trump was an idiot. The balance of trade economically is related to the amount of personal savings. In the US Muricans save at most 1%, and Chinese save 34%. Since you don't save, you have to borrow. And your debt to GDP is at record levels of over 135%. China's is 42%. You are going belly up with all your fine representative democracy. Your congress is bilking you and always has bilked you.

Xi and his celebrity wife are very successful but they are not millionaires. How did Biden accumulate over $10 million on his gov salary, or Bill Nelson $15 million on his gov salary. This is not private industry... these guys are bilking you, insider trading everything. They know which companies are being moved to the USA entity's list in advance. Your society is corrupt, yet you who I know have never been to China know all about it. Well, you don't.

China runs like a corporation. And if you have ever worked for a large corporation you would know that. Most businesses don't want your self-expression, or your tattoos greeting customers. They don't want your Marxist spew.

Look who is running the show... Trump a product of nepotism and 7 Bankruptcies. Tax evader... Bilked the taxpayer out of $250 million on his weekends to his resorts where he rented rooms to the secret service and charged $50,000 a weekend for golf carts. Then you have Biden a UNION shill who claims he is FDR. FDR Opposed Gov Unions. Gov Unions are Biden's stock in trade. Then Biden's Commerce Secretary is the former Gov of Rhode Island. Rhode Island owns the bottom of the worst state economy forever. So Biden picks her to bring her losing track record to the Federal Gov. She's useless. You bring this kind of incompetence to bear on the global economy and you are going to be eviscerated. Protectionism has never worked.

And if you think this is real intelligent, consider that Semiconductors are only 1.2% of the US GDP. While you walk your Marxist dog out here, China is building 1000 million tons of Steel a year and has massive manufacturing capability across the board. And you think you are superior? Murica only 9% of the GDP is manufacturing. And you are losing 3% market share a year in Semis. And the losses are accelerating. With the exception of the born-again Trumper nut that runs INTEL, not one other semiconductor company agrees with Biden Trump sanctions on High tech products. High-tech has a very short shelf life. And if you are not selling your chips, you are out of business.

And as for NAND, lithography is meaningless. Rarely goes below 40mn. So China can rip your heart out in the global marketplace.

[Someone Else]

Re: Threshold

It's not like they don't know haven't stolen the Physics.

There, FTFY.

[vtcodger]

You're probably right

I upvoted you because, your argument is coherent and quite possibly correct. And also because the rather chaotic US policy seems driven by domestic politics, not by any actual understanding of the world or realistic vision of the future.

But I would also mention that the difficulty of achieving state of the art design varies from field. For example, I'm told that Chinese airframe designs seem competitive with those of the US,France,Russia. But Chinese Jet engines aren't, I'm told, quite up to best in the world standards.

OTOH, It's not clear that semiconductors that are a few years behind the best possible technology aren't perfectly fine for making consumer goods and equipping an army. It takes a long time to design, build, field test, tune and deploy a weapons system or complex consumer product. By the time your cruise missile, walkie-talkie, or electric car reaches the troops/customers, their electronics won't be state of the art anyway.

[crayon]

Re: You're probably right

"But Chinese Jet engines aren't, I'm told, quite up to best in the world standards."

Right now they are not state of the art. But they are adequate and getting better. The most important thing is that as they are domestically designed and produced there is little that outside forces can do to disrupt their production.

Cutting off China's access to chip making technology now is about as effective as bolting the proverbial stable door. China has reached a tipping point now where if they are denied certain technologies they are in a position to develop it themselves. It may take years, but once they've mastered the technology they have a huge domestic market to sell to plus the 6+ billion people in the rest of the world who are sick of being dictated to by the west. Have a look at the EU's energy policy with regards to Africa - EU officials have no qualms begging African countries to sell them oil and gas, but they have ostracised and will not provide loans or tech know how to African countries who are building infrastructure to provide other African countries with oil/gas - because it's,.... not green and African countries should be moving to renewables (and leave the oil/gas for the EU).

[Bartholomew]

Re: You're probably right

> OTOH, It's not clear that semiconductors that are a few years behind the best possible technology aren't perfectly fine for making consumer goods and equipping an army.

Not everything in consumer products require bleeding edge fabs.

e.g. The Raspberry Pi 4B BCM2711​ CPU is made with a 28 nm process. A 28 nm process was picked by the Raspberry Pi foundation because it is the lowest cost per transistor (older processes with larger transistors would physical use more space on the silicon wafer which would cost more, and smaller transistors are created using newer machines which cost more to use). The 28 nm process is the current "value node" and will probably remain so for probably the next 5 years. TSMC have had a 28 nm process since 2011 and SMIC (China) have had a 28 nm process since 2013. It is not bleeding edge being nearly a decade old.

[Anonymous Coward]

Re: You're probably right

I'd go further. Bleeding edge chips are only primarily necessary in HPC, gaming, and crypto mining.

AWS's Graviton chip which runs the world uses a 16 nm process.

As ElReg commenters will point out, general purpose computing doesn't need bleeding edge.

The car industry shutdown was about a lack of bog standard chips.

And, as far as the military, it's been reported that due to sanctions Russia has been using household appliance chips for weapon system repairs.

[Lordrobot]

Re: You're probably right

Bleeding edge narrow gate semis are only 5% of the Global Market. China is focused on 14nm and larger. There is a problem with Narrow Gate devices. 1) lower yields 2) heat,3) extraneous noise. It is a bit of a physics eye-opener for "Moore's law"

The new processes are Chiplet packaging and China leads the world in that department. The Chip's act is 100% moronic and will fail miserably but the Taxpayer gets the bill so nobody cares if it is a scam.