The game between China and the United States has focused on high-tech industries. The deadly crisis of ZTE is both a case and a footnote to the game. The interpretation of the ZTE incident will not only affect diplomacy but also affect internal affairs.
On April 20, ZTE held a press conference. Chairman Yin Yimin expressed his firm opposition to unfair and unreasonable penalties. The company adopted all legal means to solve the problem. Figure / Vision China
On April 10, after President Xi Jinping gave a speech at the Boao Forum for Asia that China will increase its opening, President Trump sent tweets to express his appreciation and gratitude. The two sides of the Pacific are relieved that the fermentation at the beginning of the year and the culmination of the beginning of April The trade conflicts between China and the United States have been turning.
But less than a week later, the ZTE event has once again tightened Sino-US relations. Regardless of the Sino-US relationship, the concerns raised by this incident are far more than just trade.
On the evening of April 16, the US Department of Commerce ordered that US companies prohibit the sale of any electronic technology and communications components to ZTE Corporation (000063.SZ/0763.HK) within the next seven years. ZTE has relied heavily on U.S. suppliers for its telecommunications equipment, handset terminals, and hardware and software supplies. The US Department of Commerce’s ruling is equivalent to a disaster.
ZTE, headquartered in Shenzhen, was established in 1985 and is China’s second largest and fourth largest telecommunications equipment manufacturer in the world. Its operating revenue in 2017 was RMB 108.82 billion.
Four days later, a senior official of the U.S. Department of Commerce stated publicly that the agency had approved ZTE’s request for more material from an informal channel. ZTE has a chance to emerge.
On April 24, Trump announced that Minister of Finance Muchinchin and Trade Representative Lite Shizzle will lead a delegation to visit China in a few days. He said that the United States and China are likely to reach an agreement on trade issues. On the evening of April 26, CNBC reported that Kudlow, the White House’s economic adviser, will also be a member of the U.S. delegation.
A senior ZTE employee told the Caijing reporter that he expects the ZTE event to be listed as a negotiating issue.
The survival of the ZTE has attracted attention, but the more domestic issues discussed are: Why did ZTE become a “target”? Why did ZTE be “shocked by one card” by the U.S. government? What is the impact of the ZTE incident on China’s high-tech industry? Should we develop the “China Core” at all costs? What is “independence” in the era of globalization?
A chip from the IC design, wafer production, IC manufacturing, IC packaging to testing, the complexity of the production process, the high demand is that many people outside the industry can not imagine. Figure / Vision China
The mainstream view is that ZTE has major flaws in compliance management and risk prevention. As a result, ZTE has become the “target” to send to the door in the context of China-US trade friction. However, the U.S. government has tried its best to fight against the ZTE incident. The goal is not to narrow the trade deficit, but to maintain the competitive advantage of the U.S. high-tech industry and prevent China from overtaking. Consistency in understanding this U.S. government is different from many differences in trade policy. Therefore, there is a possibility that the U.S. government will expand its strike, and more Chinese high-tech companies may be affected. The absence or backwardness of China’s related industries in core technologies has made China’s countermeasures inadequate. Even so, independent research and development based on the model of “two bullets and one star” is unrealistic. China’s economy has become deeply globalized. China’s high-tech industries, from the R&D and production supply chain to the patent cross-licensing system, have also become deeply globalized, and there is no way to catch up with closed doors.
The U.S. Department of Commerce insists that the settlement agreement is a 39-person sanction list, but ZTE believes that there are only 4 people targeted for sanctions.
On March 7, 2016, ZTE Corporation was accused of selling scientific and technological products containing US hardware and software to Iran and North Korea. It violated the US import and export regulations and was issued by the US Department of Commerce as an “export control refusal order”, that is, within seven years. ZTE is allowed to directly or indirectly purchase any products of U.S. companies. At the same time, the “rejection orders” are also issued by ZTE’s wholly-owned subsidiary ZTE Corporation.
