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Sanctions on letting them buy chips 1. reduced available R&D money for US competitors by reducing their revenue and 2. raised the local price to monopoly prices

Sanctions on letting them buy chips 1. reduced available R&D money for US competitors by reducing their revenue and 2. raised the local price to monopoly prices, creating a great reward for the first local manufacturer to achieve parity. If you want to see effective de-industrialization, look at what happens to US industry when China applies the opposite of sanctions (subsidies). Adam Smith figured out that mercantilism is inherently self-defeating over two hundred years ago. Maybe nation-states will catch up in the next few centuries.

seanmcdirmid 3y ago
China is still a few decades from commercially viable high end semiconductors. Yes, they can subsidize poor yields, but it doesn’t really bring them closer to figuring out the problem (they basically need to experiment a lot, and that will take time even if the money is there). China was always going to do this, they announced they were going to pour billions into semiconductors and modern jet turbines more than a decade ago. The trick is ensuring the money isn’t siphoned off to corruption.
- cavisne 3y ago
  Out of curiosity what’s stopping them cloning existing processes and technology like they do for everything else?
  - dotnet00 3y ago
    The processes being hard to just clone, involving a lot of detailed expertise and being extremely sensitive to minute differences. The West is able to lean on existing knowledge Intel has from running its own fabs in the US and the knowledge of ASML in the Netherlands who makes the machines. Basically, they could get a machine and take it apart and figure out how it works, but that's meaningless if they don't understand how to make the stuff or how to keep it working well.
    - drevil-v2 3y ago
      You don't think China already has folks working in TSMC fabs stealing IP? If you believe that every Taiwanese engineer is rabidly anti-China then I have a vaccine I want to sell you. It is my belief that China will steal what it can, corrupt who it can, threaten who it can and most importantly, re-invent what it is missing (they have a bigger STEM education pipeline that most Western countries combined) until they no longer have this achilles heel. The only unknown is if there is will be hot war before they reach that inflection point.
      - baq 3y ago
        The proof is in the pudding: they haven’t been able to replicate the process. ASML tools are step 432 of 1234. There’s a whole fab built around it and a whole supplier ecosystem. They will eventually succeed. That is obvious. High end chips have become existential in the modern world, especially now with AI, but have already been before that. When will they succeed is an open question as stealing the blueprint is absolutely not enough.
      - MangoCoffee 3y ago
        >China will steal what it can, corrupt who it can, threaten who it can and most importantly, re-invent what it is missing (they have a bigger STEM education pipeline that most Western countries combined) until they no longer have this achilles heel. https://en.wikipedia.org/wiki/Semiconductor_Manufacturing_International_Corporation#Litigation_with_TSMC https://en.wikipedia.org/wiki/Semiconductor_Manufacturing_In... China has done what you said since 2005. it've been 20 years. is China leading the semis industry?
        actionfromafar 3y ago
        And finally, they will force their citizens to be happy.
      - itsoktocry 3y ago
        >It is my belief that China will steal what it can, corrupt who it can, threaten who it can and most importantly, re-invent what it is missing So, from 10,000ft I see what you're saying, and might even agree. But what possesses someone to describe a people or country like this? We do the same with Russia; "other" them, like they have inherently "evil" traits. As if the US isn't above or involved in espionage. I guess I'm confused how otherwise seemingly intelligent people can look at another country and think their people are fundamentally different. But god forbid you point that lens at the wrong group.
  - bsder 3y ago
    1) Industrial processes are stupidly hard to duplicate. It doesn't even have to be something as advanced as semiconductors, duplicating a line that manufactures something as prosaic as paint is an exercise in patience and frustration. It's like building software from source using documentation, you may think you wrote down all the steps, but you find all the crap you missed when you actually try to execute the task. 2) Top-down command is anathema to engineering progress American corporations are bad enough for only reporting good news up the chain (see: Intel and deep UV lithography). A dictatorship like China is going to be ridiculous. You will deliver good news to Dear Leader, and you will deliver it when expected, or you will find yourself in the doghouse. So, especially if your task fails, you will make bloody sure that it either gets reported as successful or that you leave someone else hanging with the consequences (see: China and water and rocket fuel). This slows the engineering process to a crawl as nobody can trust anything delivered from anybody else.
    - worldwidelies 3y ago
      What’s the difference between American Corporations and International Dictators? Serious question. I’ve always been under the assumption they operate similarly.
      - aydyn 3y ago
        Well there are a lot more corporations than dictators, and usually shit doesn't go sideways when a corporation falls.
      - lucianbr 3y ago
        As an employee of a corporation, I often speak my mind. The most I risk is being fired, and I believe I can find another job relatively easy. I sometimes do keep my mouth shut, because saying the truth would get me some sour looks, and I don't feel like dealing with that right now. I lived for a few years behind the iron curtain, in an actual honest to god dictatorship. The fear pervading and perverting society was palpable. Say the wrong thing at the wrong time and you might die, and your family will suffer too. Not to mention destroying your career and social status. Best to lie most of the time, even to realtives. You never know who to trust, and the price of a mistake is enormous. From the way you phrased your question, I get the feeling you have no idea what a dictatorship is like. The two are only very superficially similar. Look at how Navalny ended up vs Ilya Sutskever.
