Washington’s decision to cut off U.S. supplies to a Chinese chip-maker spotlights mounting tensions over China’s drive to be a global player in computer chips and the ways in which Taiwan companies are helping it get there.
Shut out of major global semiconductor deals in recent years, China has been quietly strengthening cooperation with Taiwan chip firms by encouraging the transfer of chip-making expertise into the mainland.
Taiwan chip giant United Microelectronics Corp (UMC) last week halted research and development activities with its Chinese state-backed partner Fujian Jinhua Integrated Circuit Co Ltd, following the U.S. move.
Taiwan firms such as UMC have helped supply China with a steady pipeline of chip expertise in exchange for access to the fast-growing chip market there.
China has faced a shortage of integrated circuit (IC) chips for years. In 2017, it imported $270 billion worth of semiconductors, more than its imports of crude oil.
At least 10 joint ventures or technology partnerships have been set up in the last few years between Chinese and Taiwanese firms, according to industry experts, luring Taiwanese talent with hefty salaries and generous perks.
“Such companies will need to also take care to ensure no patent or IP infringement is involved as the U.S. has export control means to restrict support of critical technology,” said Randy Abrams, an analyst at Credit Suisse in Taipei.
Among the most valuable cross-strait partnerships for China would be ones that strengthen its foundry services and memory chip production. Those two sectors require much-needed help from overseas firms due to the complexity of the manufacturing technologies and intense capital requirements, analysts have said.
But the technology transfer between China and self-ruled Taiwan has raised concerns amid the Sino-U.S. trade war and escalating tensions across the Taiwan Strait.
China has aggressively used “market-distorting subsidies” and “forced technology transfers” to capture traditional and emerging technology industries, Brent Christensen, the director of America’s de facto embassy in Taipei, told a business gathering in late September.
“These actions are harming the United States’ economy, Taiwan’s economy, and other economies.”
Taiwan is one of the largest exporters of IC globally and many worry the island could lose a key economic engine to its political foe.
Taiwan’s government views the island’s chipmakers’ cooperation with China cautiously and has implemented policies to ensure Taiwan’s most advanced technology is not transferred.
“When businesses go to the mainland to invest in wafer production, they must accept controls including one that requires the manufacturing technology to be a generation behind,” the economics ministry’s industrial development bureau said in a statement to Reuters.
INTELLECTUAL PROPERTY CONCERNS
Cooperation between UMC and Fujian Jinhua came under scrutiny last month, when the U.S. government put the Chinese company on a list of entities that cannot buy components, software and technology goods from U.S. firms amid allegations it stole intellectual property from U.S.-based Micron Technology. Fujian Jinhua denied the allegations.
Fujian Jinhua now faces big challenges to reach commercial high volume production as expected in 2020, industry observers say.
Last week, both UMC and Fujian Jinhua, which was only founded in 2016, were charged with conspiring to steal trade secrets from Micron in a U.S. Justice Department indictment.
“Taiwanese tech companies need to carefully re-evaluate their positions and supply chain arrangements as the tension between the two super powers escalates,” Bernstein analyst Mark Li said.
While China will need at least six years before it can catch up in chip manufacturing, according to some estimates, the scale of its chip-making abilities is already seen as a threat in other parts of the chip supply chain.
Barely 2-1/2 years after breaking ground on a 12-inch wafer plant in China, Nexchip, a joint venture between the Chinese city of Hefei and Taiwan DRAM maker Powerchip, started producing 8,000 wafers a month. Wafers are thin pieces of material, usually consisting of silicon, used to make semiconductor chips.
Nexchip’s main goal is to produce liquid crystal display driver ICs for flat-panel makers.
Using Powerchip’s resources and Taiwanese talent, which make up a quarter of its 1,200 employees, Nexchip is helping reduce China’s reliance on foreign chip suppliers.
With an aim to become “the world’s No.1 chipmaker for display drivers,” Nexchip plans to build three more 12-inch wafer plants and ramp up its monthly production to 20,000 wafers by 2019, according to a person with direct knowledge of the matter.
After visiting Nexchip late last year, researchers from Taiwan’s chip hub, Hsinchu Science Park, said progress at the Hefei plant was a “breakthrough”.
“This will likely increase Taiwan firms’ needs to invest in the China market, and it will be a test for the (Taiwan) government’s industrial policy.”
Japan’s Central Bank Sitting On Assets Worth More Than The Country’s Entire Economy
An epic bond-buying spree by Japan’s Central Bank means it’s now sitting on assets worth more than the country’s entire economy.
Data released by the Bank of Japan on Tuesday show that its total holdings stand at about five-fifty-three trillion Yen that is 4.9 trillion Dollars. The figure is bigger than Japan’s annual Gross Domestic Product (GDP) at the end of the second quarter and more than five times the size of Apple’s market value.
The years of heavy stimulus have warped parts of Japan’s financial markets and left the central bank with dwindling options to juice growth if a new crisis hits. But the splurge is unlikely to end anytime soon.
The US federal reserve’s total assets are about one fifth of the size of US GDP, and the European central bank’s are around 40% of the Eurozone economy.
PDP Responds To Osinbajo’s Debt Claims
The People’s Democratic Party, along with former President Goodluck Jonathan, has broken its silence over comments made last week by Vice-president Osinbajo, assailing the party on the way they handled economy and on alleged corruption.
Osinbajo said on Tuesday that the former president ruined the Nigerian economy and left the country with huge debt and hardship as a result of alleged corruption under his watch.
One of Jonathan’s aides released a statement that such accusations should not come from Osinbajo whom he claims was recently indicted by the House of Representatives for an alleged corruption.
The statement says fingers should not be pointed at Jonathan whom he says is celebrated internationally for his efforts at achieving Nigeria’s best rating in Transparency International’s Annual Corruption Perceptions Index.
He accused the current government of increasing the nation’s debt because it lacked the discipline of the former President.
Mnangagwa Defends “Painful” Economic Reforms
Zimbabwean President, Emmerson Mnangagwa, has defended what he called painful economic reforms. He says the policies are necessary to get the country out of economic stagnation. He said, “yes, the medicine is harsh, but the patient requires it in order to live”.
Mnangagwa says his administration has identified privatisation of state institutions, broadening of the tax base and fighting corruption as key to turning the economy around.
He also defended a two percent levy imposed on electronic transactions which make up around ninety-six percent of all financial transactions. He said, that will enable them to reduce the budget deficit.
He highlighted increasing output in gold mines and privatisation of the agriculture sector as some of the positive developments in Zimbabwe since he came to power.
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