After one year’s hard work, on March 13, 2017, ZTE reached a settlement agreement with the US Department of Commerce, the Ministry of Justice, and the Overseas Assets Management Office of the Ministry of Finance. ZTE conceded violation of the US import and export regulations and agreed to pay 1.192 billion U.S. dollars for this purpose. fine. Of which 892 million US dollars a one-time payment, the remaining 300 million U.S. dollars whether the payment depends on the company’s compliance with the agreement in the next seven years, ZTE agreed to accept US compliance supervision and audit. The settlement agreement does not mean that the U.S. Department of Commerce will revoke the ban on ZTE, but “suspend implementation,” and the U.S. Department of Justice maintains a three-year observation period for ZTE.
During the observation period, the United States dispatched an independent compliance ombudsman to supervise ZTE’s compliance with U.S. export control laws and fulfillment of the settlement agreement, and issued an annual report; in the three years after the observation period expired, it was changed to ZTE’s own independent and compliant audit. The staff conducts inspections and issues annual audit reports.
In short, in the seven years after March 13, 2017, the U.S. Department of Commerce maintained the power to activate the refusal order.
The U.S. Department of Commerce’s website announced that the activation of the restraining order was caused by ZTE’s “false statement” during the “initial investigation period, the suspension of the suspension period and the observation period”, in which the “false statement of the observation period” was detonated. point.
At the end of the announcement, the U.S. Department of Commerce attached a PDF file called “ZTE-denial-Order,” which explained ZTE’s “false statement in the observation period.” The 14-page document states that on July 30, 2016, ZTE submitted two e-mails to the Ministry of Commerce on July 30, 2017.
In an email on November 30, 2016, ZTE Corporation stated that the company has initiated internal investigation and reorganization procedures; in an email on July 20, 2017, ZTE Corporation stated to the U.S. Department of Commerce that the investigation and rectification were over, and provided a 39-person List of penalties.
On February 2, 2018, the U.S. Department of Commerce sent a letter to ZTE asking for the current position, title, scope of duties, salary, and bonuses of 39 people. At this time, ZTE admitted that only 4 employees were fired, and all but 35 of them had won 2016 full bonuses.
It was the handling of these 35 people that angered the U.S. Department of Commerce. U.S. Secretary of Commerce Wilbur L. Ross stated in a related announcement: “ZTE misled the Ministry of Commerce. ZTE not only did not condemn its employees and senior management personnel, but also rewarded them. This behavior is shocking and cannot be ignored. ”
However, ZTE’s statement is different. In an internal letter issued by ZTE to all employees on April 20, ZTE stated that the agreement reached with the U.S. Department of Justice was simply to “handle four executives/employees,” and the company also admitted to be in 2017. On July 20th, the US Department of Commerce sent an e-mail “report on the completion of disciplinary measures of some employees”, but it did not clearly indicate whether it provided a 39-person list to the U.S. Department of Commerce in this letter.
ZTE stated that it was not until the end of February 2018 and early March 2018 that the company learned that “the bonus deduction plan for certain employees has not been implemented in a timely manner” and that President Zhao Xianming “arranged to act swiftly” to remediate, in addition to punishing the relevant employees. “We also took the initiative to report the situation to the North District Court in Texas.”
However, these remedies have no use, and the sword of Damocles, which hangs over Zhongxing, has fallen. On April 15, the U.S. Department of Commerce activated the refusal order.
Does “35 people” appear in the settlement agreement? Both parties expressed different opinions. OBI News interviewed Will Reinert, the U.S. Department of Commerce’s press officer, who stated clearly: “This (punishment or reduction of bonus for 35 employees) is one of the contents of the agreement signed by them (ZTE).”
ZTE held a 10-minute briefing on April 20, which was the only time that ZTE officially expressed its position. Yin Yimin, chairman of the board, said at the press conference that the U.S. sanctions will put the company into a state of shock.
ZTE chip R&D capabilities are not as bad as the outside world has imagined. ZTE IC chip revenue ranked third in China. Figure / Vision China
Not only ZTE, China, and related companies in the global science and technology sector are digesting the costs of different sizes for this round of Sino-American games.
From the perspective of follow-up development, a wider range of Sino-US related companies have been drawn into the pressure zone.
Frank Semiritz, Co-Chair of International Trade at Squire Patton Boggs LLP, pointed out that ZTE’s situation may not be eased, but it will also damage some important US suppliers. Among the U.S. listed companies, more than a dozen have listed ZTE as a partner in their financial reports.
