Brandon admin just gutted China’s microchip industry
As previously reported here, China’s tech sector is very weak because they lack enough people with sufficient expertise to manage it. China has been casting covetous eyes towards Taiwan, but has not invaded despite much fist shaking and bluster. Yes, the CCP would love to get their hands on Taiwan’s chip industry, but it won’t happen or at least not soon for a variety of reasons. First they would have to get past the US Navy (maybe), but there is much uncertainty as to whether the US would fight or not. Making a successful landing on Taiwan in the face of the strong resistance would be really tough, not least because the terrain is inhospitable to an invading force. Even if the CCP managed to take Taiwan and capture the chip factories intact (doubtful) they don’t have the trained manpower to be able to operate them.
Jordan Schneider put out a series of posts on Twitter revealing the carnage.
The US government’s new export controls are wreaking havoc on China’s chip industry.New rules around “US persons” are driving an “industry-wide decapitation.”
The following is the translation of a thread posted earlier this week by @lidangzzz.
“Lots of people don’t know what happened yesterday.
To put it simply, Biden has forced all Americans working in China to pick between quitting their jobs and losing American citizenship.
Every American executive and engineer working in China’s semiconductor manufacturing industry resigned yesterday, paralyzing Chinese manufacturing overnight.
One round of sanctions from Biden did more damage than all four years of performative sanctioning under Trump.Although American semiconductor exporters had to apply for licenses during the Trump years, licenses were approved within a month.With the new Biden sanctions, all American suppliers of IP blocks, components, and services departed overnight —— thus cutting off all service [to China].Long story short, every advanced node semiconductor company is currently facing comprehensive supply cut-off, resignations from all American staff, and immediate operations paralysis.This is what annihilation looks like: China’s semiconductor manufacturing industry was reduced to zero overnight. Complete collapse. No chance of survival.
[Translation of the DMs in a screenshot:
Person A: Everyone from Lam Research at Yangtze Memory left today, and on the 12th the AMAT folks will leave as well
Person B: Yes. Not just Yangtze, but also HLMC, ICRD’s Jiading fab, Hefei’s CXMT DRAM fab
Even Geehy in Hangzhou is pausing operations]
Q: Why hasn’t Chinese media reported on this?
A: I don’t know.The only possible explanation is that this major story, and its future ramifications, will bring severe damage to the supposedly “continuously flourishing” semiconductor industry and Chinese national security as a whole.The level of embarrassment is on par with Pelosi’s Taiwan visit.
Many people don’t understand why this is annihilation.
ASML has stopped providing services and support to mainland China.
Summary from Lam Research, which is involved with these new sanctions:
1. All Chinese advanced computing chip design companies are covered by these sanctions, and TSMC will no longer do any tape-out for them from now on;
2. All autonomous-driving chips will be sanctioned as well;
3. The starting point for this round of sanctions is to go all the way up the food chain and ensure the elimination of all American products and technologies from the entire ecosystem;
4. Any company or individual who violates these sanctions face arrest by the US Department of Justice..I will stress again:This round of sanctions means annihilation for China’s semiconductor industry. This is nothing like the 10+ rounds of performative sanctioning during the Trump years —— this is a serious act of industry-wide decapitation.
Any Chinese company that survives is a company that hasn’t been fully sanctioned yet;
Any fully sanctioned Chinese company is 100% doomed; there’s no possibility of survival.
American citizens and permanent residents will predictably vote with their feet.”
FWIW, while I think there is certainly a grain of truth in this thread, the impact into the medium term may be a bit overstated.
My guess is that companies like LAM out of an abundance of caution paused servicing in order to make sure they were complying with the law.The regs, after all, are not intended to stop US firms from working in China behind the cutting edge, and if that is their impact they may be tweaked in the coming months.That said, executives in China, many of whom do hold US passports, have a very difficult decision to make.Given that many of China’s most successful entrepreneurs in recent years in light of Zero Covid and Xi’s leadership have decided to leave the country, these new regs may be the tipping point for a lot of China’s most experienced talent in the chip space.
Leave a Reply