source:
https://technode.com/2019/12/19/cheap-loans-underpin-chinas-semiconductor-sector-oecd/
Posted on 10/28/2019 11:37:51 AM PDT by AdmSmith
Most, if not all, of the relocating companies are from China, and have been affected by the raging trade war between two of the biggest economies in the world, which also benefited Vietnam.
Chang said many of the companies that may return to Taiwan are concerned about China’s requirement to transfer technology and its intellectual-property violations—two of the charges hurled by the Trump administration against Beijing.
https://businessmirror.com.ph/2019/12/11/taiwan-leans-on-rd-to-expand-fish-exports/
Both companies are known on the local Chinese OS market. CS2C created “China's Windows XP clone,” known as the NeoKylin OS, and TKC is the current steward of Kylin, China's first-ever homegrown operating system. CS2C and TKC plan to set up a new company in which they'll become investors, and through which the new joint OS will be developed.
The roots of both operating systems reside in the original Kylin operating system, created in 2001 by academics at the National University of Defense Technology.
The original Kylin OS was based on FreeBSD and was developed via the popular 863 Program, a government fund set up in the 80s to stimulate the development of local tech to help China reach independence from foreign technologies.
NeoKylin is the only Chinese-made OS to support all six major “domestic CPUs” — namely Feiteng, Godson, Zhaoxin, Shenwei, Haiguang, and Kunpeng.
Currently, many apps that run on Kylin won't run on NeoKylin, and vice-versa, creating problems with managing a nation-wide IT system without unwanted friction and incompatibilities.
With a plan to rip out all foreign hardware and software from government systems within three years, orders likely came down from Beijing to unite the two OSes into a common platform.
The Beijing government is well known for its heavy-handed approach to controlling the local tech market, primarily through state-owned companies and generous government subsidies.
Chinese Chip Makers Get Biggest State Boost, Report Finds
Beijing’s support for industry outdid other governments’ backing for rivals, says OECD
https://www.wsj.com/articles/chinese-chip-makers-get-biggest-state-boost-report-finds-11576164610
The 111 page report with a good description of the supply chain and the semiconductor market:
https://read.oecd-ilibrary.org/trade/measuring-distortions-in-international-markets_8fe4491d-en#page1
Chinese original design manufacturer (ODM) of intelligent communication terminals Huaqin Communication Technology has secured over 1 billion yuan ($142 million) in a Series B round of financing. Investors in the Series B round include Qualcomm Ventures, the investment platform of US semiconductor giant Qualcomm, and Intel Capital, the investment arm of Qualcomm’s fellow Intel Corporation, according to a statement on late Thursday.
The new investment is also backed by a group of Chinese investment companies including Beijing-based SinoKing Capital, private equity firm Wise Road Capital, and SummitView Capital, which specializes in investments in advanced manufacturing, precision medicine, and information industries. Shanghai-listed new industry property developer Zhangjiang Hi-Tech, CMB International, a financial service unit of China Merchants Bank and Chinese securities brokerage firm CMSC also poured money in the new round. Huaqin, founded in August 2005 and headquartered in Shanghai, specialises in the R&D and design of multi-category intelligent communication terminals, including smartphones, tablets, laptops, smartwatches, servers, automotive electronics, and other internet of things (IoT) products.
The company claims to serve over 80 operators across more than 100 countries and regions in China, Latin America, the US and Europe. It operates research and development centres in Chinese cities like Xi’an, Wuxi, Dongguan and Nanchang, as well as production bases around the world. The company booked 30.8 billion yuan ($4.39 billion) in revenue in 2018 and is expected to reach about 36 billion yuan ($5.13 billion) in revenue this year. It boasted an over 100 per cent growth in the laptop business, while its smartwatch delivery more than tripled in 2019, according to the statement. Proceeds of the new round will be used to further enhance the R&D of intelligent communication terminals, promoting the application of products powered by AI, 5G and IoT.
https://www.dealstreetasia.com/stories/chinas-huaqin-series-b-round-166729/
China’s Companies Binged on Debt. Now They Can’t Pay the Bill. Rising bond defaults raise new questions about whether Beijing can effectively address its huge debt problem.