Qualcomm is the US chip giant, ZTE’s most important chip supplier. Affected by the ZTE event, Qualcomm’s share price fell by 9% for a time, making it the most visible victim of Sino-US trade disputes. Acacia Communications, a US fiber optic communications component company, is a ZTE supplier. Last year, ZTE contributed approximately 30% of its revenue, and its share price has fallen by one-third since April 16. San Jose Optical Communications Device Provider Oclaro In 2017, with $600 million in revenue, ZTE contributed 18%. NeoPhotonics, a leading manufacturer of photonic integrated modules, saw a 13% drop in share price due to the ZTE event. The Wall Street Journal reported on April 25 that the US Department of Justice is investigating whether Huawei violated the Iranian embargo regulations. On the same day, the share price of NeoPhotonics fell by 11%, because Huawei brought 40% revenue in 2017, and ZTE’s revenue only accounted for 5%…
There is another “time bomb” that sparked widespread concern among Chinese companies.
Four days after the incident, on April 19, the U.S.-China Economic and Security Review Committee of the U.S. Congress released the report “U.S. Federal Information and Communication Technology (ICT) Supply Chain Vulnerability Analysis for China” (Supply Chain Vulnerabilities from China in US Federal Information and Communications Technology, hereinafter “US ICT Supply Chain Risk Report.”
The report pointed out that in the commercial electronic components and information systems that support the United States Federal Information System, the role of Chinese suppliers plays a decisive role. The business information technology supply chain is an international business controlled by East Asian suppliers. In addition to companies in mainland China, many companies headquartered in Taiwan and Singapore also have their own manufacturing branches in mainland China. Mainland China assembles most of the world’s consumer electronics and commercial electronic devices, producing components such as flash memory cards, which account for most of the global IT industry’s production. China is the world’s largest exporter and importer of information technology hardware. It is also an important producer of computer workstations, notebook computers, routers, switches, fiber optic cables and printers.
The report thus describes the threat China poses to the U.S. federal ICT supply chain: Relatively speaking, Chinese state-owned companies located in China are more threatened than those manufactured by Chinese companies in Singapore. According to the report, the Chinese government may support certain Chinese companies in conducting commercial espionage activities to increase their competitiveness and promote the government’s interests. ZTE, Huawei, Lenovo, Inspur, BOE, Chinese Academy of Sciences, China Electronics Technology Group (CECT), Beijing Huasheng Tiancheng and other 19 companies were named. These 19 companies are either state-owned or industry leaders or have a national defense background. According to the report, BOE and TPV Technology provide display screens and LCD screens for Dell Inc.; Lenovo Group and Huawei Inc. provide various hardware products for US companies and have “cyber spy” risk.
From 2012 onwards, the relevant investigation agencies will provide a report to the U.S. Congress every year – “The risks from Chinese companies in the ICT supply chain in the United States”. Huawei and ZTE are listed annually.
This year, we chose to publish and make a name on this sensitive node so that the companies on the list are particularly nervous.
A personage in the Lenovo Group told the Caijing reporter that the Lenovo Group is indeed assessing the financial and strategic implications of the US government’s additional tariff value of US$100 billion. However, he believes whether it will affect Lenovo Group, but also depends on the outcome of the new round of Sino-US trade negotiations.
A core person in BOE told the Caijing reporter that BOE and the relevant departments of the Ministry of Commerce have maintained close communication and the long-term influence is difficult to assess, but the stock price of BOE has been under pressure.
On April 20, Chinese Foreign Ministry spokesperson Hua Chunying responded to the report and stated that the US frequently sets limits on Sino-U.S. trade and investment activities in the high-tech field on the grounds of national security. It is obviously in the name of national security that it carries out trade protection. The realism reveals the hegemonic mentality of the US “only if I can have it and you are not allowed to have it”.
A senior company official on the list commented to the “Finance” reporter that if the new round of Sino-US trade negotiations went smoothly, it would not necessarily be a material risk to be included in the list. However, the selection of this list at this time could be regarded as an “effective threat”. “.
Technology Cold War?
Cross-border investment in science and technology between China and the United States may suddenly cease
Cross-border investment, cooperation, and mergers and acquisitions in high-tech fields have become a sensitive battlefield for Sino-US trade.
