10 ms·

This is the standard Chinese operating model, as I understand it. Accept foreign subsidiary investment on condition of 51% Chinese ownership, transfer the techn

This is the standard Chinese operating model, as I understand it. Accept foreign subsidiary investment on condition of 51% Chinese ownership, transfer the technology, then turn around and compete with the parent. It was a similar story with maglev trains.

sp332 5y ago
-
- adriancr 5y ago
  Softbank sold 51% > Arm Holdings, the SoftBank subsidiary sold a 51% stake of the company to a consortium of Chinese investors for paltry $775M.
- njarboe 5y ago
  Softbank held 49%. "SoftBank subsidiary sold a 51% stake of the company to a consortium of Chinese investors for paltry $775M."
  - Proven 5y ago
    Of course it was sold for a paltry sum. Does anyone think they were not nudged to sell to local state-designated champ and had one serious candidate (with the CCP pulling the strings behind the scene)?
    - SkyMarshal 5y ago
      Softbank was also in the middle of the failed WeWork IPO at the time, and probably needed to make a quick sale to raise cash. Any time you're in a hurry to buy or sell, and the counterparties know that, you're gonna get taken to the cleaners.
klelatti 5y ago
Interesting that it's not the 51% (and I think some of the 51% may be held by non Chinese investors) that has been key but rather Allen Wu having the seal - so even without control of the board he's still been able to get control of the company.
- dylan522p 5y ago
  Author here, there is a Singaporean investor as well, but they have deep Chinese ties. I agree with your assessment. Allen Wu is an American citizen too, but loyal to China with deep CCP contacts.
  - cwizou 5y ago
    Since you are the author, there's a near duplicated paragraph below the CPU/XPU pictures, the paragraphs starts with "Besides standing out and calling themselves". Very interesting content otherwise, I remember the seal issue being something very controversial too when other companies went there (I believe it was regarding Intel, that was maybe 15 years ago). To this day it still is a pretty prevalent issue when doing local branches in China.
    - dylan522p 5y ago
      Thanks, I messed up when copying to from the actual site to the Substack, which is the one being shared here. Thanks!
  - leephillips 5y ago
    Did he register with the US gov. as a foreign agent? If not, he should be apprehended next time he enters the US.
    - nzmsv 5y ago
      Go look up the actual requirement for FARA before spewing nonsense.
downrightmike 5y ago
And cellular and networking and and and
jimbob45 5y ago
This gets overblown a lot in the same way that we used to discredit Soviet scientific advancements by claiming they stole all the important bits from the Americans. Yes, China does steal US technology and industry and yes, it has happened on a number of occasions with concrete documentation. However, that does not mean that China is not capable of innovation or shrewd business moves and it should not be assumed to be the norm.
- denverkarma 5y ago
  The fact that they are more than capable of innovation and shrewd business is the entire reason that casually stealing whatever they want on top of things is problematic.
  - webmaven 5y ago
    > The fact that they are more than capable of innovation and shrewd business is the entire reason that casually stealing whatever they want on top of things is problematic. Hardly casual. The theft is thoughtful, deliberate, careful, and strategic.
    - andrey_utkin 5y ago
      Maybe the West woruld come to realization that they could abolish paw protections of trade secrets and patents, and not lose much, but boost local innovation?
  - memonkey 5y ago
    I don't see how that is any different if we're comparing it to the United States who is also capable of the same things but violently steals whatever they want.
throwawaysea 5y ago
I’m not familiar with the story around maglev but it is certainly true for conventional high speed rail in China. See stories detailing blatant IP theft and deceptive partnerships such as https://www.wsj.com/articles/SB10001424052748704814204575507353221141616 https://www.wsj.com/articles/SB10001424052748704814204575507... or https://www.bloombergquint.com/global-economics/alstom-and-siemens-show-how-not-to-deal-with-china-and-vestager https://www.bloombergquint.com/global-economics/alstom-and-s... I wonder how this happens. Is it the naivety of leadership at western corporations, or is it simple greed because those leaders may show short term results that boost their compensation? And of course, I have to wonder why western governments don’t restrict their corporations from risking their economic and military sovereignty in the future through these terrible