  - jtriangle 3y ago
    The tooling is ultra specialized and requires whole teams of highly skilled techs to assemble and calibrate. That's like half the cost involved, and the crews running the lines don't know much about how it works, they don't need to. If something goes wrong, they have service contracts. So China can glean some of the process, but, because the design, assembly, and setup of the machines is done by western contractors, they're effectively locked out of 'the hard part'. Not to say they can't learn it, it's just not nearly as trivial as the rest of the things they clone. Also worth noting that, many of the chinese clones are made in the same plants as the orignals, sometimes in parallel to the originals as to benefit from existing successful processes that were already in place, but using cheaper materials, less QC, different branding, etc. It's actually quite impressive engineering really, they can often reduce part count and cost significantly while shipping a functional, albeit inferior, product. Chip fabs don't work in that model though, so, that presents an additional difficulty.
    - baal80spam 3y ago
      Reading Chris Miller's Chip War allowed me to realise how mind-bogglingly complicated the chip making process is.
- Analemma_ 3y ago
  > China is still a few decades from commercially viable high end semiconductors. I'm going to set a reminder to check in on this comment in three years to see how it has aged. My guess is, very poorly.
  - beebeepka 3y ago
    Just just look at seanmcdirmid's submission and post history. Shitting on China is what this account all about. It's a total coincidence it has a ton of karma, too. Yup
    - resolutebat 3y ago
      Unlike most HN posters, I believe Sean lives (or at least lived) in China and thus has much clearer view of what's happening on the ground there.
      - gaoryrt 3y ago
        > in China I believe in Hong Kong instead. And thus has so many prejudices.
        deleted 3y ago
        [deleted]
        seanmcdirmid 3y ago
        I lived in Beijing for 9 years. You know you are doing something right when the pro Chinese crowd calls you anti Chinese and the anti Chinese crowd calls you pro Chinese.
      - beebeepka 3y ago
        Totally invalidates what I said somehow. This guy has quite an obsession, don't you think? Oh, right We shouldn't think. Let's just blindly eat the narrative.
        3y ago
- deleted 3y ago
  [deleted]
tw04 3y ago
>2. raised the local price to monopoly prices, creating a great reward for the first local manufacturer to achieve parity. The government was both going to demand, and fund local companies creating a competing product and was already doing so long before sanctions arrived. Nothing about the sanctions sped up the process in the least. The Western sanctions had almost 0 bearing on accelerating local chip production, but it did do a GREAT job of limiting their ability to buy the hardware required for advanced fabrication. You also seem to have a belief that a "monopoly" in China is anything remotely like the West. It's not a free market, if a company in China tries to gouge the market or take it in a direction that's not approved at the expense of what the party wants, their executive leadership will quickly find themselves on the outside looking in (if they're lucky) or sitting in a jail cell if they aren't. See: Jack Ma Semiconductors were core to the "Made in China" strategy the party was pushing in 2014... https://www.mckinsey.com/industries/semiconductors/our-insights/semiconductors-in-china-brave-new-world-or-same-old-story https://www.mckinsey.com/industries/semiconductors/our-insig...
- joshuaissac 3y ago
  > The government was both going to demand, and fund local companies creating a competing product and was already doing so long before sanctions arrived. Nothing about the sanctions sped up the process in the least. Whatever encouragement or pressure the Chinese government was applying was insufficient to get manufacturers like Huawei to switch to domestic suppliers. Chinese companies still worked with established companies like TSMC, until forced by US sanctions to switch to worse domestic alternatives.
  - corimaith 3y ago
    If sanctions are so effective the CCP could just do the same thing to themselves via a trade ban on imported goods.
    - joshuaissac 3y ago
      > CCP could just do the same thing to themselves via a trade ban on imported goods. They could, but a domestic trade sanction, just like foreign sanctions, would guarantee at least near-term damage to Chinese companies. Domestically, Beijing would be seen as the responsible party for the resulting economic damage, causing resentment towards the government, with no actual guarantee of self sufficiency. Companies, in general, do not care about having a domestic supply chain; they want to increase profits. Internationally, other countries would also see China as the initiator of the conflict, and those that are negatively affected may want to respond with sanctions of their own, escalating it beyond what Beijing intended. The risk analysis is different between foreign sanctions and domestic sanctions. In the end, the Chinese government was not prepared to take that risk, but the American government was.
spacebanana7 3y ago
In fairness, a lack of sanctions an also accelerate the industrial progress of rivals. Nazi Germany and the Soviet Union had close partnerships with Detroit auto makers that helped their industry.
sparrowInHand 3y ago
The inherently parasitic, extractive elite in every empire so far loved mercantilism though, it appeals to the centralization focused, extractive, landlording mindset. China is trying to be as mercantilistic as possible (buy raw goods everywhere, ship only final products) and has none of the free trade idealism of the us. Which is one of the reasons the belt and road initivative is already collapsing.
- mastax 3y ago
  I'm starting to think the US has little free trade idealism left.
  - sparrowInHand 3y ago
    The empire, the external face-hugger to any country, eats it all after a while, turning it into giant estates ala rome, with slaves and no middle class - with hired mercenaries for troops.