On April 19, a U.S. research institute released a report saying that due to policy and political factors, the scale of bilateral direct investment between Chinese and U.S. companies in 2017 decreased by nearly one-third from 2016. Among them, China’s direct investment in the United States decreased by about 37% last year, the first decline in the past decade; the United States investment in China remained basically unchanged.
This report shows that China’s investment in the United States is mainly concentrated in four industries: real estate and hotel accommodation, information and communications technology, energy, agriculture, and food. From 1990 to 2017, in all Chinese investments in the United States, the above four areas accounted for more than two-thirds of the total.
According to the agency’s estimates, more than US$8 billion in investment transactions were cancelled last year because of concerns that the US Foreign Investment Committee (CFIUS), which is responsible for national security reviews, could not be resolved.
Douglas Paal, vice president of the Carnegie Endowment for International Peace, told Caijing reporters that the entire U.S. government officials have actively prevented technology from flowing from the United States to China, and they have used too much force.
He said that the U.S. government believes that the Chinese government has “reached too far abroad and is too closed at home”, and this proposal makes it impossible for the United States and China to continue their existing trade and cooperation. ZTE violated the settlement agreement at this critical moment, making these claims of the United States easier.
Anne Salladin spent nearly 20 years at CFIUS and is now a partner at Stroock & Stroock & Lavan LLP. She told Caijing reporters that Trump has asked Finance Minister Mukuchin to consider restricting investment by Chinese companies, but it is unclear what these restrictions will involve.
Saladin pointed out four risks for Chinese companies: Future acquisitions in semiconductors will be very challenging; companies that purchase cutting-edge and emerging technologies in the United States, especially those with potential military technologies, will also face challenges; in trade Involving the “Made in China 2025” field is also challenging, for example, in the field of artificial intelligence; in addition, there are also risks in China and the United States where there are market access issues and the lack of reciprocal reciprocity.
In recent years, China and the United States have been active in M&A investment activities in emerging technologies such as artificial intelligence. Statistical data of financial service system service enterprises’ business cards show that since 2016, Tencent, which has the most active investment in the United States, has invested in a total of 27 American technology companies. In addition, the investment departments of Lenovo Group include Lenovo Venture Capital, Junlian Capital, and Lenovo. Star, etc., invested a total of 9 US technology companies in the past two years.
The power to stop technology from flowing from the United States to China comes mainly from the Trump administration and the US Congress. CFIUS is becoming more and more powerful, and the aggressiveness of investing in China is also increasing.
Informed sources told the Caijing reporter that the Trump administration will empower CFIUS to review transactions that may result in the transfer of technology to China, and even some joint ventures and potential greenfield investment projects will be included. The CFIUS privilege will be expanded. Under the label of “national security threats,” this trend will continue to grow.
The United States is increasingly watching for high-tech companies in China. The United States Wireless Communications and Internet Association (CTIA) released a report saying that China is aggressive in its 5G deployment and that China will win 5G competition. This is a major mistake made by the United States.
Regardless of the fate of ZTE, more and more US government agencies are all referring to Chinese technology companies. On April 17, the U.S. Federal Communications Commission (FCC) prohibited the Universal Service Fund (USF) from purchasing any equipment or services that pose a threat to the U.S. national security. This is actually a ban on its purchase of Chinese equipment.
Steven Berry, president and chief executive officer of the American Competitive Operators Association (CCA), commented on the comments of the Caijing reporter: “The FCC prohibits the USF from purchasing any equipment or services that pose a threat to the national security of the United States. This recommendation refers to a wide range and may affect every aspect of the communications supply chain, whether or not you use a general service fund, or whether you purchase equipment and services in China and Russia.”
Some small operators in the United States serving remote areas rely on telecommunication companies such as ZTE and Huawei to provide equipment. Berry hopes that any actions taken by the FCC should push the United States to a wide range of solutions, rather than a measure to make rural American consumers paralyzed.
Saladin told the Caijing reporter that Sino-U.S. relations and the environmental requirements of China and the United States have more extensive solutions, and CFIUS should not be involved in the solution to trade problems. However, “national security” has become an expression of Trump, down to some American civilians in protectionism, and this is particularly evident when it comes to targeting China.