Chinese companies owe hundreds of billions of dollars in debt that is coming due over the next two years, including more than $200 billion owed to lenders and investors around the globe.
While most of the lending comes from banks, Chinese borrowers have increasingly turned to the bond market to get money they need to run their businesses. Now the bill is coming due.
According to S&P Global, Chinese companies must pay back $90 billion in debt denominated in American dollars, meaning the lenders are global companies and investors outside China. In 2021, an additional $110 billion will come due.
At home, Chinese companies will have to pay $694.6 billion to bondholders next year and $706 billion in 2021.
https://www.nytimes.com/2019/12/12/business/china-default.html
I just finished consulting with US startup that was funded from China for semiconductor design of image processor. After chip was functional, they transferred design to China and shut down startup. Technically not theft, marginal ITAR - definitely action of enemy, not competitor
At @handelsblatt event, Chinese ambassador Wu issues clear threat to Germany:
„If you decide to exclude Huawei this will have consequences. You sell million cars per year in China. We may also declare them unsafe“.
Gloves are off.
https://twitter.com/thorstenbenner/status/1205547443389157376
Intel released the results of a new study today, “Accelerate Industrial,” that represents the most comprehensive view of Industry 4.0, the digital transformation of the manufacturing sector. The research uncovered a serious skills gap that most Western industrial production training programs and government investment initiatives fail to address.
Why It’s Important: A recent Deloitte/Manufacturing Institute study suggests that industries are entering a period of acute long-term labor shortages, with a shortfall in manufacturing expected to be 2.4 million job openings unfilled by 2028, resulting in a $2.5 trillion negative impact on the U.S. economy. Germany and Japan, two other developed economies, are expected to fare even worse in terms of this projected labor shortage.
https://newsroom.intel.com/news/intel-research-identifies-digital-skills-gap-slowing-industry-4-0/
The implication of this is that plastics => semiconductors in this quote from the Graduate : https://www.youtube.com/watch?v=PSxihhBzCjkn
China has made developing its own chip industry a matter of patriotic pride. It helps that “China chip” and “China heart” sound the same in the local language. The strain of this 1.7 trillion yuan ($243 billion) endeavor may be too much for the debt-clogged arteries of its municipal governments, though.
Aiming to become a global leader in AI by 2030, China is backing its national AI plan with substantial resources.
In 2017, the year China published its “Next Generation Artificial Intelligence Development Plan”, the country accounted for 48 per cent of total equity funding for AI start-ups compared to 38 per cent funded by the US and 13 per cent by the rest of the world.
The US, with its superior higher education system, is the training ground for Chinese AI scientists like Zheng, who obtained a PhD from the University of Maryland after earning bachelor’s and master’s degrees at China’s premier Tsinghua University.
“Many professors in China have great academic ability, but in terms of the number [of top professors], the US is ahead,” said Luo Guojie, who himself accepted an offer from Peking University to become an assistant professor after studying computer science in the US.
Among international students majoring in computer science and maths in US universities, Chinese nationals were the third largest group behind Indians and Nepalese in the 2018-2019 academic year, representing 19.9 per cent, according to the Institute of International Education.
“[To build] the best universities is not easy,” Gunther Marten, a senior official with the European Union delegation to China, said on the sidelines of the World Internet Conference in Wuzhen in October. “The university is a free speech space, whereas in China, this is not the case.”
“China has many great universities and companies, especially in certain subfields of AI such as computer vision, but many people remain hesitant to move to China due to the political environment, quality of life concerns and workplace issues,” said Remco Zwetsloot, a research fellow at Georgetown University’s Center for Security and Emerging Technology (CSET).
“If you include pre-tax income, many of us get offers that pay more than 1 million yuan (US$142,000) a year but in China the salaries offered to the best batch of fresh undergraduates are about 200,000 to 300,000 yuan (US$28,000 to US$43,000),” Chen said.