partnerships. The same thing is happening in aerospace and it isn’t even new. For example China tried cloning a Boeing jet it acquired way back in 1980 (https://www.washingtonpost.com/archive/politics/1980/05/09/china-said-to-clone-a-708-from-boeing-jet-it-brought/9561fa4e-cc69-48cd-9dad-24773cec3be2/ https://www.washingtonpost.com/archive/politics/1980/05/09/c...). China’s more recent attempts are much more successful (https://www.bbc.com/news/business-47689386 https://www.bbc.com/news/business-47689386) and although they rely on western avionics and engines, I am sure they’re busy trying to clone those as well. EDIT: found an article detailing IP competition and theft relating to HSR broadly, including maglev (https://itif.org/publications/2021/04/26/heading-track-impact-chinas-mercantilist-policies-global-high-speed-rail https://itif.org/publications/2021/04/26/heading-track-impac...)
- glandium 5y ago
  Note, you say "leadership of western corporations", but in the case of high speed rail, Japanese companies are involved too, and have fallen to the scam just as well.
- oaiey 5y ago
  The maglev was developed by Siemens in the 80s in Germany. It was called Transrapid. But we Germans were motivated to built a single railroad for it. So when Siemens went to China with it, we knew what would happen. Personally, i am kind of grateful that they use the technology instead that it rots away in some storage room in Munich at Siemens.
matheusmoreira 5y ago
Seems to be going on for decades if the book Poorly Made in China is to be believed. Western corporations deliver their intellectual property to chinese factories on a silver platter.
jlduan 5y ago
the rogue ceo allen wu is american.
- DangitBobby 5y ago
  And?
- ur-whale 5y ago
  > is american. on paper. where is loyalties actually lie is another story.
fnord77 5y ago
so, the Tesla subsidiary in china is 51% chinese owned?
- evancox100 5y ago
  No actually, I think Tesla is one of the few foreign companies who has been able to operate there without the JV requirement. Edit: backing this up with a link https://www.google.com/amp/s/www.forbes.com/sites/greggardner/2019/10/17/china-clears-tesla-to-begin-production-in-shanghai-plant/amp/ https://www.google.com/amp/s/www.forbes.com/sites/greggardne...
- thesausageking 5y ago
  Yes. All companies that operate in China have to be 51% domestically owned. Often they're setup so the parent company keeps all of the IP but as the Arm situation shows, that only gives the parent so much power.
  - jhugo 5y ago
    > All companies that operate in China have to be 51% domestically owned. this is not true - there is a type of legal entity called a Wholly Foreign Owned Enterprise (WFOE). It is only allowed for certain lines of business, of course, which wouldn't include anything of strategic importance to China.
  - PostThisTooFast 5y ago
    I thought they recently abolished this bullshit. China has been making a joke out of foreign entities for years with this blatant rip-off.
droopyEyelids 5y ago
Maglev trains, and also with McDonnell Douglas/Boeing and airframes. https://mattstoller.substack.com/p/how-bill-clinton-and-american-financiers https://mattstoller.substack.com/p/how-bill-clinton-and-amer...
- justicezyx 5y ago
  """ American officials want to avoid sending any signals that would fuel China's belief that the United States is trying to ''contain'' China's power, militarily or economically. And they know that if they deny a range of industrial technology to China, other competitors -- chiefly France and Germany -- are ready to leap in and fill the void. """ I am not sure the clickbating sensentional title really can be substantiated by the content... Except from the fact that China practiced a different political system and ideology, developing China is not morally worse or better than developing any other nations. Of course, when China grows powerful, they'll become more aggressive, and may even become the next super bully. Buy is that particularly exceptional in history?
wazoox 5y ago
And Airbus. An incredible number of people working at Airbus Tianjin factory went to work at Comac.
- NonEUCitizen 5y ago
  In California, we celebrate workers' rights to move between companies, and have made non-compete clauses unenforceable.
  - wazoox 5y ago