When normal trade and commerce are caught in the whirlpool of national security, many things begin to become subtle and dangerous.
How to solve “core disease”
“We shouldn’t do anything. It’s best that we have a few things that other people can’t do.”
The ZTE dilemma is the most painful to the people. ZTE’s “a shock on one card” exposed the fragility of the Chinese chip industry.
ZTE chip R&D capabilities are not as bad as the outside world has imagined. According to the “Chip Industry Patent Analysis and Patent Portfolio Quality Assessment” report issued by Questel, an internationally renowned patent search company, ZTE IC chip revenue ranks third in China. ZTE has developed and successfully commercialized more than 100 kinds of chips, mainly including wired transmission chips, wired packet chips, broadband access chips, wireless system chips, mobile terminal chips, and multimedia chips. In terms of scale, ZTE has actually formed a cloud, Pipeline, full range of communications chip design capabilities.
Despite this, ZTE’s 20%-30% key components are highly dependent on U.S. companies such as FPGA chips, baseband chips, server chips, and optical modules, and domestic autonomous replacement capabilities are limited.
At present, the optical modules used by ZTE are mainly provided by American ACIA and Oclaro. In particular, high-end optical modules can only rely on imports from the United States; baseband chips are mainly provided by Qualcomm. Although Spreadtrum has certain ability to replace, Spreadtrum chips contain Qualcomm patents. Theoretically, it could not be sold to ZTE; the global server chip market was mainly controlled by Intel; the FPGA chip market was mainly controlled by Xilinx and Intel.
Communication equipment involves a large number of components. One base station has one chip banned and the entire base station cannot be delivered. In fact, not only ZTE, ZTE’s overseas rivals Nokia and Ericsson also rely heavily on chip outsourcing.
China is already the world’s largest consumer market for semiconductor chips. China Semiconductor Industry Association (CSIA) statistics show that China’s integrated circuit import value exceeded US$260 billion in 2017 and has become China’s largest import commodity for three consecutive years. According to the data of the General Administration of Customs, the import volume of integrated circuits has exceeded crude oil for three consecutive years since 2015, and the difference in import between the two countries is more than US$95 billion per year.
A chip from the IC design, wafer production, IC manufacturing, IC packaging to testing, the complexity of the production process, the high demand is that many people outside the industry can not imagine. In addition to the large number of manufacturing processes and product types, the rapid replacement of technology also leads to high investment risks. For example, the 28nm nanometer (nm) chip design of the world’s mainstream technology has an R&D investment of about 100 to 200 million yuan, and a 14nm chip is about 200 to 300 million yuan. The research and development cycle is 1 year to 2 years. An investment of 28nm process integrated circuit production line is about 5 billion US dollars, 20nm process production line up to 10 billion US dollars.
In this interlocking industry chain, China has made rapid progress in the areas of chip design and packaging and testing, but it is difficult to make up for gaps in chip manufacturing and other areas.
A senior personage who is engaged in chip design for ten years analyzes that in the field of chip design, China is ranked in the second echelon and has not yet mastered the design capabilities of high-end general-purpose chips, but “is not insurmountable”.
Chip design is the locomotive of the IC industry. China Semiconductor Industry Association statistics, the first half of 2017 China’s integrated circuit industry sales were 220.13 billion yuan, an increase of 19.1%. Among them, the design industry grew 21.1% year-on-year, sales of 83.01 billion yuan; manufacturing growth rate is still the fastest to reach 25.6%, sales of 57.12 billion yuan; packaging and testing industry sales of 80.01 billion yuan, an increase of 13.2%.
“Simple calculation of revenue is easy to give people the illusion of prosperity.” The chip design industry said, “Huawei Hasi, Zhanrui have entered the world’s top ten IC design revenue, but China’s IC design company’s general gross margin is 30% Below, European and American competitors are all above 45%.”
Moreover, China’s chip design leader lacks talent, corporate technology and management teams are unstable, and companies are weak. More than 500 integrated circuit design companies earn about 60%-70% of Qualcomm’s revenue. The industry’s R&D investment is less than that of Intel’s. the company.