seanmcdirmid 3y ago

China is still a few decades from commercially viable high end semiconductors. Yes, they can subsidize poor yields, but it doesn’t really bring them closer to figuring out the problem (they basically need to experiment a lot, and that will take time even if the money is there). China was always going to do this, they announced they were going to pour billions into semiconductors and modern jet turbines more than a decade ago. The trick is ensuring the money isn’t siphoned off to corruption.

cavisne 3y ago
Out of curiosity what’s stopping them cloning existing processes and technology like they do for everything else?
- dotnet00 3y ago
  The processes being hard to just clone, involving a lot of detailed expertise and being extremely sensitive to minute differences. The West is able to lean on existing knowledge Intel has from running its own fabs in the US and the knowledge of ASML in the Netherlands who makes the machines. Basically, they could get a machine and take it apart and figure out how it works, but that's meaningless if they don't understand how to make the stuff or how to keep it working well.
  - drevil-v2 3y ago
    You don't think China already has folks working in TSMC fabs stealing IP? If you believe that every Taiwanese engineer is rabidly anti-China then I have a vaccine I want to sell you. It is my belief that China will steal what it can, corrupt who it can, threaten who it can and most importantly, re-invent what it is missing (they have a bigger STEM education pipeline that most Western countries combined) until they no longer have this achilles heel. The only unknown is if there is will be hot war before they reach that inflection point.
    - baq 3y ago
      The proof is in the pudding: they haven’t been able to replicate the process. ASML tools are step 432 of 1234. There’s a whole fab built around it and a whole supplier ecosystem. They will eventually succeed. That is obvious. High end chips have become existential in the modern world, especially now with AI, but have already been before that. When will they succeed is an open question as stealing the blueprint is absolutely not enough.
    - MangoCoffee 3y ago
      >China will steal what it can, corrupt who it can, threaten who it can and most importantly, re-invent what it is missing (they have a bigger STEM education pipeline that most Western countries combined) until they no longer have this achilles heel. https://en.wikipedia.org/wiki/Semiconductor_Manufacturing_International_Corporation#Litigation_with_TSMC https://en.wikipedia.org/wiki/Semiconductor_Manufacturing_In... China has done what you said since 2005. it've been 20 years. is China leading the semis industry?
      - actionfromafar 3y ago
        And finally, they will force their citizens to be happy.
    - itsoktocry 3y ago
      >It is my belief that China will steal what it can, corrupt who it can, threaten who it can and most importantly, re-invent what it is missing So, from 10,000ft I see what you're saying, and might even agree. But what possesses someone to describe a people or country like this? We do the same with Russia; "other" them, like they have inherently "evil" traits. As if the US isn't above or involved in espionage. I guess I'm confused how otherwise seemingly intelligent people can look at another country and think their people are fundamentally different. But god forbid you point that lens at the wrong group.
- bsder 3y ago
  1) Industrial processes are stupidly hard to duplicate. It doesn't even have to be something as advanced as semiconductors, duplicating a line that manufactures something as prosaic as paint is an exercise in patience and frustration. It's like building software from source using documentation, you may think you wrote down all the steps, but you find all the crap you missed when you actually try to execute the task. 2) Top-down command is anathema to engineering progress American corporations are bad enough for only reporting good news up the chain (see: Intel and deep UV lithography). A dictatorship like China is going to be ridiculous. You will deliver good news to Dear Leader, and you will deliver it when expected, or you will find yourself in the doghouse. So, especially if your task fails, you will make bloody sure that it either gets reported as successful or that you leave someone else hanging with the consequences (see: China and water and rocket fuel). This slows the engineering process to a crawl as nobody can trust anything delivered from anybody else.