    That's not what I'm talking about. Notice that Airbus started assembling A320 planes in China (under Chinese pressure), then Comac was founded, most of Chinese people working at Airbus went to Comac 1000 km away to build an A320 clone. This isn't simply a case of people "freely switching jobs". Particularly not in light of blatant and repeated Chinese espionage of incredible breadth in France going on for years and years: 2011: https://www.lefigaro.fr/actualite-france/2011/10/12/01016-20111012ARTFIG00436-nouvelle-affaire-d-espionnage-chinois-en-france.php https://www.lefigaro.fr/actualite-france/2011/10/12/01016-20... 2014: https://www.nouvelobs.com/societe/20141204.OBS7033/comment-la-chine-espionne-le-monde-depuis-la-banlieue-parisienne.html https://www.nouvelobs.com/societe/20141204.OBS7033/comment-l... 2015: https://www.liberation.fr/futurs/2015/02/16/l-espionnage-chinois-passe-a-l-echelle-industrielle_1203962/ https://www.liberation.fr/futurs/2015/02/16/l-espionnage-chi... 2018: https://www.capital.fr/economie-politique/la-france-visee-par-un-gigantesque-programme-despionnage-chinois-1312370 https://www.capital.fr/economie-politique/la-france-visee-pa... https://www.businessinsider.fr/des-espions-chinois-ont-ete-arretes-apres-avoir-tente-de-voler-une-technologie-du-francais-safran-utilisee-dans-de-nombreux-moteurs-davion-110249 https://www.businessinsider.fr/des-espions-chinois-ont-ete-a... 2019: https://rmc.bfmtv.com/emission/expliquez-nous-quand-le-contre-espionnage-francais-s-inquiete-des-mariages-entre-des-militaires-bretons-et-des-etudiantes-chinoises-1793476.html https://rmc.bfmtv.com/emission/expliquez-nous-quand-le-contr... 2020: https://www.leparisien.fr/faits-divers/l-improbable-trahison-de-deux-espions-francais-retournes-par-la-chine-05-07-2020-8347695.php https://www.leparisien.fr/faits-divers/l-improbable-trahison...
    - 5y ago
justicezyx 5y ago
Nonsense Arm China was set up because they want to be listed on the Shanghai Star board, the Chinese Nasdaq. If Arm just want to do business in China, it's totally OK to have fully owned subsidiary. And this whole setup was in turn from Softbank's acute sense that Arm China will be given a lofty valuation because of the tech wars happening right now... And for all are happening right now, it's because Mr. Wu learned how to manuvurer based on his own interests. The Chinese investors are actually not directly benefiting from this mess.
jacknews 5y ago
Exactly. Why are companies and their governments still falling for it? Contrast with how Chinese companies operate in the west, essentially imposing a system of apartheid between Chinese bosses and western workers.
- coldacid 5y ago
  Because C-level execs and corporate directors think only as far as the next quarterly report and don't consider the big picture.
  - me_me_me 5y ago
    Well that wont be my problem after i get this big bonus!
cma 5y ago
Standard US operating too: https://en.wikipedia.org/wiki/Samuel_Slater https://en.wikipedia.org/wiki/Samuel_Slater " In the UK, he was called "Slater the Traitor"[2] and "Sam the Slate" because he brought British textile technology to the United States, modifying it for American use. He stole the textile factory machinery designs as an apprentice to a pioneer in the British industry before migrating to the United States at the age of 21. He designed the first textile mills in the US and later went into business for himself, developing a family business with his sons. He eventually owned thirteen spinning mills and had developed tenant farms and company towns around his textile mills, such as Slatersville, Rhode Island." Historically, strong international IP protection only becomes extra important once you are an a big established incumbent rather than a developing upstart country.
- mr_toad 5y ago
  It worked for Hollywood too. https://en.wikipedia.org/wiki/Motion_Picture_Patents_Company#Backlash_and_decline https://en.wikipedia.org/wiki/Motion_Picture_Patents_Company...
- roenxi 5y ago
  There is a sort of lived-truth here, that innovative upstarts are generally going to be in opposition to IP laws rather than in favour of it. Laws generally favours established players with money, lawyers and political contacts.
- ctvo 5y ago
  > Historically, strong international IP protection only becomes extra important once you are an a big established incumbent rather than a developing upstart country. The theft of IP in a less interconnected age with different IP laws, at a smaller scale? If it was good enough for the British and the Americans, why not a policy from the top down for the Chinese in the modern age? It would explain what China is doing in Africa, and their treatment of African immigrants in China during the pandemic. Colonialism was OK back then too! And many countries did it! Why not a more modern take by China [1]? 1 - https://thediplomat.com/2020/11/is-china-a-new-colonial-power https://thediplomat.com/2020/11/is-china-a-new-colonial-powe...
- 5y ago
justicezyx 5y ago
No, certain industry used to require that like financial industry. Of course, the state controlled joint venture gives more benefit on the table, like any business deals. Use your brain... US capitalists are the best and smartest. You think they are willing to subject to such draconic rullings?!

