About a week ago, an exclusive China.Table survey conducted by the market research institute Civey showed that more and more people reject goods produced under forced labor. Politicians are responding to this sentiment with supply chain laws such as Germany and Europe or the Uyghur Forced Labor Prevention Act in the US.
Today’s issue is about the production of these goods: Marcel Grzanna spoke with people who were forced to work in Chinese factories. If you read about the fate of Gulzira Auyelkhan, you realize how far the system goes: It involves arbitrary arrests, electricity bills for employees, and loans where people never receive the money but still have to work off huge debts. In the end, what remains is a meager salary for a lot of hard work: Around €15 a month.
Our second analysis focuses on the future of mobility. Some are highly skeptical about the EV boom and see hydrogen as a far more promising alternative. So, Christian Domke Seidel took a look at how far China has already come in the field of hydrogen mobility. After all, the smooth use of hydrogen-powered buses and shuttles was publicly praised at the Olympic Games in Beijing.
But a closer look reveals that Beijing’s hydrogen plans are more than ambitious. However, hydrogen will not be used for cars in the near future. The energy is currently needed in other areas.
Those who were hungry were allowed to eat their fill of cooked rice – tasteless, no side dishes, few nutrients. But in the weaving mill of the textile industrial park in Yining County in northwestern Xinjiang near the border with Kazakhstan, the kitchen also offered alternatives. Stuffed dumplings with vegetables, for example, served with delicious sauces – but only for a fee. Similar to the canteen of a German company, one might think.
But the female workers in the Yining Industrial Park cannot afford the decent meals. The wage promised to former worker Gulzira Auyelkhan at the time was ¥600 a month, about €75 at the time. That is almost ¥1,000 less than the legal minimum wage in the region. Even in remote Yining, €75 for a month’s work is very low. Therefore, Gulzira Auyelkhan had to do without the dumplings.
The Kazakh woman sewed lambskin gloves from morning to night. She did not do the badly paid work voluntarily. Chinese authorities forced her to do it, she says in an interview with China.Table. Today, she lives in Washington’s suburbs. The United States granted her political asylum. She is one of those refugees who later publicly told the US Senate about human rights crimes in Xinjiang.
At the end of last year, an expert commission of the International Labor Organization (ILO) accused the People’s Republic of China of violating international conventions through a “widespread and systematic” forced labor program. This primarily targets Uyghurs and other Muslim minorities.
Sectors such as textiles, agriculture, and solar power are considered particularly high-risk, with a high probability that forced labor is part of the value chain. The problem is particularly prominent in Xinjiang. According to the ILO report, some 80,000 Uyghurs have also been deported to other parts of the country, where they are forced to work for minimal wages.
China.Table has also received testimonies from representatives of government authorities who were involved in organizing forced labor. “In order to give forced labor a veneer of legality, the authorities forced women in Yining to apply for a loan of up to ¥10,000 from a local bank,” says Gulipiyan Hazibek.
The trained physician also has Kazakh roots; she was appointed to the Chinese civil service as a student. She worked for the Chinese administration for 22 years before she was allowed to leave for Kazakhstan as an ethnic Kazakh for health reasons and accepted citizenship there.
Her last job was to round up women from the villages in the region to recruit them for work in the factories. “I had to force the women to come along. Even old women, sick or disabled. Those who refused faced harsh punishments,” Hazibek tells China.Table. Depending on their capabilities, the women were assigned to various tasks in production.
The catch was the loan agreement that the women had already signed. The money never flowed after the papers were signed, Hazibek says. Yet the women were in debt. So much, in fact, that repayment was almost always impossible. To justify their forced employment, the authorities argued that the women had to work off the sum in local factories.
The glove seamstress Gulzira Auyelkhan was also supposed to sign such a paper. In July 2017, she entered Xinjiang from Kazakhstan to visit her sick father in her home village. Three years earlier, she had left the People’s Republic with her husband and children to start a new life in Kazakhstan. At that time, in 2014, the Chinese government launched the “Strike Hard Campaign Against Violent Terrorism” (严厉打击暴力恐怖活动专项行动). The campaign was directed against Uyghurs and other minorities in Xinjiang.