The closest integrated circuit in China to the international level is package testing. Compared with the world’s largest semiconductor packaging and testing company, Taiwan Riyueguang, there are no technical gaps in the three major domestic plants (Changdu, Tongfu Micro, and Tianshui Huatian). However, Wang Yanhui, secretary-general of the China Semiconductor Investment Union, told Caijing reporters that the three major Chinese packaging and testing plants are taking a low-cost operating route, which limits the introduction of high-end talent.
Chip manufacturing is currently the shortest short board in China’s chip industry.
Moore’s Law determines that when the price does not change, the number of components that can be accommodated on an integrated circuit will double every 18-24 months, and the performance will also double, requiring the integrated circuit to be smaller in size. The chip process is a parameter used to characterize the size of the integrated circuit, which has been developed from 0.5 microns to the current 10 nm, 7 nm, and 5 nm. At present, the 28nm-14nm process node in the world’s integrated circuit industry is mature, and the 14nm-10nm process has been in volume production. Intel, Samsung, and TSMC all announced that they have achieved mass production of 10nm chips and are ready to invest in the construction of 7nm and 5nm production lines. The Apple iPhoneX uses the 10nm process from TSMC.
SMIC, the best manufacturer of chip technology in the Mainland, is still struggling with 14nm, and it may be mass-produced next year.
Wang Yanhui analyzed with the reporter of Caijing. From the perspective of experience and technology, 14nm is a road ridge. It can step over and catch up with speed. Samsung also started to catch up with TSMC from 14nm.
Liang Mengsong was formerly the head of R&D for 14nm development of TSMC, and also the R&D director for 14nm developed by Samsung. The Liang Mengsong team has greatly accelerated the 14nm development process of SMIC and proved the decisive role of talents in the IC industry. Liang Meng Song is currently the joint chief executive officer and executive director of SMIC.
A senior engineer at Huawei Hass told the “Finance” reporter that another common problem in China’s chip design industry today is that it is separated from the market, and the design direction is not integrated with the rapidly changing market demand, and it is difficult to enter the high-end market in the whole machine sector. Qualcomm, Intel, etc. build a vertically integrated industrial ecosystem in the world, and domestic companies can only adopt passive follow-up strategies.
A chip design senior engineer at a national research institute told the “Finance” reporter that he mainly undertakes all the unspoken rules of IC design research. There are several types of funds allocated by the state to various research institutes. The most important one is the technical renovation fee, which is about a few hundred million yuan per year for a single institute, followed by vertical research funding, which amounts to tens of millions of yuan each year.
Since 2005, almost every department of the institute has its own production line, produces some low-end products, and uses state subsidies to compete with private companies. After 2005, “Everybody is thinking about taking orders and selling things. Nobody pays attention to the accumulation of technology. It has violated the original intention of the state to invest in the Institute.”
“This kind of quick success and instant benefit is very common in the institute. The country has no hard-and-fast requirements for the R&D performance of the institute. It depends on the various institutes to feel conscious that if the management of the institute is academically affiliated and attaches importance to R&D, the situation will be better.” The engineer said.
Another key factor is the limitation of the Wassenaar Agreement. Chinese companies cannot buy the most advanced manufacturing equipment and integrated circuit technologies. The Wassenaar Agreement, which is the full name of the Wassenaar Arrangement on Export Control of Conventional Arms and Dual-use Goods and Technologies, was established in 1996. It has a total of 33 member states and China is not included. The main purpose of the agreement is to prevent Key technologies and components are lost outside the member countries.
The most important lithography machine in chip manufacturing, the latest in 2010 is the 32nm process lithography machine, which can be purchased by mainstream semiconductor manufacturers all over the world, but Chinese manufacturers cannot buy it. SMIC did not cooperate with the Belgium Microelectronics Research Center until 2015 and obtained a 32 nm lithography machine. However, in the same year, leading global chip makers such as TSMC, Intel and Samsung have all purchased 10nm lithography machines. In addition, traditional chip giants have made strict arrangements from hardware to software to ecology, and Chinese companies have had great difficulties in catching up.
“This is not China’s personalization issue. Europe, Japan, and most countries in the world are actually the same.” The above-mentioned chip veterans told the “Financial” reporter that some countries have some breakthroughs in the subdivided areas, but they are often unable to “gather the momentum”. “To expand the breakthrough point.