sp332 5y ago

adriancr 5y ago
Softbank sold 51% > Arm Holdings, the SoftBank subsidiary sold a 51% stake of the company to a consortium of Chinese investors for paltry $775M.
njarboe 5y ago
Softbank held 49%. "SoftBank subsidiary sold a 51% stake of the company to a consortium of Chinese investors for paltry $775M."
- Proven 5y ago
  Of course it was sold for a paltry sum. Does anyone think they were not nudged to sell to local state-designated champ and had one serious candidate (with the CCP pulling the strings behind the scene)?
  - SkyMarshal 5y ago
    Softbank was also in the middle of the failed WeWork IPO at the time, and probably needed to make a quick sale to raise cash. Any time you're in a hurry to buy or sell, and the counterparties know that, you're gonna get taken to the cleaners.

klelatti 5y ago

Interesting that it's not the 51% (and I think some of the 51% may be held by non Chinese investors) that has been key but rather Allen Wu having the seal - so even without control of the board he's still been able to get control of the company.

dylan522p 5y ago
Author here, there is a Singaporean investor as well, but they have deep Chinese ties. I agree with your assessment. Allen Wu is an American citizen too, but loyal to China with deep CCP contacts.
- cwizou 5y ago
  Since you are the author, there's a near duplicated paragraph below the CPU/XPU pictures, the paragraphs starts with "Besides standing out and calling themselves". Very interesting content otherwise, I remember the seal issue being something very controversial too when other companies went there (I believe it was regarding Intel, that was maybe 15 years ago). To this day it still is a pretty prevalent issue when doing local branches in China.
  - dylan522p 5y ago
    Thanks, I messed up when copying to from the actual site to the Substack, which is the one being shared here. Thanks!
- leephillips 5y ago
  Did he register with the US gov. as a foreign agent? If not, he should be apprehended next time he enters the US.
  - nzmsv 5y ago
    Go look up the actual requirement for FARA before spewing nonsense.

downrightmike 5y ago

And cellular and networking and and and

jimbob45 5y ago

This gets overblown a lot in the same way that we used to discredit Soviet scientific advancements by claiming they stole all the important bits from the Americans. Yes, China does steal US technology and industry and yes, it has happened on a number of occasions with concrete documentation. However, that does not mean that China is not capable of innovation or shrewd business moves and it should not be assumed to be the norm.

denverkarma 5y ago
The fact that they are more than capable of innovation and shrewd business is the entire reason that casually stealing whatever they want on top of things is problematic.
- webmaven 5y ago
  > The fact that they are more than capable of innovation and shrewd business is the entire reason that casually stealing whatever they want on top of things is problematic. Hardly casual. The theft is thoughtful, deliberate, careful, and strategic.
  - andrey_utkin 5y ago
    Maybe the West woruld come to realization that they could abolish paw protections of trade secrets and patents, and not lose much, but boost local innovation?
- memonkey 5y ago
  I don't see how that is any different if we're comparing it to the United States who is also capable of the same things but violently steals whatever they want.

throwawaysea 5y ago

I’m not familiar with the story around maglev but it is certainly true for conventional high speed rail in China. See stories detailing blatant IP theft and deceptive partnerships such as https://www.wsj.com/articles/SB10001424052748704814204575507353221141616 https://www.wsj.com/articles/SB10001424052748704814204575507... or https://www.bloombergquint.com/global-economics/alstom-and-siemens-show-how-not-to-deal-with-china-and-vestager https://www.bloombergquint.com/global-economics/alstom-and-s... I wonder how this happens. Is it the naivety of leadership at western corporations, or is it simple greed because those leaders may show short term results that boost their compensation? And of course, I have to wonder why western governments don’t restrict their corporations from risking their economic and military sovereignty in the future through these terrible partnerships. The same thing is happening in aerospace and it isn’t even new. For example China tried cloning a Boeing jet it acquired way back in 1980 (https://www.washingtonpost.com/archive/politics/1980/05/09/china-said-to-clone-a-708-from-boeing-jet-it-brought/9561fa4e-cc69-48cd-9dad-24773cec3be2/ https://www.washingtonpost.com/archive/politics/1980/05/09/c...). China’s more recent attempts are much more successful (https://www.bbc.com/news/business-47689386 https://www.bbc.com/news/business-47689386) and although they rely on western avionics and engines, I am sure they’re busy trying to clone those as well. EDIT: found an article detailing IP competition and theft relating to HSR broadly, including maglev (https://itif.org/publications/2021/04/26/heading-track-impact-chinas-mercantilist-policies-global-high-speed-rail https://itif.org/publications/2021/04/26/heading-track-impac...)