After leaving the country, Auyelkhan accepted Kazakh citizenship and therefore believed she was safe in Xinjiang when she returned there for the first time. But she was mistaken. Shortly after crossing the border, she was arrested and detained. “I was accused of not thinking the way the Communist Party would like me to think. That’s why they decided to re-educate me,” she tells China.Table. She was put in an internment camp for 15 months.
As a Kazakh citizen, she always hoped to be freed through international pressure. This was one reason why Auyelkhan refused to sign a loan agreement. Uyghur women with Chinese citizenship, on the other hand, were threatened with long imprisonment. Still, Auyelkhan did not escape forced labor. After her time in the camp, she worked at least twelve hours a day, sometimes 16 hours a day, from October 14, 2018, to December 29 of the same year, by order of the authorities.
During this time, the women were also under strict surveillance. Work in the factory was very similar to internment in the camp. They spent their time after work in communal quarters three kilometers away from the factory. Sometimes the workdays were so long that the women slept inside the factory. They were forbidden to return to the dormitory alone.
The money they earned went into bank accounts set up specifically for the workers. But they did not have access to it. Instead, costs for their accommodation, including ancillary costs for electricity, were automatically deducted. They also had to pay for their commute between the dormitory and the factory, so in the end, there was hardly any money left. The workers were left defenseless against the arbitrary will of the authorities.
The Chinese government categorically rejects allegations of systematic forced labor and believes itself to be the victim of a smear campaign. Only at the beginning of the year did the country sign two UN ILO conventions against forced labor. Chinese support would be indispensable for clarifying the situation on the ground. But it is unlikely that the authorities will cooperate.
At its annual conference a few weeks ago, the ILO decided to send a “technical advisory mission” to the People’s Republic. However, such a mission is not allowed to investigate the allegations. It can only act in a supportive role to insist on compliance with conventions. To tackle the problem, supply chain laws in Germany and Europe or the Uyghur Forced Labor Prevention Act (UFLPA) in the United States are intended to put producers under so much pressure that they will cease the system of forced labor.
Gulzira Auyelkhan was released on December 30, 2018, and was taken to the Kazakh border five days later to return home. Her husband had organized political pressure from Kazakhstan that eventually led to success. Upon her release, she was paid ¥250, just over €30, for her entire time at the factory.
Hydrogen will not play a role in individual mobility in the foreseeable future. Not even in China. The technology and infrastructure for battery-electric vehicles are too advanced for that. There are only significant market opportunities in the truck and bus sector. This is how Dirk Niemeier sums up the hydrogen market in the People’s Republic of China. Niemeier is the Director of Strategy&, the strategy consultancy of PricewaterhouseCoopers (PwC). The existing hydrogen is being used more sensibly elsewhere. This also applies to the vast amounts of energy needed to produce it.
China certainly has its sights set on hydrogen as a universal energy carrier. “There are plans for similar growth in this area, as is the case in Europe. However, much later because there are still few regulations and subsidies,” Niemeier told Table.Media. There would be long-term goals, but no current legislation yet to drive its use on a larger scale in the industry.
China’s hydrogen plans sound ambitious. Starting in 2025, 100,000 tons of green hydrogen are to be produced per year (China.Table reported). In the same period, 30 gigawatts of storage capacity are to be created. In parallel, test fleets of fuel cell vehicles are being built. At the Olympic Games, buses and shuttles were already running on fuel cells. By 2025, a total of 50,000 fuel cell vehicles are expected to be on the road. This number is divided into 40,000 cars and 10,000 trucks.
Currently, China produces 33 million tons of hydrogen per year – mostly gray hydrogen produced from natural gas, coal, and oil (China.Table reported). Almost all of this hydrogen flows into the chemical industry, where it serves as a feedstock. The promised 30 gigawatts of storage capacity is also just four percent of the additional 800 gigawatts generation capacity planned.
