(What’s Left of) Our Economy: More Evidence of the Crucial U.S. Role in China’s Tech Rise

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Broadcom, China, Daniel Strumpf, Huawei, Intel, Qualcomm, Silicon Valley, tech, tech transfer, The Wall Street Journal, Trade, Trump, {What's Left of) Our Economy

If you need any further evidence that American technology firms have played vital roles in China’s transformation into a major technology power capable of threatening U.S. national security as well as economic interests, check out Dan Strumpf’s article in The Wall Street Journal today. In the process, he inevitably exposes gaping holes in President Trump’s China strategy that need to be closed up pronto if the President is serious about checking China’s dangerous rise.

Here are just some of the highlights of Strumpf’s piece – which is limited to U.S. tech firms’ contributions to the emergence of Huawei, whose CFO (and founder’s daughter) was arrested in Canada a week ago on charges of helping the entity use fraud to evade U.S. sanctions on Iran. (As always, I refuse to use words like “company” or “business” in describing Chinese economic actors, since they have nothing in common with corporate organizations in free market economies.)

>”Silicon Valley giants from Intel Corp. to Broadcom Inc. and Qualcomm Inc. are top suppliers of Huawei, which buys their components to make equipment such as base stations and routers and Huawei mobile phones.”

>”Qualcomm and Intel are also working with Huawei on its development of next-generation 5G technologies, a field in which the Chinese company’s aim to be a global leader has alarmed some in Washington.”

>”Huawei still relies on imports from U.S. chip companies such as Broadcom, Xilinx Inc. and Analog Devices Inc. for components used in its telecom equipment…Huawei buys equipment from data-storage equipment maker Seagate Technology PLC for use in its enterprise business, and uses memory chips made by Micron Technology Inc. in its smartphones….”

>”Intel and Qualcomm, which draw huge revenue from China, are seen by Huawei as more than suppliers. In Huawei’s annual report, Intel is described as a ‘strategic partner,’ and the companies work together in a range of areas, including next-generation 5G technology.”

>”In 2015, Qualcomm, Huawei and China’s largest chip maker, Semiconductor Manufacturing International Corp., launched a joint venture in Shanghai to work on next-generation chip technology.”

And lest you think it’s just Huawei, click here and here for numerous examples of similar assistance rendered by such American corporations to other Chinese entities and industries.

Strumpf’s article also makes clear the flip side of these American companies’ operations: Chinese entities like Huawei have become major customers and sources of revenue for the U.S. tech sector.

Nonetheless, it’s inconceivable that any Trump administration policy to address the China tech threat can succeed if these sales and partnerships are allowed to continue. Silicon Valley will of course cite these earnings in its inevitable campaign to any attempted curbs on its China activities (while simultaneously urging Washington to “do something” about the Chinese intellectual property theft- and extortion-fueled tech ambitions that has these companies scared silly for their own selfish reasons). And that’s why the President urgently needs to get on TV from the Oval Office, explain comprehensively how the tech firms’ massive giveaway of critical knowhow has undermined their country’s future, how his globalist predecessors’ indulgence has enabled this risky business, why the course change he’s engineering in China policy is so essential, and what his end-game is.

Trade wars may not be easy to win, contrary to the President’s recent boast. But can anyone reasonably doubt that this message will be easy to sell?

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Making News: John Batchelor Podcast On-Line…& More!

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Broadcom, Canada, China, Gordon G. Chang, IndustryToday.com, Making News, Marketwatch.com, national security, Qualcomm, tech, The John Batchelor Show, Trade, trade deficit, Trump, Voice of America

I’m pleased to announce that the podcast is on-line of my Thursday night interview on John Batchelor’s nationally syndicated radio show. In case you missed it live, click here to listen to a fascinating discussion among John, co-host Gordon G. Chang, and me, about the Trump administration’s recent decision to prevent semiconductor manufacturer Broadcom from taking over fellow chip-maker Qualcomm.

Also that day, I was quoted in this Marketwatch.com post on the President’s controversial claim that the United States currently runs a trade deficit with Canada.

In addition, on March 12, I was interviewed at length on the Voice of America (VOA) about President Trump’s China trade policy. Since the segment was broadcast on one of VOA’s Chinese-language TV channels, you’ll be hearing a simultaneous translation of my remarks with my own English version only somewhat audible in the background. But although it’s nearly impossible for a non-Chinese speaker to know what’s going on, here, for the record, is the link. My segment begins just before the 23-minute mark.