glandium 5y ago
Note, you say "leadership of western corporations", but in the case of high speed rail, Japanese companies are involved too, and have fallen to the scam just as well.
oaiey 5y ago
The maglev was developed by Siemens in the 80s in Germany. It was called Transrapid. But we Germans were motivated to built a single railroad for it. So when Siemens went to China with it, we knew what would happen. Personally, i am kind of grateful that they use the technology instead that it rots away in some storage room in Munich at Siemens.

matheusmoreira 5y ago

Seems to be going on for decades if the book Poorly Made in China is to be believed. Western corporations deliver their intellectual property to chinese factories on a silver platter.

jlduan 5y ago

the rogue ceo allen wu is american.

DangitBobby 5y ago
And?
ur-whale 5y ago
> is american. on paper. where is loyalties actually lie is another story.

fnord77 5y ago

so, the Tesla subsidiary in china is 51% chinese owned?

evancox100 5y ago
No actually, I think Tesla is one of the few foreign companies who has been able to operate there without the JV requirement. Edit: backing this up with a link https://www.google.com/amp/s/www.forbes.com/sites/greggardner/2019/10/17/china-clears-tesla-to-begin-production-in-shanghai-plant/amp/ https://www.google.com/amp/s/www.forbes.com/sites/greggardne...
thesausageking 5y ago
Yes. All companies that operate in China have to be 51% domestically owned. Often they're setup so the parent company keeps all of the IP but as the Arm situation shows, that only gives the parent so much power.
- jhugo 5y ago
  > All companies that operate in China have to be 51% domestically owned. this is not true - there is a type of legal entity called a Wholly Foreign Owned Enterprise (WFOE). It is only allowed for certain lines of business, of course, which wouldn't include anything of strategic importance to China.
- PostThisTooFast 5y ago
  I thought they recently abolished this bullshit. China has been making a joke out of foreign entities for years with this blatant rip-off.

droopyEyelids 5y ago

Maglev trains, and also with McDonnell Douglas/Boeing and airframes. https://mattstoller.substack.com/p/how-bill-clinton-and-american-financiers https://mattstoller.substack.com/p/how-bill-clinton-and-amer...

justicezyx 5y ago
""" American officials want to avoid sending any signals that would fuel China's belief that the United States is trying to ''contain'' China's power, militarily or economically. And they know that if they deny a range of industrial technology to China, other competitors -- chiefly France and Germany -- are ready to leap in and fill the void. """ I am not sure the clickbating sensentional title really can be substantiated by the content... Except from the fact that China practiced a different political system and ideology, developing China is not morally worse or better than developing any other nations. Of course, when China grows powerful, they'll become more aggressive, and may even become the next super bully. Buy is that particularly exceptional in history?

wazoox 5y ago

And Airbus. An incredible number of people working at Airbus Tianjin factory went to work at Comac.