Added to this are the ambitious targets for reducing greenhouse gasses. China wants to become carbon-neutral by 2060. The biggest hurdle is the country’s dependence on coal-fired power plants. The planned solar and wind power plants must therefore replace the energy of coal-fired power plants in the long term. This means that it will not be available for extremely energy-consuming additional projects such as the expansion of the hydrogen industry, as Niemeyer explains.
While coal-fired power plants generate power for between 7,000 to 8,000 hours a year, wind turbines do so for only about 2,500 hours a year. This means that a lot more capacity has to be installed for the same amount of electricity. In addition, huge energy storage facilities are necessary. This leads to a market disadvantage: “Green hydrogen is currently still significantly more expensive than gray hydrogen. Especially if there is no carbon price for the fossil feedstock,” says Niemeyer. As long as this difference exists, PwC expects business to stagnate.
But of course, hydrogen research is also being pursued in China. “There are five city clusters that are pushing the production and use of green hydrogen and fuel-cell vehicles,” Niemeyer explains. “Since their hydrogen demand is lower, this area is easier to develop with smaller decentralized plants.”
With corresponding success. “In China, far more cost-effective devices and aggregates are used. However, their efficiency is lower.” If the market grows rapidly in the future, the cheaper units could play a role. Foreign investors and companies are not included in the plan. Subsidies in this sector are aimed at maintaining local value creation, while EVs have received “watering can principle” subsidies.
Consequently, fuel cell vehicles are also a long way from becoming relevant in everyday life. “In our estimation, battery-electric passenger cars will not be replaced by hydrogen-powered vehicles.” Mainly because the necessary infrastructure does not exist, while the electric charging infrastructure very much does. Although the Communist Party is working on building a network of filling stations, it is primarily intended for buses and trucks. However, these are technically incapable of servicing passenger cars as well, according to Niemeyer.
On the first two days after its opening, the new branch of the Palace Museum in Hong Kong drew a lot of interest from visitors. On Sunday and Monday, long queues formed outside the new facility in West Kowloon. The Palace Museum in Beijing is lending the exhibits to the Hong Kong show. At launch, these are 900 precious pieces from imperial history, such as vases, scrolls and jade objects.
The museum was actually supposed to have opened on the anniversary of Hong Kong’s handover from Britain to China. However, the opening had to be postponed due to a storm warning.
However, the new building also proved to be controversial. Carrie Lam, the Chief Executive of the administration, who is loyal to Beijing, pushed the project and presented it as a boon from the central government. The museum is explicitly intended to strengthen the identity of Hong Kong residents as part of China. Accordingly, the museum has been criticized as a pro-Beijing project. fin
When Joe Biden landed in South Korea last month – his first official trip to the country as US President – he headed straight for Samsung’s massive semiconductor factory outside Seoul. There, he met with South Korean President Yoon Suk-yeol and Samsung Electronics Vice Chairman Lee Jae-yong, and praised the construction of a $17 billion Samsung semiconductor factory in Texas. The economic and strategic importance of semiconductors could not have been made any clearer.
During the COVID-19 pandemic, semiconductor supply disruptions forced a range of industries – from automobiles to consumer electronics – to slow or halt production. Reliable semiconductor supplies, it became clear, are vital to a country’s economic resilience. For the United States and China, they are also central to a strategic competition in which leadership in cutting-edge industries plays a crucial role.
As it stands, the US has a bigger slice of the global semiconductor pie, owing to its strength in chip design and in the fabless segment of the industry. But the vast majority of chips are manufactured far from America’s shores, including at the Samsung factory in Chinese President Xi Jinping’s hometown of Xi’an. And China – the world’s biggest chip market – is investing heavily in the sector as part of its effort to boost indigenous innovation. So, is the US set to lose its semiconductor edge?
So far, China has struggled to catch up. First, the typical latecomer strategy – focused on building cheaper, low-end products – cannot be applied to semiconductors, because a more advanced “next-generation” memory chip tends to cost the same or less than its predecessors. Less advanced chips are thus virtually worthless.