Finally, on March 6, IndustryToday.com re-ran my recent RealityChek post on naive (or disingenuous?) claims that there’s lots of free trade in the world steel market. Here’s the link.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

 

Making News: A New Op-Ed, National Radio Tonight…& More!

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aluminum, At the Crossroads, automotive, foreign takeovers, Making News, Memphis Commercial Appeal, Qualcomm, semiconductors, steel, tariffs, Ted Evanoff, The John Batchelor Show, The National Interest, Trump

I’m pleased to announce that a new op-ed of mine was published yesterday – a post on the website of the foreign policy journal The National Interest on some of the more fundamental issues raised by the Trump administration’s tariffs on steel and aluminum imports. Click here to read my argument that the uproar over the levies reveals a major disagreement tension between the ideal of free trade and the ideal of free markets.

In addition, I’m scheduled to reappear on John Batchelor’s nationally syndicated radio show tonight on the Trump administration’s decision to block a foreign takeover of the U.S. semiconductor company Qualcomm. The segment is slated to begin at 10:15 PM EST, and you can listen live at this link. As usual, I’ll post a link to the podcast as soon as one’s available.

And I just found out that on March 8, Ted Evanoff of the Memphis (Tennessee) Commercial Appeal quoted me in a piece on the economic impact of the Trump tariffs. Ted is one of the country’s best manufacturing reporters, and his 2010 book At the Crossroads is a superb history of the modern American automobile industry and why its fortunes sank so sharply through the outbreak of the financial crisis. So I’m always flattered to know that he’s keeping up with my work.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: New Trump Tariffs and China Podcasts – & More

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aluminum, AM 970 The Answer, Broadcom, Chicago Stock Exchange, foreign takeovers, FoxNews.com, Gordon G. Chang, Lifezette.com, Making News, manufacturing, Morano in the Morning, national security, Plastics News, Qualcomm, steel, tariffs, tech, The Christian Science Monitor, The John Batchelor Show, Trade, Trump

I’m pleased to report that, thanks largely (but not entirely) to the firestorm set off by President Trump’s announcement of steel and aluminum tariffs, it’s been a busy media period recently.

At the crack of dawn (literally!) this morning, I was interviewed on the subject on “Morano in the Morning” on New York City’s AM 970 The Answer. Here’s the podcast.  My segment begins at just before the 16-minute mark.

Speaking of podcasts, here’s the one of my appearance on John Batchelor’s nationally syndicated radio show last Wednesday. The subject, as you may recall, was the prospect of foreign interests taking over one of America’s leading semiconductor manufacturers – Qualcomm.

In addition, in a March 2 FoxNews.com post, Batchelor Show co-host Gordon G. Chang quoted in more detail my views on this proposed deal and the broader subject of foreign takeovers of key defense-related American economic assets. Here’s the link.

Also on March 2, The Christian Science Monitor featured my views on the Trump tariffs in this lengthy news analysis.

In addition, on that day, Lifezette.com‘s coverage of the tariffs included my views at length.

The day before, Plastics News highlighted my analysis of the latest U.S. manufacturing trade figures in this post.

On February 19, in another FoxNews.com post, Gordon presented my views on another proposed Chinese takeover of an important American asset – this time, an entire stock exchange!  Here’s the link.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: Talking Tech and National Security Tonight on the Batchelor Show

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Broadcom, Gordon G. Chang, Making News, national security, Qualcomm, semiconductors, tech, The John Batchelor Show

I’m pleased to announce that I’m scheduled to be returning to John Batchelor’s nationally syndicated radio show tonight at 10:30 PM EST. Our subject: The efforts of U.S. semiconductor manufacturer Broadcom to take over Qualcomm, another American microchip giant, in a deal that raises some surprising, novel, and knotty national security questions.