  - worldwidelies 3y ago
    What’s the difference between American Corporations and International Dictators? Serious question. I’ve always been under the assumption they operate similarly.
    - aydyn 3y ago
      Well there are a lot more corporations than dictators, and usually shit doesn't go sideways when a corporation falls.
    - lucianbr 3y ago
      As an employee of a corporation, I often speak my mind. The most I risk is being fired, and I believe I can find another job relatively easy. I sometimes do keep my mouth shut, because saying the truth would get me some sour looks, and I don't feel like dealing with that right now. I lived for a few years behind the iron curtain, in an actual honest to god dictatorship. The fear pervading and perverting society was palpable. Say the wrong thing at the wrong time and you might die, and your family will suffer too. Not to mention destroying your career and social status. Best to lie most of the time, even to realtives. You never know who to trust, and the price of a mistake is enormous. From the way you phrased your question, I get the feeling you have no idea what a dictatorship is like. The two are only very superficially similar. Look at how Navalny ended up vs Ilya Sutskever.
- jtriangle 3y ago
  The tooling is ultra specialized and requires whole teams of highly skilled techs to assemble and calibrate. That's like half the cost involved, and the crews running the lines don't know much about how it works, they don't need to. If something goes wrong, they have service contracts. So China can glean some of the process, but, because the design, assembly, and setup of the machines is done by western contractors, they're effectively locked out of 'the hard part'. Not to say they can't learn it, it's just not nearly as trivial as the rest of the things they clone. Also worth noting that, many of the chinese clones are made in the same plants as the orignals, sometimes in parallel to the originals as to benefit from existing successful processes that were already in place, but using cheaper materials, less QC, different branding, etc. It's actually quite impressive engineering really, they can often reduce part count and cost significantly while shipping a functional, albeit inferior, product. Chip fabs don't work in that model though, so, that presents an additional difficulty.
  - baal80spam 3y ago
    Reading Chris Miller's Chip War allowed me to realise how mind-bogglingly complicated the chip making process is.
Analemma_ 3y ago
> China is still a few decades from commercially viable high end semiconductors. I'm going to set a reminder to check in on this comment in three years to see how it has aged. My guess is, very poorly.
- beebeepka 3y ago
  Just just look at seanmcdirmid's submission and post history. Shitting on China is what this account all about. It's a total coincidence it has a ton of karma, too. Yup
  - resolutebat 3y ago
    Unlike most HN posters, I believe Sean lives (or at least lived) in China and thus has much clearer view of what's happening on the ground there.
    - gaoryrt 3y ago
      > in China I believe in Hong Kong instead. And thus has so many prejudices.
      - deleted 3y ago
        [deleted]
      - seanmcdirmid 3y ago
        I lived in Beijing for 9 years. You know you are doing something right when the pro Chinese crowd calls you anti Chinese and the anti Chinese crowd calls you pro Chinese.
    - beebeepka 3y ago
      Totally invalidates what I said somehow. This guy has quite an obsession, don't you think? Oh, right We shouldn't think. Let's just blindly eat the narrative.
      - 3y ago
deleted 3y ago
[deleted]

