A few years ago, just as the Chinese Communist Party was boasting about its “Great, My Country”, a trade war between China and the United States quickly brought the Communist Party’s ambition back to its original form, especially the U.S. embargo on Chinese chips, which pushed a large number of Chinese companies into a desperate situation.
Chip shortage causes companies to shut down production
China’s electronics industry is in an increasingly difficult situation due to the shortage of chips. In the Pearl River Delta region of Guangdong Province, some downstream enterprises have had to suspend orders due to the lack of chips, or even shut down or close down. According to the 21st Century Business Herald, a small chip is stirring the nerves of the entire Chinese electronics industry. Since the beginning of this year, enterprises such as Dongguan Zhonghe Video Technology Co., Ltd. have been anxious about the price increase of chips. What makes business owners more anxious is that the chip not only repeatedly increased prices, and now even if the money can not order goods.
According to the report, the chip price surge, downstream enterprises have to face the pressure of rising costs. Under the pressure of the lack of core, many companies fell into the embarrassing situation of a single dare not accept; some companies had to suspend the order, and delayed the shipment cycle. Chip shortage enterprises shutdown holiday, this week in the WeChat circle of friends circulated a video of enterprises forced to stop work due to the lack of chips. A man filming the shutdown said, “(The factory) has no chips and has gone on vacation. Vacation, vacation, vacation, no chip vacation la.”
The enterprise shutdown has led to a large number of workers losing their jobs. In an interview with Radio Free Asia, Mr. Sun, who works in Wuhan, said, “Since the beginning of this year, many enterprises have shut down and laid off workers due to the lack of chips, the business survival environment is so bad, the whole environment is also bad ah, wages can not be paid, many enterprises are laying off workers. But the country’s newspapers and television went to the ceiling, saying this good that good, and said Wuhan has recovered. Recover a ghost ah!”
Chip shortage hit China’s electronics industry
According to a research report by the China Business Industry Research Institute, the semiconductor materials market is in an oligopoly situation, the domestic industry is very small. Taiwan, South Korea, mainland China, Japan, the United States is the world’s largest semiconductor materials market, together accounting for more than 80% of the global market. Mainland China ranks third in the global semiconductor materials market with a 13% sales share. Taiwan became the world’s largest semiconductor materials market for the 10th consecutive year due to its advantages in wafer foundry and advanced packaging.
Data show that the total output value of China’s UHD video industry was $761.48 billion in 2017. With the active layout of the leading enterprises in the industry chain and the strong support from government departments, China’s UHD video industry ushered in a “trillion” windfall in 2018, and the industry scale will be close to 1.2 trillion yuan in 2019. It is expected that the market demand of China’s ultra-high-definition video industry will exceed 4 trillion yuan by 2022. But due to the shortage of imported chips, the whole industry will be seriously affected.
China has more than 150 organizations on the U.S. blacklist
Wikipedia shows that as of April 15, 2021, the Bureau of Industry and Security of the U.S. Department of Commerce has blacklisted Huawei, Beijing Institute of Technology, Nanjing University of Technology, Nanjing University of Aeronautics and Astronautics, Jiangsu Nanhang Hengliao Science and Education Equipment Company, Tongfang Nuctech Technology Company Limited, Beijing University of Posts and Telecommunications, China Shipbuilding Industry Group and its affiliates, and more than one hundred and fifty other companies or institutions involved in China’s military manufacturing and research. The companies or institutions involved in China’s military manufacturing and research are listed on the U.S. Export Control Regulations entity list.
While China’s technological innovations in the areas of face recognition and artificial intelligence have led to the perception that China has become a technological powerhouse, China’s technology in the semiconductor industry, a key area of digital technology, lags significantly behind international leaders. The New York Times has published an article pointing out that the difference between China’s technological level in the field of semiconductor chips and the world’s leading technology is incredible. Today, the world’s advanced computer chips are designed and manufactured without U.S. technology, and U.S. companies such as Cadence Design Systems and Lam Research manufacture products that are virtually irreplaceable.
The “lack of core” has spread to many fields
According to the official website of China International Import Expo on April 1, 2021, China imported 2.4 trillion yuan of integrated circuits last year, and as the shortage of chips intensifies, the “shortage of cores” has spread to many fields such as automobiles, cell phones and home appliances.
To relieve the pressure of enterprises, recently, the Ministry of Finance, the General Administration of Customs, the General Administration of Taxation issued a “notice on import tax policies to support the development of integrated circuit industry and software industry”. The Notice said that on the basis of the original preferential import tax policy for the development of integrated circuit industry and software industry, further expand the scope of the application of import tariff exemptions to promote the development of the integrated circuit industry.
However, some industry insiders believe that companies are closed without chips, the government is undoubtedly too late to introduce tax reduction policies.
TSMC with the U.S. sanctions Chinese companies
On April 8, the U.S. Department of Commerce once again put seven Chinese supercomputing entities on the export blacklist on the grounds of “safeguarding national security.
The U.S. Department of Commerce stated that companies and organizations on the U.S. export control entities list cannot obtain U.S.-origin technology products unless the U.S. Department of Commerce agrees. This is the first such move since Biden took office and is intended to make it more difficult for China to obtain U.S. technology. Following the release of the new U.S. Export Control Entity List, TSMC launched a comprehensive inventory mechanism in the first instance to comply with regulations and systematically align with international directions, continue to respond dynamically to the U.S. export control update measures, and stop taking orders from targets sanctioned by the newly included entities on the list.
U.S. Sanctions Spell Disaster for China
The U.S. not only prohibits U.S. companies from selling chips to Chinese companies, but also prohibits U.S. companies from exporting related technologies. It will be very difficult for China’s chip industry to create a very complete industrial chain from scratch, and almost all experts in the chip industry believe that China is unlikely to get rid of its dependence on imports for a considerable period of time.
French newspaper Le Monde commented on the U.S. chip embargo against China, saying that 20 years ago, China began to impose a cyber blockade on overseas websites; 20 years later, the U.S. imposed a chip embargo on China. The Chinese Communist Party seems to be at a loss for this karmic retribution. The U.S. sanctions against China in the semiconductor industry have also caused a huge disaster in China.
The “lack of cores” has knocked back the ambition of the Chinese Communist Party
Since the beginning of the trade war between China and the United States, the Communist Party has been making a lot of noise about “One Belt, One Road,” “Made in China 2025,” “Thousand Talents Program,” “Confucius Institute,” and “Confucius Institute. Confucius Institute,” “China Dream,” and “Great, My Country” have all been taken off the shelves. As China’s “lack of cores” intensifies, the Chinese Communist Party’s ambition to dominate the world will be knocked back to its original form.
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