This is not to say that incumbents’ position is unassailable. After all, South Korean firms like Samsung managed to overtake more established Japanese companies like Toshiba in semiconductors. The key is a “leapfrogging” strategy: developing more advanced versions of a technology before the incumbent can. Such a strategy requires that the development of a technology follows a relatively predictable path – in the case of chips, upgrading from a capacity of one kilobyte to 2K, then 4K, and so on – and that companies have access to technology from abroad.
South Korean companies like Samsung never made the lowest-capacity chips. Instead, they used equipment and facilities imported from Sharp in Japan, and circuit designs licensed from Micron Technology in the US, to begin developing 64K chips immediately upon market entry.
Later, Samsung set up a research-and-development facility in California’s Silicon Valley, in order to develop designs for high-capacity (256K) chips ahead of Japanese firms. Its use of the “stacking method” for increasing chip complexity – rather than the “trenching method” used by firms like Toshiba – helped to propel progress. But Samsung continues to rely on high-tech components, parts, and supplies from Japanese and other foreign sources, and on software from the US.
At a time when China’s access to foreign technologies and equipment is increasingly constrained, the country will have a hard time replicating this leapfrogging strategy. Semiconductors and other cutting-edge industries are dominated by a very small number of firms. In some cases, just one or two companies can provide a particular input or piece of equipment.
These firms are concentrated largely in the US and Europe. One Dutch company, ASML, is the only producer of extreme ultraviolet (EUV) lithography machines, which are vital to the chipmaking process, and US firms dominate software.
This is not to say that China has no chance to develop an advanced – even world-leading – semiconductor industry. While this will certainly not happen overnight, there are opportunities to boost China’s prospects.
For starters, while the market for memory chips is uniform – lacking high- or low-end segments – the market for system chips (or Application Specific Integrated Circuit chips) is segmented according to application. Automobile companies, for example, do not use the most advanced fabrications, manufactured through the cutting-edge sub-ten nanometer (10nm) lithography process. Instead, they use 20nm or 30nm process technologies, for which technology transfer is not tightly controlled. In this segment, the Chinese foundry maker SMIC is reaping huge profits, which can be channeled toward investment in advanced or future-generation chips.
True leapfrogging success, however, will probably depend on China’s ability to carve a new technological path that diverges from the path taken by industry incumbents and thus relies less on Western technologies. For example, Micron Technology claims that next-generation chips can be developed using a last-generation process machine – “deep ultraviolet lithography” (DUV) – instead of EUV. This kind of alternative thinking could go a long way toward boosting China’s semiconductor prospects.
Here, China’s rapidly growing scientific capabilities will work in its favor. From 2013 to 2018, China’s share of information-technology journal articles rose from 22.4% to nearly 40%, while America’s fell from more than 20% to 16%.
In any case, restrictions on China’s access to foreign technology might soon begin to be loosened. Some argue that, by constraining supply, restrictions on Chinese manufacturers, including chipmakers, are contributing to rapidly rising US inflation. The US Innovation and Competition Act is supposed to counter this effect by funneling $50 billion in subsidies to semiconductor firms, possibly including foreign-origin firms like Samsung or TSMC. But critics point out that companies could waste the subsidies by using them for, say, stock buybacks, rather than investing in factories. And the Act might not be implemented at all.
With midterm elections looming, the Biden administration faces a dilemma. If it loosens restrictions on Chinese firms, including chipmakers, it could help offset inflationary pressures – Biden’s “top domestic priority” – while potentially enabling China to make progress on a leapfrogging strategy. If it does not, semiconductor shortages will likely continue to exacerbate inflation, and China might ultimately find its own alternative technological path and leapfrog anyway.
Keun Lee, Vice Chair of the National Economic Advisory Council for the President of South Korea, is Distinguished Professor of Economics at Seoul National University and the author of China’s Technological Leapfrogging and Economic Catch-up: A Schumpeterian Perspective (Oxford University Press, 2022).
Copyright: Project Syndicate, 2022.
www.project-syndicate.org
What seems impossible in politics is actually possible in sports: China and Taiwan – or Chinese Taipei – meet fair and peaceful. The occasion is the qualification for the Basketball World Cup. However, the balance of power is clear: The team from the mainland won 97:56 on Monday.