Wang Yanhui pointed out that the core of technological breakthrough is to lead talents at the high end, but most of the world’s top chip design talents are in the United States. Although there have been many overseas personnel studying abroad in the past 30 years, very few people have access to high-level IC companies in Europe and America. Individuals can enter. It’s also monitored by the U.S. government.
Therefore, the big discussion triggered by the ZTE event focused on a single point. Should China develop the “China Core” independently?
In an interview with the media, Li Hongbin, a professor of Peking University and a member of the National Key Research Program for Broadband Communications and New Network of the 13th Five-Year Plan, recently stated that China has raised the level of research and development in basic fields such as core chips with or without a technology blockade. time.
A number of industry experts told the “Finance” reporter, in the traditional CPU, GPU and other traditional chip areas, Intel, Nvidia and other US companies have cultivated a mature and stable ecology, Chinese companies catch up with the difficulty, it takes a long time to shorten the gap. Yu Kai, the founder of the AI chip startup Horizon, told Caijing reporters that he should not engage in “reinventing iron and steel cores” because of the ZTE incident.
A board member with more than 20 years of chip experience from the North American China Semiconductor Association (NACSA) interviewed a local Chinese-language media “American Chinese” and said that the success of China’s true chip leader Huawei Hass is not due to national policy but rather to business. The results of tactics and market forces. Some government-sponsored enterprises that used to report heavily did not dare to compliment their results. The real success must be the commercial success that can be put on the international table. Draw your own circle, and afterwards, it is not a climate to entertain yourself.
A person close to the decision-maker told the Caijing reporter: “We should not do everything. It is best that we have something that others cannot do without, such as Taiwan’s chip foundry, Korean memory and display, and Japan. Special tools and silicon wafer materials, etc.. The so-called inseparable, not that others will not do, but we do the best, the cheapest, others do not have, you may lose competitiveness.”
But the global chip industry is emerging a new track – artificial intelligence (AI) chip. AI chips are generally used to accelerate specific artificial intelligence algorithms. Traditional chip giants such as Intel and Nvidia, Chinese and foreign Internet companies such as Google, Ali, and startups are all pouring into this market.
The 2017 ISSCC Conference (International Solid-State Circuits Conference, the highest level conference in the field of integrated circuit design recognized by the world’s academic and business circles, known as the World Olympic Congress in the field of IC design) defines the theme as “Intelligent World Smart Chips” “. Internet of things and artificial intelligence are the future development directions of integrated circuits. New growth points mainly come from applications such as the Internet of Things, smart cars, VR/AR, 5G, and artificial intelligence.
Because of the AI chip, China and the United States stood on the same starting line again.
It is very likely that a startup company will become the main player in this round of racing. China’s AI chip startup Cambrian Technology launched the world’s first commercially available deep learning processor in 2016. It is now available in Huawei’s P10 handsets and is quickly deployed to the market.
According to data from the end of 2017 of global venture capital dynamic tracking agency CB Insights, China accounts for 48% of the total amount of artificial intelligence startup funds in the world (38% in the United States), focusing on face recognition and chips.
Yu Kai told the “Financial” reporter that the AI chip startup company must move forward quickly, so from the very beginning, it clearly focused on the market segments. From the beginning, it solved the problem of the disconnection between traditional chips and the market, and it was precisely because of this. At the rhythm of system design, Chinese and American companies are basically in the same pace. “We are standing on the same starting line and we step on the right track. That’s it,” he said. AI chips are still on the eve of an industry outbreak and the future is full of uncertainty.
In addition to ZTE, the fate of a number of Chinese companies is also affected by this round of Sino-U.S. negotiations.
On April 21, the fifth day after the US Department of Commerce’s Bureau of Industry and Security activated an export restraint order against ZTE, the day after ZTE issued a protest statement, a senior U.S. Department of Commerce official stated publicly that the agency has approved ZTE has requested more material from informal channels.
This means that the ZTE crisis ushered in a turning point. However, the fate of ZTE not only depends on its own efforts, but also depends on the outcome of a new round of Sino-US trade negotiations.