You can listen live on-line at this link to what’s sure to be another lively and important discussion among John, me, and co-host Gordon G. Chang of how economics and defense issues intersect. And as usual, if you miss it, I’ll post a link to the podcast of the segment as soon one’s available.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

 

Our So-Called Foreign Policy: America’s Ever More Dangerous Asia Policies

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alliances, allies, Asia, China, Donald Trump, foreign policy establishment, Hillary Clinton, nuclear weapons, Obama, Our So-Called Foreign Policy, Qualcomm, semiconductors

Although American foreign policy establishmentarians across the political spectrum have grown fond of warning how dangerous Republican nominee Donald Trump’s election as president would be, their own favored policies keep bringing the United States and China ever closer to war in East Asia. Two seemingly unrelated developments in the last week alone demonstrated how Washington is escalating its military pushback versus Beijing’s expansionism in the region, while continuing to ignore ongoing American corporate activity in China that literally feeds the beast.

The pushback came in the form of an Obama administration decision to send an undisclosed number of B1 bombers to the mid-Pacific island of Guam. Their mission? According to the Air Force, to “provide a significant rapid global strike capability that enables our readiness and commitment to deterrence, offers assurance to our allies and strengthens regional security and stability.” Translation? They’ll be periodically flying missions aimed at reminding China that the United States doesn’t recognize its new territorial claims – which for the most part have recently been rejected by an international court.

A handful of such flights into contested air space have been carried out by B52 bombers, but the B1s are newer, faster, more versatile, and stealthy to boot.

The feed-the-beast activity concerned American semiconductor manufacturer Qualcomm announcing – proudly – that a Chinese government-owned joint venture had just begun producing the kinds of silicon wafers needed to make what are currently the most powerful computer chips in existence. Since semiconductors and other advanced electronics components have become integral parts of nearly every key modern weapon or other military device, American national security specialists are becoming increasingly concerned about the proliferation of such deals – as I reported last November. But so far, the Obama administration has turned a blind eye.

As I’ve written repeatedly, I oppose stationing large U.S. forces in East Asia for two main, related reasons. First, all of America’s essential interests in the region (which are economic) can be secured by wielding the immense leverage enjoyed by the United States by dint of representing the paramount end-use market for this export-dependent region’s products. In other words, as long as the Asians – including the Chinese – still desperately need to sell to the United States, there’s no special reason for Washington to care who controls the region politically.

Second, it’s still U.S. policy to use nuclear weapons if necessary to defend its Asian allies against China, North Korea, or any other adversary. And since China’s burgeoning territorial claims clash with those of neighbors that are American allies, this U.S. policy could expose the American homeland to nuclear attack. (America’s commitment to South Korea’s security, of course, creates the same kind of risk.)

Trump’s various statements about these arrangements, and about free-loading American allies, strongly indicate that he agrees. But President Obama, Hillary Clinton, and the foreign policy establishment across-the-board insist that the status quo is essential – and that anyone who dissents is a threat to regional and world peace. So, at least logically, they urgently need to curb U.S. corporate transactions that, like the above, greatly strengthen China’s military potential – as well as rethink U.S. trade and other economic policies that achieve the same result. Let’s hope a Chinese missile guided by one of those advanced Qualcomm-designed chips doesn’t shoot down a B1 before they wake up.

Our So-Called Foreign Policy: Worries About Another U.S. Screening Process – For Defense-Related Technology Assets

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CFIUS, Committee on Foreign Investment in the United States, foreign investment, Hewlett-Packard, Integrated Silicon Solutions, national security, Our So-Called Foreign Policy, Philips, Qualcomm, semiconductors, technology, Tsinghua University, Western Digital

As Americans have embroiled themselves in a heated debate over how adequate screening procedures are for refugees from the war-torn Middle East, some big, possibly dangerous holes in another key security government screening system may have opened wide – the inter-agency process for vetting proposed foreign takeovers of or investments in U.S. companies when the deals have national security implications.

According to a valuable report by the tech industry publication EE Times, China has proposed buying outright or acquiring important stakes in no less than five major American technology firms this year alone. One such bid, for leading memory chip maker Micron, has been squashed – at least for now – in part because of likely opposition from the inter-agency group, known as the Committee on Foreign Investment in the United States (CFIUS).

Two more are awaiting CFIUS analysis. The first is the purchase of a 15 percent stake in hard disk drive manufacturer Western Digital by the investment arm of China’s government-controlled Tsinghua University. The second is Hewlett Packard’s sale to the same Chinese entity of its telecommunications hardware, server, storage, and technical services assets in China.