tw04 3y ago

>2. raised the local price to monopoly prices, creating a great reward for the first local manufacturer to achieve parity. The government was both going to demand, and fund local companies creating a competing product and was already doing so long before sanctions arrived. Nothing about the sanctions sped up the process in the least. The Western sanctions had almost 0 bearing on accelerating local chip production, but it did do a GREAT job of limiting their ability to buy the hardware required for advanced fabrication. You also seem to have a belief that a "monopoly" in China is anything remotely like the West. It's not a free market, if a company in China tries to gouge the market or take it in a direction that's not approved at the expense of what the party wants, their executive leadership will quickly find themselves on the outside looking in (if they're lucky) or sitting in a jail cell if they aren't. See: Jack Ma Semiconductors were core to the "Made in China" strategy the party was pushing in 2014... https://www.mckinsey.com/industries/semiconductors/our-insights/semiconductors-in-china-brave-new-world-or-same-old-story https://www.mckinsey.com/industries/semiconductors/our-insig...

joshuaissac 3y ago
> The government was both going to demand, and fund local companies creating a competing product and was already doing so long before sanctions arrived. Nothing about the sanctions sped up the process in the least. Whatever encouragement or pressure the Chinese government was applying was insufficient to get manufacturers like Huawei to switch to domestic suppliers. Chinese companies still worked with established companies like TSMC, until forced by US sanctions to switch to worse domestic alternatives.
- corimaith 3y ago
  If sanctions are so effective the CCP could just do the same thing to themselves via a trade ban on imported goods.
  - joshuaissac 3y ago
    > CCP could just do the same thing to themselves via a trade ban on imported goods. They could, but a domestic trade sanction, just like foreign sanctions, would guarantee at least near-term damage to Chinese companies. Domestically, Beijing would be seen as the responsible party for the resulting economic damage, causing resentment towards the government, with no actual guarantee of self sufficiency. Companies, in general, do not care about having a domestic supply chain; they want to increase profits. Internationally, other countries would also see China as the initiator of the conflict, and those that are negatively affected may want to respond with sanctions of their own, escalating it beyond what Beijing intended. The risk analysis is different between foreign sanctions and domestic sanctions. In the end, the Chinese government was not prepared to take that risk, but the American government was.

spacebanana7 3y ago

In fairness, a lack of sanctions an also accelerate the industrial progress of rivals. Nazi Germany and the Soviet Union had close partnerships with Detroit auto makers that helped their industry.

sparrowInHand 3y ago

The inherently parasitic, extractive elite in every empire so far loved mercantilism though, it appeals to the centralization focused, extractive, landlording mindset. China is trying to be as mercantilistic as possible (buy raw goods everywhere, ship only final products) and has none of the free trade idealism of the us. Which is one of the reasons the belt and road initivative is already collapsing.

mastax 3y ago
I'm starting to think the US has little free trade idealism left.
- sparrowInHand 3y ago
  The empire, the external face-hugger to any country, eats it all after a while, turning it into giant estates ala rome, with slaves and no middle class - with hired mercenaries for troops.