Whether the Sino-U.S. trade negotiations will eventually reach an agreement on which level, whether it involves the ZTE issue and the national information security issues related to the ZTE event will directly determine the next decision of the U.S. Department of Commerce. If there is a slowdown on the refusal order, ZTE will obtain A lively life.
Frank Samolis, co-chairman of international trade at Squire Patton Boggs LLP, told the Caijing reporter that Chinese companies “read Washington” are very important.
He said that this government is unprecedented, and the relationship between President Trump and Republican lawmakers in Congress is unprecedented – the presidential leading Republican Party has completely weakened the position of Republican congressional leaders. They do not agree with Trump’s actions, but they cannot challenge the President. Some respected Republican leaders have tended to completely obey Trump in economic and trade policies.
After the outbreak of the incident, there was a voice that the U.S. Department of Commerce once again penalized ZTE for violating the principle of “indisputable punishment”. However, a number of legal professionals interviewed by the “Finance” reporter believe that ZTE’s violation of the settlement agreement and the illegal trade with Iran are two related actions triggered by the same thing. The US Department of Commerce’s penalties for violating the settlement agreement are established. . This means that the U.S. has issued a “refusal order for trade” on ZTE to be legally established. The only turning point is whether the U.S. government can “put aside ZTE”.
It is precisely because of this that the fate of ZTE was finally suspended in the outcome of the mediation between China and the United States. If, as Trump said, China and the United States are very hopeful of reaching a trade agreement, ZTE will also usher in a fate. If Washington does not ultimately have the incentive to change the ruling, ZTE will face the final death.
Options given by the market include: Huawei’s mergers and acquisitions in the same city, and then the listing of the shell by ZTE; Lenovo or TCL acquisitions, expand the mobile phone business, cancel the ZTE brand, save the team and assets. Violet and other national teams have also frequently appeared in the discussion list. However, some ZTE executives told the Caijing reporter that these discussions are currently too early.
In addition to ZTE, the fate of a number of Chinese companies is also affected by this round of Sino-U.S. negotiations.
On the night of April 25th, the Wall Street Journal reported that the U.S. Department of Justice is investigating whether China’s largest telecommunications equipment company, Huawei, has violated its ban on Iran’s exports. This has made it more difficult for Huawei, which has already been restricted, to conduct business in the United States.
The U.S. Department of Justice, the Ministry of Commerce, and the Ministry of Finance declined to comment on the issue to the Wall Street Journal.
An informed source told the Caijing reporter that the situation between Huawei and ZTE is completely different. Huawei has more than 28% of the telecommunications equipment market share in the world, and its market share in Europe has reached 15% to 20%. The U.S. European allies are highly dependent on Huawei. If they are sanctioned, Huawei will have a fatal blow to the EU. ZTE has only 13% of the global market share, and most of the markets are in China.
Hosuk Lee-Makiyama, director of the European Center for International Political Economy Research, told Caijing reporters that in the current political climate, foreign companies have been found guilty until they are proven innocent, which will result in the market between China and the United States. Destructive damage. Since the United States does not have a telecommunications equipment manufacturer, this may not be an example of protectionism, more like a deep suspicion of successful Asian companies.
He believes that although Huawei is a strong contender for some of Europe’s major companies (Nokia and Ericsson), European governments have moved away from protectionism. On the contrary, Huawei has always been considered as a valuable partner. However, in front of European customers, Huawei will face increasing pressure in explaining its company ownership and its relationship with the Chinese government.
In 2017, Huawei’s revenue was 603.6 billion yuan. According to the business line, the operator’s business income reached 297.8 billion yuan, accounting for 49.3%, which was the company’s largest business; geographically, Huawei’s revenue in Europe, the Middle East, and Africa was 163.8 billion yuan. , accounting for 27.1% of total revenue, close to Huawei’s revenue in China (accounting for 29.0%).
“The most taboo thing in Washington is Huawei, not ZTE,” said the core person close to the relevant ministries and commissions of the country. “But Trump’s sanctions on Huawei will inevitably intimidate the sensitive allies of the European allies. Even Trump will not dare to. Make this decision easily.”
He believes that the investigation of Huawei is more like adding chips for the upcoming negotiations.
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