Chinese semiconductor industry

AndrewS said:

What you've written is accurate, but isn't relevant to the prior discussion.

I mentioned that printing money makes the US dollar less attractive.
Of course, others are also printing money (to a lesser or greater degree), so their currencies are also becoming less attractive.
But this is a short-term viewpoint, and the prior context was some point in the far future, when the Chinese economy is 2-3x the size of the USA.

Remember that:
1. the the US dollar is regarded as the reserve currency
2. the US has a persistent and large trade deficit
3. the US has a significantly negative "international investment position" - where it owes the rest of the world more in terms of financial liabilities
4. the US has a persistent and large federal spending deficit
5. There is a large and growing federal debt

So if the US government continues to print money, and run large government and trade deficits, eventually everyone will see that the debts and payments will be unsustainable. That would be the US Dollar losing the trust of the market.

So you don't actually need a significant crisis or alternative to emerge, as you put it.

The US just has to continue running large trade deficits which continue to increase how much the USA owes to the rest of the world.

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The Eurozone and China are also economic blocs that already rival the USA in terms of size.
But the difference is that both these currency areas have small trade surpluses.
That means they do not rely on foreign currency inflows to fund their government spending deficits.

Click to expand...

Why does the us need foreign currency inflows for funding deficit? The US gov spends and taxes in USD. If there is a deficit, they can print more USD to finance that deficit. Sure if the deficits gets big enough and too much USD gets printed, hypothetically there will be inflation. But in reality, most of the USD printed ends up in the top 0.5% richest population who don't really spend that money on goods or service so inflation is subdued. Instead that money gets channeled to the stock market inflating asset prices. Which is exactly what is happening right now with the multiple trillion dollar printing operation and soaring stock market and near zero inflation.

My point being, as long as USD remains king. No country will unsurp US dominance. The only way to devalue USD is for some black Swan event to happen internally in the US.

What you guys think of this?

Huawei has spent billions on a two-year stockpile of American chips
But obviously, there are reasons why companies don't want to stockpile tech
By

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on May 31, 2020

rest of the article;

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free_6ix9ine said:

Why does the us need foreign currency inflows for funding deficit? The US gov spends and taxes in USD. If there is a deficit, they can print more USD to finance that deficit. Sure if the deficits gets big enough and too much USD gets printed, hypothetically there will be inflation. But in reality, most of the USD printed ends up in the top 0.5% richest population who don't really spend that money on goods or service so inflation is subdued. Instead that money gets channeled to the stock market inflating asset prices. Which is exactly what is happening right now with the multiple trillion dollar printing operation and soaring stock market and near zero inflation.

My point being, as long as USD remains king. No country will unsurp US dominance. The only way to devalue USD is for some black Swan event to happen internally in the US.

Click to expand...

You're looking too short-term.

Think about the long-term..

The USA runs a large and persistent trade deficit.
So the USA needs foreigners to buy and hold US-denominated assets eg. Treasury Bills, stock market shares, property etc

But Treasury bills are the only instruments which are large and liquid enough to absorb the level of inflows required.

If the US government continues to print money and deficit spend, eventually those debts will become unsustainable.
That would trigger a domestic financial crisis, and yes, they could print even more money to cover the debts.

But if the US does this, foreigners holding USD assets will get screwed by domestic US inflation, the resulting devaluation of the US currency, not to mention the recession and financial crisis.

So foreigners will see risk in holding US Treasuries, and demand a higher interest rate.

But the US is still running a significant trade deficit with the outside world.
The Net International Investment Position of the USA is also significantly negative, so there isn't much scope for asset sales to repatriate USD.
So the US will have to offer higher interest rates to those foreigners, otherwise they will dump US Treasuries and cause a currency crash. Those higher interest rates will apply to all Treasury bonds, and potentially cause a debt-servicing or inflation death spiral.

At that point, if China has:

1. sustainable domestic finances
2. an economy which is 2-3x larger than the USA
3. does more trade with the world than the USA
4. has a convertible currency

So why would people stick with the US Dollar in such a scenario?

Anyway, back on topic.

Guys. I love economics, since I did my degree on the subject. But please move to Chinese economics or the American economics thread.

Gatekeeper said:

What you guys think of this?

Huawei has spent billions on a two-year stockpile of American chips
But obviously, there are reasons why companies don't want to stockpile tech
By

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on May 31, 2020

rest of the article;

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Click to expand...

Saw that a while ago.

It's a hard 2 year deadline for Huawei to de-Americanise.

The worse case scenario is that Huawei shrink for a while.
The Chinese government isn't going to let them go under, and Huawei do have the capacity to operate in many segments without US technology.

Then they will start to grow again, based on non-US technology.

---

But let's say Huawei did go bankrupt for argument's sake.

They would be taken over by the Chinese government, and then be tasked with developing Chinese technology self-sufficiency.

AndrewS said:

Saw that a while ago.

It's a hard 2 year deadline for Huawei to de-Americanise.

The worse case scenario is that they shrink for a while. But then they will start to grow again, with non-US technology.

Click to expand...

Yeah. I think it's a fair assessment on the hardware stuff. But what about software? No Google etc. Will this affect the western market where Huawei is being sold?

I mean the Chinese market is pretty much sown up anyway. The battle is the western market like Europe, south America and middle East.

AndrewS said:

Saw that a while ago.

It's a hard 2 year deadline for Huawei to de-Americanise.

The worse case scenario is that Huawei shrink for a while.
The Chinese government isn't going to let them go under, and Huawei do have the capacity to operate in many segments without US technology.

Then they will start to grow again, with non-US technology.

Click to expand...

Tactical retreat is the way I see this. Huawei de Americanizes the supply chain. Come back stronger than before with new IP and a local supply chain. At that point the US could shove their sanctions up their asses.

I hope we double down on graphene non tubes as a silicon alternative. Same performance but with half the power consumption.

Gatekeeper said:

Yeah. I think it's a fair assessment on the hardware stuff. But what about software? No Google etc. Will this affect the western market where Huawei is being sold?

I mean the Chinese market is pretty much sown up anyway. The battle is the western market like Europe, south America and middle East.

Click to expand...

Answer is yes. But that is not the main concern right now. First Huawei needs to solve their chip fab issue and de americanize. Second business strategy is fluid, Huawei can make inroads with chip design and telecom equipment for 6G etc. which has higher margins than phone assembly.

AndrewS said:

Saw that a while ago.

It's a hard 2 year deadline for Huawei to de-Americanise.

The worse case scenario is that Huawei shrink for a while.
The Chinese government isn't going to let them go under, and Huawei do have the capacity to operate in many segments without US technology.

Then they will start to grow again, based on non-US technology.

---

But let's say Huawei did go bankrupt for argument's sake.

They would be taken over by the Chinese government, and then be tasked with developing Chinese technology self-sufficiency.

Click to expand...

Huawei will not go bankrupt. Trust me that is the only certainty in this world.

It's pretty obvious now that rules and laws that US tells China to abide by are worthless. Every time China wins at a game, the rules gets changed at a whim to benefit the US.


International IP and patent laws are probably also bullshit and will be changed again when China starts to become the top innovator.


Now that US is in full undermine-China mode, it's important that Chinese businesses circumnavigate all rules that doesn't benefit it. China will not be like Japan.