Judging from CFIUS’ decisions in two previous cases, though, the Chinese government – and its U.S. partners-to-be – have little reason for concern. For Washington has approved the sale of Omnivision to a Chinese investment consortium, and Integrated Silicon Solutions Inc. to similar buyers. Omnivision makes image sensors important for semiconductor design and manufacturing, while Integrated Silicon Solutions is a fabless memory chip producer. Apparently CFIUS saw no significant national security potential in either transaction, even though semiconductors are vital building blocks of all advanced weapons systems, and even though all Chinese investors prominent enough to bid for such key foreign assets are either directly or indirectly controlled by Beijing.

In addition, another tech publication has reported that CFIUS is looking into the sale to yet another group of Chinese investors of Philips’ LED lighting division, including “a broad patent portfolio of more than 600 patent families related to LED manufacturing and automotive lighting.” And EE Times has recently explained why financially struggling American communications chip giant Qualcomm could be China’s next target.

More ominously, the Tsinghua investment arm has announced intentions to spend $47 billion over the next five years to build up China’s tech sector by purchasing foreign companies and knowhow, and that America’s tech sector is its top target. So it looks like, at the least, CFIUS will be kept pretty busy going forward. Then again, since prospective foreign buyers aren’t legally obligated to notify CFIUS of their intentions, who’s to say?

(What’s Left of) Our Economy: Follow the Money, Not the Pundits, to Understand the Chinese Tech Challenge

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Ali Baba, CFIUS, China, cyber-security, forced technology transfer, foreign direct investment, IBM, innovation, Intel, Qualcomm, technology, Thomas Friedman, Xi JInPing, Xiaomi, Yahoo, {What's Left of) Our Economy

Few stereotypes are as hardy (and seductive, at least for Americans) as that of copycat Asians who come from cultures incapable of fostering creativity and innovation – at least not on the scale for which the USA is known. And few are as as misleading. If you’re skeptical of either proposition, just consider Thomas Friedman’s column today in The New York Times about China’s economic and technological future, and a spate of news reports about the activities of U.S. and Chinese technology companies themselves.

In Friedman’s words, there’s a major conflict between Chinese leader Xi Jinping’s push to move his economy from labor-intensive manufacturing to “more knowledge-intensive work” and his determination to censor the internet as well as university research. “Alas, crackdowns don’t tend to produce start-ups,” Friedman concludes.

It’s hard to argue with the logic, but oft times the world thumbs its nose at sensibileness – or at least as it’s defined by particular peoples. And however Americans cherish the notion that the political freedoms and inventiveness go hand in hand, and vice versa, lots of U.S. tech firms don’t seem to agree.

Cosmically, today also saw the appearance of a Wall Street Journal piece describing how Some of Silicon Valley’s largest companies have deepened their China partnerships in the past year.” The article mentions Intel and IBM, and could have added Qualcomm as well. Many of these deals and investments are simply responses to China’s longstanding policy of forcing foreign companies to transfer technology to Chinese partners in exchange for access to the potentially enormous Chinese market.

Lately, moreover, Beijing has added two big new wrinkles. First, its professions to fear spyware insertions in technology imports and high-profile decisions to curb purchases from U.S. firms in particular have given these companies major incentives to team up with Chinese entities. These are easier for the Chinese government to control – that is, when it doesn’t own them outright or indirectly. Second, China has begun to accuse foreign companies in numerous industries of violating Chinese laws in areas like anti-trust and bribery, and handed out some stiff fines. Non-Chinese firms have gotten the message that carrying out Beijing’s bidding in areas like tech transfer is a great way to stay on the Chinese authorities’ good side.

Nonetheless, it’s also clear that China has developed some technology winners – like Xiaomi, the up-and-coming smartphone producer that’s received Qualcomm funding ever since it held its first financing round. And let’s not forget the Yahoo stake in Chinese e-tailer Ali Baba – which may be the most valuable assets it owns.

Also ignored by Friedman is how, thanks to the literally trillions of dollars in trade profits it’s made with the United States and the rest of the world, China can now buy outright much of the advanced knowhow it needs – and has made acquiring U.S. companies a priority. Chinese takeovers with national security implications can be blocked or quietly deterred by an inter-agency American screening panel, but this Committee on Foreign Investment in the U.S. has more often acted like a rubber stamp than like a guardian.  

So the choice is pretty clear: When trying to understand innovation and economics in China, you can listen to the pundits, or you can follow the money. Hardly a close call if you ask me.