China rocked by 'sandpaper' chip fraud

vnunet.com ^ | 15 May 2006 | Simon Burns

[E. Pluribus Unum]

The revelation that a groundbreaking mobile phone chip is a fake has shocked China, where the home-grown 'invention' had become a source of considerable national pride. 

Shanghai's prestigious Jiaotong University announced at the weekend that the Hanxin DSP (digital signal processing) chip had been faked by inventor Professor Chen Jin, who was also the dean of the university's School of Microelectronics.

Rumours of foul play have been swirling around the project for several months, and appear to have provided the impetus for the investigation of Professor Chen.

One anonymous online forum post that began circulating in China in January claimed that Professor Chen had created the original Hanxin chips simply by grinding away the top surface of some of Motorola's Freescale DSP chips with sandpaper and having them reprinted with the Hanxin logo. 

The university did not confirm this version of events, but investigators told local media that the chip had used "foreign" technology.

They also said that, contrary to claims by the design team, Hanxin's performance in tasks like media encoding and fingerprint image matching had failed to meet targets.

Professor Chen, a 38 year-old who earned his doctorate at the University of Texas at Austin, has been lauded by the media and feted by China's political leaders during the past three years.

However, he has now been fired from his post and will have to repay millions of dollars in government funds invested in the project, reports say.

Angry comments on Chinese forums and blogs have called for everything from criminal charges to execution for the disgraced academic.

Projects like the Hanxin chip have become entangled with issues of national pride in China.

The country is heavily dependent on expensive foreign technology for its huge, and growing, electronics manufacturing industry. The word 'Hanxin' can be translated as 'Chinese heart' or 'Chinese core'.

Growing dependence on international trade, and membership of the World Trade Organisation, have forced China to adhere more strongly to rules on intellectual property rights.

In recent years the government has been strongly promoting home-grown technology as a way to reduce payments to foreign patent holders like mobile phone chip maker

Qualcomm. 

Foreign chip manufacturers provided about 80 per cent of the chips used in Chinese-made products last year, earning some $36bn in revenue in the country.

The first version of the Hanxin was unveiled to much fanfare in February 2003, amid proud boasts from political leaders that Shanghai could soon become one of the world's top chip manufacturing centres.

The Hanxin chips could be used in mobile phones and would help China develop its own digital signal processor chip technology without having to pay for foreign intellectual property rights, Ministry of Science and Technology officials told journalists. 

IBM planned to use the chip in future products, Chinese media reports claimed last year. However, a search of IBM's China and international websites returns no hits for Hanxin in English or Chinese.

Professor Chen and the university set up a company, Hisys, to develop and market the DSP chip. The Hisys website is currently offline, as are the university's pages about the invention.

Earlier this year, Chen and his 100-strong team began work on a new, more advanced version of the Hanxin. The now-cancelled Hanxin 5 was to be a system-on-a-chip which would combine a CPU with DSP functions.

[1rudeboy]

How can this be? I thought we shipped our chip industry to the Chinese.

[Hop A Long Cassidy]

I wonder if he is being punished for the forgery and theft... or the discovery of such? I'll bet it is more the latter.

[Toddsterpatriot]

Or was it our sandpaper industry?

[1rudeboy]

Everytime I look, I find another semiconductor manufacturing facility in either Chandler, Arizona or Austin, Texas (or in the case of Freescale, both). And the FReeper here that claimed to be an "expert" on such matters is becoming more and more quiet.

It's mildly frustrating . . . if I had believed him instead of looking for myself, I'd be well on the way to becoming a doom & gloomer.

[BJClinton]

This guy is going to become an involuntary organ donor.

[Dinsdale]

The now-cancelled Hanxin 5 was to be a system-on-a-chip which would combine a CPU with DSP functions.

Did this reporter even bothering to look up what DSP stands for? (Digital Signal PROCESSOR).

A DSP is a CPU with on chip DtoA and AtoD. The CPU architecture is different as it is optimized for a different task. But none of those changes are part of the definition of DSP.