About a week ago, an exclusive China.Table survey conducted by the market research institute Civey showed that more and more people reject goods produced under forced labor. Politicians are responding to this sentiment with supply chain laws such as Germany and Europe or the Uyghur Forced Labor Prevention Act in the US.
Today’s issue is about the production of these goods: Marcel Grzanna spoke with people who were forced to work in Chinese factories. If you read about the fate of Gulzira Auyelkhan, you realize how far the system goes: It involves arbitrary arrests, electricity bills for employees, and loans where people never receive the money but still have to work off huge debts. In the end, what remains is a meager salary for a lot of hard work: Around €15 a month.
Our second analysis focuses on the future of mobility. Some are highly skeptical about the EV boom and see hydrogen as a far more promising alternative. So, Christian Domke Seidel took a look at how far China has already come in the field of hydrogen mobility. After all, the smooth use of hydrogen-powered buses and shuttles was publicly praised at the Olympic Games in Beijing.
But a closer look reveals that Beijing’s hydrogen plans are more than ambitious. However, hydrogen will not be used for cars in the near future. The energy is currently needed in other areas.
Those who were hungry were allowed to eat their fill of cooked rice – tasteless, no side dishes, few nutrients. But in the weaving mill of the textile industrial park in Yining County in northwestern Xinjiang near the border with Kazakhstan, the kitchen also offered alternatives. Stuffed dumplings with vegetables, for example, served with delicious sauces – but only for a fee. Similar to the canteen of a German company, one might think.
But the female workers in the Yining Industrial Park cannot afford the decent meals. The wage promised to former worker Gulzira Auyelkhan at the time was ¥600 a month, about €75 at the time. That is almost ¥1,000 less than the legal minimum wage in the region. Even in remote Yining, €75 for a month’s work is very low. Therefore, Gulzira Auyelkhan had to do without the dumplings.
The Kazakh woman sewed lambskin gloves from morning to night. She did not do the badly paid work voluntarily. Chinese authorities forced her to do it, she says in an interview with China.Table. Today, she lives in Washington’s suburbs. The United States granted her political asylum. She is one of those refugees who later publicly told the US Senate about human rights crimes in Xinjiang.
At the end of last year, an expert commission of the International Labor Organization (ILO) accused the People’s Republic of China of violating international conventions through a “widespread and systematic” forced labor program. This primarily targets Uyghurs and other Muslim minorities.
Sectors such as textiles, agriculture, and solar power are considered particularly high-risk, with a high probability that forced labor is part of the value chain. The problem is particularly prominent in Xinjiang. According to the ILO report, some 80,000 Uyghurs have also been deported to other parts of the country, where they are forced to work for minimal wages.
China.Table has also received testimonies from representatives of government authorities who were involved in organizing forced labor. “In order to give forced labor a veneer of legality, the authorities forced women in Yining to apply for a loan of up to ¥10,000 from a local bank,” says Gulipiyan Hazibek.
The trained physician also has Kazakh roots; she was appointed to the Chinese civil service as a student. She worked for the Chinese administration for 22 years before she was allowed to leave for Kazakhstan as an ethnic Kazakh for health reasons and accepted citizenship there.
Her last job was to round up women from the villages in the region to recruit them for work in the factories. “I had to force the women to come along. Even old women, sick or disabled. Those who refused faced harsh punishments,” Hazibek tells China.Table. Depending on their capabilities, the women were assigned to various tasks in production.
The catch was the loan agreement that the women had already signed. The money never flowed after the papers were signed, Hazibek says. Yet the women were in debt. So much, in fact, that repayment was almost always impossible. To justify their forced employment, the authorities argued that the women had to work off the sum in local factories.
The glove seamstress Gulzira Auyelkhan was also supposed to sign such a paper. In July 2017, she entered Xinjiang from Kazakhstan to visit her sick father in her home village. Three years earlier, she had left the People’s Republic with her husband and children to start a new life in Kazakhstan. At that time, in 2014, the Chinese government launched the “Strike Hard Campaign Against Violent Terrorism” (严厉打击暴力恐怖活动专项行动). The campaign was directed against Uyghurs and other minorities in Xinjiang.
