| > Imagine China sanctions Intel with the intent of driving them out of key markets China increasingly is in the consumer market (where the 28nm nodes Chinese players can domestically produce are competitive). Chinese state agencies are phasing out Intel processors for domestic processors [0] and amendments to the CHIPS act increasingly restrict Intel and other grantees from purchasing Chinese intermediate parts [1], and Intel anyhow has export controls placed on it to prevent sales to Huawei and other controlled organizations [2] In return, the US is helping subsidize Intel in building our High NA EUV capabilities (a major reason for the Intel layoffs this week) as well as Secure Enclave related R&D The whole idea of the Sullivan Principle is to force Chinese players to spend more and more money but remaining the same distance apart (2 gen) [3]. The idea is Chinese players keep burning money building capacity, yet lagging behind relatively speaking, and that money could have been used for better applications by China. Already China's GDP per Capita has remained stagnant since COVID began [4] and those tens of billions spent on building capacity could have been better applied building a more robust domestic economy, yet median per capita household incomes are stuck at around $4.6k/yr with a massive urban-rural gap (approx $7k urban, $2.9k rural) [5]. Without a robust domestic economy, and increased limits on export markets, this only leads to overproduction and deflation. [0] - https://www.ft.com/content/7bf0f79b-dea7-49fa-8253-f678d5acd... [1] - https://www.bloomberg.com/news/articles/2024-06-18/lawmakers... [2] - https://www.reuters.com/technology/us-revoked-some-export-li... [3] - https://www.belfercenter.org/event/competition-without-catas... [4] - https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location... [5] - https://www.stats.gov.cn/english/PressRelease/202402/t202402... |
This sounds like a perspective from a finance/law person who doesn't understand how engineering works. Technological and engineering expertise ultimately come from human capital. That human capital is built through learning and practicing. Money plays a role, yes, but it's not everything, and is sort of an abstraction.
On the one hand, China "wastes" money by having to build everything themselves. On the other hand, importing foreign technology has always been the cheap way out (that many Chinese company voluntarily signed up for, until they no longer could). You don't own the technology in the sense that you don't (need to) truly understand it. This is different if you have to build everything yourself: you own it and understand every little part of it. This "waste" results in a ton of spillover effect: it builds a huge domestic supply chain and human capital basis that's not at the mercy of foreign IP demands. You can see this spillover effect in the renewable energy and EV market, for example. They spent decades learning how to build batteries, solar panels, electric engines, etc. and now the whole is bigger than the sum of the parts: expertise in building solar panels has positive spillover effects on the semiconductor industry because some of the technology is shared; expertise in building batteries is synergetic with expertise in building electric engines; etc.
This is one reason why for example India has more trouble with developing than China. Often times, India imports foreign technology but stops there, being mere users of said technology. China imports foreign technology, but considers it merely as a first step towards learning the underlying technology. They will try to modify or rebuild some part of it, learn from the successes and failures, and iterate until they've modified/replaced everything and understand the whole machine. And from there they would try to improve it. Some call this "stealing technology". Okay. But don't forget that the Europeans during the Renaissance had this philosophy that in order to become excellent, you first have to copy the classics (Romans), then create something equally valuable to the classics, then surpass the classics. This is China doing the same, but I understand it if people don't like it.
China had been trying for decades to incentivize its own semiconductor companies to develop, but failed to do because all the Chinese semiconductor companies chose the cheap way out, and imported foreign technology, instead of buying from domestic tool makers. As a result, domestic tool makers lacked practice, which is why they didn't develop in quality very quickly. This created a chicken and egg problem that was hard to get out. Until the sanctions did what the Chinese government failed to do. Yes, they hurt in the short term. But they provided an important opportunity in the long term.
All of this is "wasteful" from a globalist, financial perspective. But it's absolutely godsent from the perspective of China being a developing country that 1) still needs to lift up a lot of people, not only out of monetary poverty, but also out of educational and skill poverty, and 2) wants to improve their sovereignty, in the sense of becoming more resilient to foreign sanctions and being able to walk their own path without interference from others.
Truly, money is not everything. The real economy is not all about money. GDP is but a proxy for real value.