Chinese authorities are investing heavily in the sector, with the city of Shanghai setting up a 10 billion yuan (US$142 million) AI fund in August and Beijing city government announcing in April it would provide a 340 million yuan (US$48 million) grant to the Beijing Academy of Artificial Intelligence.
“More and more senior people like me have come back, and some start their own businesses,” said Zheng, the Siemens Healthcare researcher who joined Tencent. “It’s easier for Chinese to seek venture capital in China than in other countries.”
Therefore, mainland companies have increased their attractiveness to Taiwanese talents in China. Peter Huang, who jumped from being a leading chip maker in Taiwan to a Beijing company in 2017, said: “I think I can see the future, because if mainland China wants to make its own chips, it will become self-reliant, people like me will have a good chance. “
More opportunities and higher salaries are considered to be key factors in attracting senior engineers from Taiwan to China. A survey by a China headhunter company in 2019 showed that the average annual salary of middle-level managers in the Taiwan chip industry is about NT $ 2 million (about RMB 440,000), while the average annual salary in mainland companies is as high as NT $ 4.5 million (about RMB 1 million).
https://en.liexianda.com/index.php?s=/Mobile/Show/index/cid/5/id/16.html The higher salary is paid by the Chinese Communist State, see below:
source:
https://technode.com/2019/12/19/cheap-loans-underpin-chinas-semiconductor-sector-oecd/
Chinese tech stocks dived on Monday morning in Asia following the news that the country’s state semiconductor fund will reduce stakes in the tech companies.Shenzhen Goodix Technology’s stock price fell 4.5%, while stock prices of Hunan Goke Microelectronics plunged 9.51% and Gigadevice Semiconductor dropped 7.01%.
Known as the “Big Fund”, the National Integrated Circuitry Investment Fund planned to partially divest in these tech companies by no more than one percentage point each. These three companies are pominent players in China’s semiconductor industry. The state fund currently holds 15.63% in Goke, 6.63% in Goodix, and 9.72% in Gigadevice.
The move came after the three companies made great gains this year. Goke, Goodix and Gigadevice’s stock prices have surged 93%, 161% and 214% this year. This special national industry investment fund was set up in 2014 with an aim to boost the semiconductor industry by investing in chip manufacturing and designing, as China is striving for tech self-sufficiency amid tighter U.S. scrutiny of Chinese tech firms.
China’s economy is expanding at its weakest rate in nearly 30 years and could face more downward pressure next year, but the government has vowed to keep growth within a reasonable range in 2020 and keep policies forward-looking and effective.
Import tariffs on multi-component semiconductors will be cut to zero.
https://www.reuters.com/article/us-china-economy-imports-idUSKBN1YR02Z
Arm China, the Chinese subsidiary of the British chip company owned by Japan’s SoftBank, has become a key player in Beijing’s quest for tech self-sufficiency and, in a move likely to alarm the U.S., has developed codes that enable Chinese semiconductors to run state-approved cryptographic algorithms, the Nikkei Asian Review has learned.
Huawei, the Chinese telecom gear maker that Washington has accused of spying, is among the company’s biggest customers after Arm China took over the Chinese business of its larger U.K parent last year.
“The goal of Arm China is to help all Chinese chip developers and other product makers to use Chinese-controlled technologies — not only for the domestic market but for global markets,” said William Liu, Arm China’s vice president of product development.
“In the future, these China-developed technologies could even become world leaders and have a say on the global stage,” he added.
https://www.digitalmunition.me/beijings-latest-tech-ally-in-us-clampdown-arm-china/
Japan lost out to Korea as Japanese chip engineers spent their time off on weekends in Korea, making a few extra Yen by transferring know how and secrets to brand new , start up, Korean DRAM manufacturers. We are likely at the beginning of China entering the memory market to eventually displace the existing Korean dominance. China has bought, begged, borrowed or stolen memory technology to get there
Many currently say it will never happen, or it will take too long or China will never get the technology or the manufacturing right but those statements have been heard before in the US and Japan (just before they lost their chip dominance at the time…) and we know how the movie ended…
One key factor that must be understood is that a new entrant to a market (in not just the chip market..) is not driven by profitability but by market share and total revenue even at the expense of profits…..