After leaving the country, Auyelkhan accepted Kazakh citizenship and therefore believed she was safe in Xinjiang when she returned there for the first time. But she was mistaken. Shortly after crossing the border, she was arrested and detained. “I was accused of not thinking the way the Communist Party would like me to think. That’s why they decided to re-educate me,” she tells China.Table. She was put in an internment camp for 15 months.
As a Kazakh citizen, she always hoped to be freed through international pressure. This was one reason why Auyelkhan refused to sign a loan agreement. Uyghur women with Chinese citizenship, on the other hand, were threatened with long imprisonment. Still, Auyelkhan did not escape forced labor. After her time in the camp, she worked at least twelve hours a day, sometimes 16 hours a day, from October 14, 2018, to December 29 of the same year, by order of the authorities.
During this time, the women were also under strict surveillance. Work in the factory was very similar to internment in the camp. They spent their time after work in communal quarters three kilometers away from the factory. Sometimes the workdays were so long that the women slept inside the factory. They were forbidden to return to the dormitory alone.
The money they earned went into bank accounts set up specifically for the workers. But they did not have access to it. Instead, costs for their accommodation, including ancillary costs for electricity, were automatically deducted. They also had to pay for their commute between the dormitory and the factory, so in the end, there was hardly any money left. The workers were left defenseless against the arbitrary will of the authorities.
The Chinese government categorically rejects allegations of systematic forced labor and believes itself to be the victim of a smear campaign. Only at the beginning of the year did the country sign two UN ILO conventions against forced labor. Chinese support would be indispensable for clarifying the situation on the ground. But it is unlikely that the authorities will cooperate.
At its annual conference a few weeks ago, the ILO decided to send a “technical advisory mission” to the People’s Republic. However, such a mission is not allowed to investigate the allegations. It can only act in a supportive role to insist on compliance with conventions. To tackle the problem, supply chain laws in Germany and Europe or the Uyghur Forced Labor Prevention Act (UFLPA) in the United States are intended to put producers under so much pressure that they will cease the system of forced labor.
Gulzira Auyelkhan was released on December 30, 2018, and was taken to the Kazakh border five days later to return home. Her husband had organized political pressure from Kazakhstan that eventually led to success. Upon her release, she was paid ¥250, just over €30, for her entire time at the factory.
Hydrogen will not play a role in individual mobility in the foreseeable future. Not even in China. The technology and infrastructure for battery-electric vehicles are too advanced for that. There are only significant market opportunities in the truck and bus sector. This is how Dirk Niemeier sums up the hydrogen market in the People’s Republic of China. Niemeier is the Director of Strategy&, the strategy consultancy of PricewaterhouseCoopers (PwC). The existing hydrogen is being used more sensibly elsewhere. This also applies to the vast amounts of energy needed to produce it.
China certainly has its sights set on hydrogen as a universal energy carrier. “There are plans for similar growth in this area, as is the case in Europe. However, much later because there are still few regulations and subsidies,” Niemeier told Table.Media. There would be long-term goals, but no current legislation yet to drive its use on a larger scale in the industry.
China’s hydrogen plans sound ambitious. Starting in 2025, 100,000 tons of green hydrogen are to be produced per year (China.Table reported). In the same period, 30 gigawatts of storage capacity are to be created. In parallel, test fleets of fuel cell vehicles are being built. At the Olympic Games, buses and shuttles were already running on fuel cells. By 2025, a total of 50,000 fuel cell vehicles are expected to be on the road. This number is divided into 40,000 cars and 10,000 trucks.
Currently, China produces 33 million tons of hydrogen per year – mostly gray hydrogen produced from natural gas, coal, and oil (China.Table reported). Almost all of this hydrogen flows into the chemical industry, where it serves as a feedstock. The promised 30 gigawatts of storage capacity is also just four percent of the additional 800 gigawatts generation capacity planned.