Anyhow the fact that 100 people were involved points out a giant weekness in chinese culture. Excesive respect for authority. It's understandable as lack of respect for authority has been a capital crime for thousands of years.

[Mase]

And the FReeper here that claimed to be an "expert" on such matters is becoming more and more quiet.

I wonder if this was the same FReeper who claimed that China graduates 300,000,000 engineers every year. You'd think with that much talent available these guys could create a real chip of their own.

[Toddsterpatriot]

I wonder if this was the same FReeper who claimed that China graduates 300,000,000 engineers every year.

Poor old superiorslots. I wonder who he is now? I hear the neo-cons did him in. Or maybe it was his poor math skills?

[1rudeboy]

Not the one I'm thinking of . . . I simply don't want to mention his name because then I'd feel obligated to ping him.

[expat_panama]

...I thought we shipped our chip industry to the Chinese...

Someone correct me if I err, but as I understand it our old cheap chip making industry got off-shored, while our high tech chip development and production industry is alive and well in the US.   Last time I looked at a mother board, all the diode/power regulator chips were made in China, and all the processors were domestic.

That's a recipe for a huge 'trade deficit'.  We keep exporting last year's chip designs to the cheap shops, and they keep paying for the patent rights with low tech chips.  Some people (Bernanke included) say this trade-gap can't go on forever, but they don't say why.  Personally, I don't think we'll have anything to fear from the Chinese chip designers for a long time.

[moose2004]

That's a good one.

[ThanhPhero]

will lock this guy up for the rest of his life, that's if he's lucky.

If he is healthy and his organs are proper matches for some Westerner looking for a heart or liver, well...

[ThanhPhero]

Some people (Bernanke included) say this trade-gap can't go on forever

It can and will go on so long as the American economy is stronger than the rest and investment money is safer in America than elsewhere. "Trade deficit" is the flip side of the foreign capital flooding into the US to provide more production capacity and jobs. Trade deficit is that capital.We are investing in American industry when we buy imports over and above the value of the American exports that are purchased by people in other lands.

[expat_panama]

"Trade deficit" is the flip side of the foreign capital flooding into the US to provide more production capacity and jobs....

There are more and more of us on these threads who understand the balance of trade and how important freedom is for prosperity. 

Some don't, or won't.  They're the forces of doom and darkness, whimpering for someone to protect them.  Maybe you've noticed how some people can object to having foreigners invest in American companies (because they don't want foreign control), and then they can turn right around and also object to Americans buying this very same control of foreign companies.  It's this same false logic that let's them first complain that US companies are moving too many jobs from the US to Mexico, and then they complain that US companies are making too many people move from Mexican high unemployment to America's low unemployment.

 IMHO the bottom line is that the forces of doom and darkness are not a problem.  This world will always have some people who are goofy.  Sometimes I worry that they might be getting too powerful, but when I see more and more posts like yours I know that our side is winning.

[eleni121]

Communism doesn't work ___________________________________________________________ It does work if you have help on the outside.

China Spy Club

[ThanhPhero]

The problem with economics is that it is a terribly boring subject and movers-and-shakers kinds of people can't handle it.Two presidents since 1900 have actually understood it, Coolidge and Reagan. JFK has to be given credit for at least listening to the right people. Most politicians and most people who work with money and finance do not understand economics and that includes Bernanke. They had economics courses in University but it was just their requireds that they had to get out of the way in their study of FINANCE. Some economics students do not study economics in order to discover how goods and money flow and why people make the choices they make. They rather study it in order to learn the tools available for manipulation and for convincing folks, especially politicians, that they can do those manipulations for economic and political gain. We call these people Keynesians and Monetarists and they are politicians and political enablers, not economists. Monetarists tend to do a bit less damage than Keynesians because their goals tend to be constructive but they share the Keynesians' propensity for manipulation which is always harmful. At least they mostly believe in stable money. GWB is a "conservative" Keynesian in that he wants the economy to do the things that conservatives want but inflation ultimately wrecks those things and inflation is an indispensible tool for Keynesians and W has been explicitly inflating since he came into office. Actually the current inflation began in 1999 but W institutionalized it- made it explicit policy- in 2001.