Existing players want to maintain profitability and will cede market share to try to maintain profitability. We have seen this before and see it every day in other “commodity like” markets that memory emulates.
China’s initial production of memory chips has nothing to do with profitability and everything to do with self-reliance in chips and the long game of market share and eventual market dominance. China certainly has the resources and deep pockets to sell at a loss for a very long time in order to gain more than a foothold in the memory chip market.
In other words it really doesn’t matter if China can make memory chips on a cost competitive basis, it only matters that it can make them (which it seems to be doing)
Manufacturing at a profit can come later…much later
If we take away semiconductor equipment sales to China the semiconductor equipment industry would be down, not up as it is now.
However, all that equipment that the US and others have sold to China has not been put to good, efficient use, as it has in Korea, Taiwan or the US. A lot of China bound equipment has wound up in start up fabs or trailing edge fabs that are not turning out as much value in wafers.
If all the equipment currently being sold to China were fully utilized the industry would be flooded with capacity.
read more:
We need very high import tariffs on all electronics coming into the USA.
Another company with technologies (2,000 patents) shipped to the communists:
China’s semiconductor sector-focused investment firm Hua Capital has signed an agreement to acquire an Asia-based mobile LCD touch and display driver integration (TDDI) business from Nasdaq-listed human interface solutions developer Synaptics for $120 million in cash. The transaction is expected to close in the second quarter of 2020, according to a recent statement.
Synaptics, which went public in 2002, develops human interface solutions for the mobile, PC, smart home, and automotive industries. The company offers touch, display, biometrics, voice, audio, and multimedia products built on its own R&D, intellectual property (IP) and supply chain capabilities. The company has over 2,000 patents that are either pending or issued. It has so far shipped more than 6 billion units and has reached a runway of a billion a year, shows the company website.
Read more:
https://www.dealstreetasia.com/stories/chinas-hua-capital-synaptics-167954/
At least from countries where the government is subsidizing their products. See https://www.freerepublic.com/focus/news/3789661/posts?page=92#92
Semiconductor stocks are set to rally for a second straight day, as investors continued betting on China’s increasing state investment in the cutting-edge field to compete with global tech powers.
“As traditional sectors such as real estate have entered a downward cycle, the market has been looking for new growth spots among technology and computer stocks,” said Yang Xiaolei, a Shanghai-based independent market analyst.
“Now the government policy is clearly supportive of homegrown technology shares ... so the enthusiasm over semiconductors is likely to continue into next year, making such stocks one of the most important sectors to look at in the first quarter,” he said.
China has roughly doubled its industrial subsidies since 2013, with further increases expected this year, creating a massive sticking point for the next phase of trade negotiations with the U.S.
The Chinese government doled out 156.2 billion yuan ($22.4 billion) of subsidies in 2018 to companies listed on the Shanghai and Shenzhen stock exchanges, Nikkei has found, based on data from financial research firm Wind.
The tally amounts to about 5% of total net profit earned by mainland China's publicly traded enterprises last year. Subsidies increased 15% on the year for the first nine months of 2019, with more than 90% of the 3,748 businesses included in the calculations receiving something.
Subsidies and low-interest loans are two main tools China uses to support its industries. The World Trade Organization bans corporate subsidies designed to bolster exports and requires reporting for all other subsidies. But China has reported very little and is believed to be in violation of WTO rules in many cases.
The U.S. has demanded that China scrap these subsidies in order to level the playing field, but Beijing is not budging. “The Communist Party leadership draws its authority from the distribution of wealth, and fundamental change will be difficult,” said Shinichi Seki of the Japan Research Institute.
Through the Thousand Talents Plan and other such programs, China pays thousands of scientists around the world to moonlight at Chinese institutions, often without disclosing the work to their primary employers. In some cases, researchers spend months in China without the knowledge of the U.S. institutions that employ them.
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