Added to this are the ambitious targets for reducing greenhouse gasses. China wants to become carbon-neutral by 2060. The biggest hurdle is the country’s dependence on coal-fired power plants. The planned solar and wind power plants must therefore replace the energy of coal-fired power plants in the long term. This means that it will not be available for extremely energy-consuming additional projects such as the expansion of the hydrogen industry, as Niemeyer explains.
While coal-fired power plants generate power for between 7,000 to 8,000 hours a year, wind turbines do so for only about 2,500 hours a year. This means that a lot more capacity has to be installed for the same amount of electricity. In addition, huge energy storage facilities are necessary. This leads to a market disadvantage: “Green hydrogen is currently still significantly more expensive than gray hydrogen. Especially if there is no carbon price for the fossil feedstock,” says Niemeyer. As long as this difference exists, PwC expects business to stagnate.
But of course, hydrogen research is also being pursued in China. “There are five city clusters that are pushing the production and use of green hydrogen and fuel-cell vehicles,” Niemeyer explains. “Since their hydrogen demand is lower, this area is easier to develop with smaller decentralized plants.”
With corresponding success. “In China, far more cost-effective devices and aggregates are used. However, their efficiency is lower.” If the market grows rapidly in the future, the cheaper units could play a role. Foreign investors and companies are not included in the plan. Subsidies in this sector are aimed at maintaining local value creation, while EVs have received “watering can principle” subsidies.
Consequently, fuel cell vehicles are also a long way from becoming relevant in everyday life. “In our estimation, battery-electric passenger cars will not be replaced by hydrogen-powered vehicles.” Mainly because the necessary infrastructure does not exist, while the electric charging infrastructure very much does. Although the Communist Party is working on building a network of filling stations, it is primarily intended for buses and trucks. However, these are technically incapable of servicing passenger cars as well, according to Niemeyer.
On the first two days after its opening, the new branch of the Palace Museum in Hong Kong drew a lot of interest from visitors. On Sunday and Monday, long queues formed outside the new facility in West Kowloon. The Palace Museum in Beijing is lending the exhibits to the Hong Kong show. At launch, these are 900 precious pieces from imperial history, such as vases, scrolls and jade objects.
The museum was actually supposed to have opened on the anniversary of Hong Kong’s handover from Britain to China. However, the opening had to be postponed due to a storm warning.
However, the new building also proved to be controversial. Carrie Lam, the Chief Executive of the administration, who is loyal to Beijing, pushed the project and presented it as a boon from the central government. The museum is explicitly intended to strengthen the identity of Hong Kong residents as part of China. Accordingly, the museum has been criticized as a pro-Beijing project. fin
When Joe Biden landed in South Korea last month – his first official trip to the country as US President – he headed straight for Samsung’s massive semiconductor factory outside Seoul. There, he met with South Korean President Yoon Suk-yeol and Samsung Electronics Vice Chairman Lee Jae-yong, and praised the construction of a $17 billion Samsung semiconductor factory in Texas. The economic and strategic importance of semiconductors could not have been made any clearer.
During the COVID-19 pandemic, semiconductor supply disruptions forced a range of industries – from automobiles to consumer electronics – to slow or halt production. Reliable semiconductor supplies, it became clear, are vital to a country’s economic resilience. For the United States and China, they are also central to a strategic competition in which leadership in cutting-edge industries plays a crucial role.
As it stands, the US has a bigger slice of the global semiconductor pie, owing to its strength in chip design and in the fabless segment of the industry. But the vast majority of chips are manufactured far from America’s shores, including at the Samsung factory in Chinese President Xi Jinping’s hometown of Xi’an. And China – the world’s biggest chip market – is investing heavily in the sector as part of its effort to boost indigenous innovation. So, is the US set to lose its semiconductor edge?
So far, China has struggled to catch up. First, the typical latecomer strategy – focused on building cheaper, low-end products – cannot be applied to semiconductors, because a more advanced “next-generation” memory chip tends to cost the same or less than its predecessors. Less advanced chips are thus virtually worthless.