[expat_panama]

Most politicians and most people who work with money and finance do not understand economics and that includes Bernanke.

When I read that I practically fell out of my chair-- because it's true! 

Your post was so chock full of good stuff I printed the whole thing out and tacked it on the bulletin board next to my desk for reference, but your last sentence was hard for me to follow.   What I hear you saying is that since '99 we've been having inflation that we didn't before and W's made it permanent.

Just which inflation are you talking about?

[ThanhPhero]

Reagan put an end to the Carter inflation and commenced a mild deflation. In the period up to 2000 the value of the dollar actually increased slowly. There was much Democrat complaint about "wage stagnation" because wages were not rising nominally over that period and it was a noisy issue among Democrats who decried it as evidence of the "worst economyin 50 years." But people were more ore less comfortable because their dollars stretched just a little farther as time passed. It was a long period of labor peace as unions felt no economic pressure to go on strike. In 1999 Clinton's FED began a policy of inflation, adding money to the money supply in excess of the needs of the market. Bush made that official when he announced "devaluation" of the dollar to counter perceived Chinese money manipulation. The rate of inflation was increased and the dollar has been losing value since, at a rate in excess of 10%.

The repeated raising of the interest rate by the FED to "stave off" inflation is, in fact, a ploy to attempt to channel the inflation into an area, interest rates, that the consumers won't notice. Ha! It has dealt a blow to one of the visible results of the inflation- it has ended, finally, the real estate price rise which now will direct that money that isn't chasing houses back into the rest of the market.

The European and Asian central banks, especially China, have been buying up most of those excess dollars to maintain the value of their currency reserves that back the value of their own currencies. Eventually that has to stop because they are spending value in order to keep the value of their dollar reserves stable. They have more and more dollars but no more value. They are now beginning to "sell off" those dollars and consumer prices are beginning to jump in the USA, at least in my neighborhood they are. Those dollars being sold off now, after years long delay, are entering the market and competing for goods. The portion of the current inflation that was not sucked up by the foreign banks has had a pretty strong and visible effect. Commodities have risen steadily in nominal price. Housing has steadily increased until the last year when the FED's interest rate hikes finally throttled the rise. And energy, most visibly oil, well that has beeen prettynoticeable, no? If these price rises had occurred with no inflation, other prices generally would have declined, but, except for electronics, they have not.

Most of the time our government economists have been Keynesians and/or Monetarists. Both varieties believe in manipulation of the money to achieve desirable ends. The monetarists think they have to tweak and adjust in order to maintain a stable dollar or to counter foreign governments' tweaking and adjusting. Keynesians tweak and adjust for political ends as well and to "counter" business cycle trends. In truth if a stable currency is rigidly maintained the ups and downs of the business cycly will be minimized- largely smoothed out because economic calculation is fairly easy with stable money. Businesses don't have to continually compensate for changes in the value of the unit of account.

The only proper response to foreign money manipulation is a stable dollar. Governments that manipulate their currencies harm their economies no matter what ploys are essayed and an economy with stable money will benefit relatively from other countries' manipulations, no matter what the immediate situation seems to be because that manipulation reduces economic efficiency(adds costs) for those producers that must operate with the manipulated money.

[Centurion2000]

The best and only Chinese technology is theft.

In their defense, they did make a killer water torture ... and gunpowder.

[ThanhPhero]

P.S. The inflation rate illustrated on that chart is the price level. Generally that mirrors the actual inflation rate pretty well but, because it does not measure inflation directly, it is deceptive. The inflation of the dollar is, by definition, the excess dollars put into the market over the amount required to keep the dollar stable. If those dollars are then bought up by the various central banks and held then a price level chart will not reflect them. That has been the case since 2001. A money inflation chart will not usually be characterized by bumps and dips because governments tend to inflate or deflate at steady rates. Prices of goods, however, are immediately affected by many things in the markets. The total picture of market prices would also show a smooth curve but people who make charts only measure some prices. Our government calls it a "basket of goods and services" and while that is generally representative, it does not account for all the influences in the market that shift the available dollars from one thing to another.