NonEUCitizen 5y ago
In California, we celebrate workers' rights to move between companies, and have made non-compete clauses unenforceable.
- wazoox 5y ago
  That's not what I'm talking about. Notice that Airbus started assembling A320 planes in China (under Chinese pressure), then Comac was founded, most of Chinese people working at Airbus went to Comac 1000 km away to build an A320 clone. This isn't simply a case of people "freely switching jobs". Particularly not in light of blatant and repeated Chinese espionage of incredible breadth in France going on for years and years: 2011: https://www.lefigaro.fr/actualite-france/2011/10/12/01016-20111012ARTFIG00436-nouvelle-affaire-d-espionnage-chinois-en-france.php https://www.lefigaro.fr/actualite-france/2011/10/12/01016-20... 2014: https://www.nouvelobs.com/societe/20141204.OBS7033/comment-la-chine-espionne-le-monde-depuis-la-banlieue-parisienne.html https://www.nouvelobs.com/societe/20141204.OBS7033/comment-l... 2015: https://www.liberation.fr/futurs/2015/02/16/l-espionnage-chinois-passe-a-l-echelle-industrielle_1203962/ https://www.liberation.fr/futurs/2015/02/16/l-espionnage-chi... 2018: https://www.capital.fr/economie-politique/la-france-visee-par-un-gigantesque-programme-despionnage-chinois-1312370 https://www.capital.fr/economie-politique/la-france-visee-pa... https://www.businessinsider.fr/des-espions-chinois-ont-ete-arretes-apres-avoir-tente-de-voler-une-technologie-du-francais-safran-utilisee-dans-de-nombreux-moteurs-davion-110249 https://www.businessinsider.fr/des-espions-chinois-ont-ete-a... 2019: https://rmc.bfmtv.com/emission/expliquez-nous-quand-le-contre-espionnage-francais-s-inquiete-des-mariages-entre-des-militaires-bretons-et-des-etudiantes-chinoises-1793476.html https://rmc.bfmtv.com/emission/expliquez-nous-quand-le-contr... 2020: https://www.leparisien.fr/faits-divers/l-improbable-trahison-de-deux-espions-francais-retournes-par-la-chine-05-07-2020-8347695.php https://www.leparisien.fr/faits-divers/l-improbable-trahison...
  - 5y ago

justicezyx 5y ago

Nonsense Arm China was set up because they want to be listed on the Shanghai Star board, the Chinese Nasdaq. If Arm just want to do business in China, it's totally OK to have fully owned subsidiary. And this whole setup was in turn from Softbank's acute sense that Arm China will be given a lofty valuation because of the tech wars happening right now... And for all are happening right now, it's because Mr. Wu learned how to manuvurer based on his own interests. The Chinese investors are actually not directly benefiting from this mess.

jacknews 5y ago

Exactly. Why are companies and their governments still falling for it? Contrast with how Chinese companies operate in the west, essentially imposing a system of apartheid between Chinese bosses and western workers.

coldacid 5y ago
Because C-level execs and corporate directors think only as far as the next quarterly report and don't consider the big picture.
- me_me_me 5y ago
  Well that wont be my problem after i get this big bonus!

cma 5y ago

Standard US operating too: https://en.wikipedia.org/wiki/Samuel_Slater https://en.wikipedia.org/wiki/Samuel_Slater " In the UK, he was called "Slater the Traitor"[2] and "Sam the Slate" because he brought British textile technology to the United States, modifying it for American use. He stole the textile factory machinery designs as an apprentice to a pioneer in the British industry before migrating to the United States at the age of 21. He designed the first textile mills in the US and later went into business for himself, developing a family business with his sons. He eventually owned thirteen spinning mills and had developed tenant farms and company towns around his textile mills, such as Slatersville, Rhode Island." Historically, strong international IP protection only becomes extra important once you are an a big established incumbent rather than a developing upstart country.

mr_toad 5y ago
It worked for Hollywood too. https://en.wikipedia.org/wiki/Motion_Picture_Patents_Company#Backlash_and_decline https://en.wikipedia.org/wiki/Motion_Picture_Patents_Company...
roenxi 5y ago
There is a sort of lived-truth here, that innovative upstarts are generally going to be in opposition to IP laws rather than in favour of it. Laws generally favours established players with money, lawyers and political contacts.
ctvo 5y ago
> Historically, strong international IP protection only becomes extra important once you are an a big established incumbent rather than a developing upstart country. The theft of IP in a less interconnected age with different IP laws, at a smaller scale? If it was good enough for the British and the Americans, why not a policy from the top down for the Chinese in the modern age? It would explain what China is doing in Africa, and their treatment of African immigrants in China during the pandemic. Colonialism was OK back then too! And many countries did it! Why not a more modern take by China [1]? 1 - https://thediplomat.com/2020/11/is-china-a-new-colonial-power https://thediplomat.com/2020/11/is-china-a-new-colonial-powe...
5y ago

justicezyx 5y ago

No, certain industry used to require that like financial industry. Of course, the state controlled joint venture gives more benefit on the table, like any business deals. Use your brain... US capitalists are the best and smartest. You think they are willing to subject to such draconic rullings?!