This is not to say that incumbents’ position is unassailable. After all, South Korean firms like Samsung managed to overtake more established Japanese companies like Toshiba in semiconductors. The key is a “leapfrogging” strategy: developing more advanced versions of a technology before the incumbent can. Such a strategy requires that the development of a technology follows a relatively predictable path – in the case of chips, upgrading from a capacity of one kilobyte to 2K, then 4K, and so on – and that companies have access to technology from abroad.
South Korean companies like Samsung never made the lowest-capacity chips. Instead, they used equipment and facilities imported from Sharp in Japan, and circuit designs licensed from Micron Technology in the US, to begin developing 64K chips immediately upon market entry.
Later, Samsung set up a research-and-development facility in California’s Silicon Valley, in order to develop designs for high-capacity (256K) chips ahead of Japanese firms. Its use of the “stacking method” for increasing chip complexity – rather than the “trenching method” used by firms like Toshiba – helped to propel progress. But Samsung continues to rely on high-tech components, parts, and supplies from Japanese and other foreign sources, and on software from the US.
At a time when China’s access to foreign technologies and equipment is increasingly constrained, the country will have a hard time replicating this leapfrogging strategy. Semiconductors and other cutting-edge industries are dominated by a very small number of firms. In some cases, just one or two companies can provide a particular input or piece of equipment.
These firms are concentrated largely in the US and Europe. One Dutch company, ASML, is the only producer of extreme ultraviolet (EUV) lithography machines, which are vital to the chipmaking process, and US firms dominate software.
This is not to say that China has no chance to develop an advanced – even world-leading – semiconductor industry. While this will certainly not happen overnight, there are opportunities to boost China’s prospects.
For starters, while the market for memory chips is uniform – lacking high- or low-end segments – the market for system chips (or Application Specific Integrated Circuit chips) is segmented according to application. Automobile companies, for example, do not use the most advanced fabrications, manufactured through the cutting-edge sub-ten nanometer (10nm) lithography process. Instead, they use 20nm or 30nm process technologies, for which technology transfer is not tightly controlled. In this segment, the Chinese foundry maker SMIC is reaping huge profits, which can be channeled toward investment in advanced or future-generation chips.
True leapfrogging success, however, will probably depend on China’s ability to carve a new technological path that diverges from the path taken by industry incumbents and thus relies less on Western technologies. For example, Micron Technology claims that next-generation chips can be developed using a last-generation process machine – “deep ultraviolet lithography” (DUV) – instead of EUV. This kind of alternative thinking could go a long way toward boosting China’s semiconductor prospects.
Here, China’s rapidly growing scientific capabilities will work in its favor. From 2013 to 2018, China’s share of information-technology journal articles rose from 22.4% to nearly 40%, while America’s fell from more than 20% to 16%.
In any case, restrictions on China’s access to foreign technology might soon begin to be loosened. Some argue that, by constraining supply, restrictions on Chinese manufacturers, including chipmakers, are contributing to rapidly rising US inflation. The US Innovation and Competition Act is supposed to counter this effect by funneling $50 billion in subsidies to semiconductor firms, possibly including foreign-origin firms like Samsung or TSMC. But critics point out that companies could waste the subsidies by using them for, say, stock buybacks, rather than investing in factories. And the Act might not be implemented at all.
With midterm elections looming, the Biden administration faces a dilemma. If it loosens restrictions on Chinese firms, including chipmakers, it could help offset inflationary pressures – Biden’s “top domestic priority” – while potentially enabling China to make progress on a leapfrogging strategy. If it does not, semiconductor shortages will likely continue to exacerbate inflation, and China might ultimately find its own alternative technological path and leapfrog anyway.
Keun Lee, Vice Chair of the National Economic Advisory Council for the President of South Korea, is Distinguished Professor of Economics at Seoul National University and the author of China’s Technological Leapfrogging and Economic Catch-up: A Schumpeterian Perspective (Oxford University Press, 2022).
Copyright: Project Syndicate, 2022.
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What seems impossible in politics is actually possible in sports: China and Taiwan – or Chinese Taipei – meet fair and peaceful. The occasion is the qualification for the Basketball World Cup. However, the balance of power is clear: The team from the mainland won 97:56 on Monday.
