This analysis of the October EAR update is consistent with most western media reporting - that the updated sanctions: a) were a surprise to CCP leadership; and b) that it will cripple the mainland semi sector.

In fact, China has long anticipated a de-coupling of advanced chip fab technology (see the 2014 Guidelines to Promote National Integrated Circuit Industry) and, as is noted in this article, has invested heavily to minimize that risk, arguably with questionable ROI. But that doesn;t mean that China is not capable of independently developing sub-10nm fabs.

Another important factor is that China is the single largest chip market in the world - more than 50% of total demand. Once again, US foreign p[olicy has failed to consider the unintended consequences of sanctions, and that is reflected in equity prices for fabless US chip manufacturers. As with oil and other sanctions directed at Russia, there will be significant aftershocks when the dust settles on the latest EAR.

It's important to recognize that the bulk of chip demand is still with older 10+nm chips (mostly 28nm chips), where China has a compelling cost advantage that will likely be sustainable for some time to come. The recent sanctions were specifically intended to limit China's ability to develop local super-computer and AI capabilities that could be used ofr both commercial and military purposes. It's likely these sanctions will be successful in the short term.

But the real question is whether China has reached a critical mass in its ability to innovate (in the semi and other sectors). IMO, it has - if you consider its technical accomplishments in critical fields like space exploration, aeronautics, naval warfare, biotech, etc, there is a compelling argument that the latest sanctions are a day late and a dollar short.

TSMC introduced 7nm chip manufacturing in 2018 and is only now ramping up 3nm capabilities. SMIC already has limited 7nm capabilities - while China is behind the curve, it's doubtful it will take 10 years to catch up to today's state-of-the-art wafer manufacturing.

And finally, although many (most) advancements come from the private sector, if someone were to compute the number of Chinese ex-pat grad students in leading US STEM programs, it would be evident that the US has not (yet) cut-off China from basic research.

Like him or not, Chairman Xi plays the long game. And unlike the US, China's hi-tech strategy is coordinated, albeit rife with corruption. This topic should be revisited every 6 months to see if assumptions that were baked into US sanctions are durable over the long run. If they're anything like the logic that went into sanctions against Russia, we will see important unintended consequences from US actions taken in 2022.

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Dec 14, 2022·edited Dec 28, 2022


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ChinaTalk's coverage of the decisions after Sullivan's September speech has been valuable. However, some aspects jump out at me: 1) Sullivan is saying China cannot have 21st-century technology. The relationship between advanced chips, AI, and the rest of technology is just too close. 2) Wars result from attempting to close off the technical advancement of nations. 3) The desire for "...CCP to rethink its approach to tech, curb industrial policy and state-led capitalism more broadly and perhaps draw cleaner lines between civilian and military firms." is hypocritical ."

The US is (and should be) adopting an industrial policy regarding the chip supply chain and (I hope) technology to limit climate change and moderate its effect. The US has no right to demand China change its form of government, which does include state-led capitalism, any more than Hitler has a right to demand FDR abandon his industrial policy for building our navy and air force. We must be honest about how the US Congress, K-street, and military firms have collaborated to build a tightly integrated military-industrial complex.

Those who don't want to see nuclear war should focus on pressuring both US and China to reduce nuclear stockpiles and refrain from an ever-expanding set of aggressive 'defense' technologies. Both should commit to no first strike. China and US should back off the current direction of war based on autonomous weapons.

Dwight D. Eisenhower's commitment to peaceful existence between nations with different social systems and his fear of the US military-industrial complex is a piece of history worth studying.

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Dec 14, 2022·edited Dec 14, 2022

war is now INEVITABLE. What does this mean for our own freedoms? the TLDR of Sullivan is that ALL tech is military tech. He literally stated that point blank in his "doctrine". So Google, Facebook, Clearview, Palantir, Amazon, Oracle, Microsoft, Apple are all now de-facto military national security tools and targets. You will note, the Sullivan doctrine was orchestrated by "six panels"...(laughably sounds almost like a CCP policy press release with it's phrasing, like "the three truths", "the four wisdoms" etc), the six panels cover: foreign policy, defense, intelligence, economy, "society", and, get this, even "future tech platforms" (meaning what? they will shape VC money and R&D into controlling hegemony?)! Have we replaced our constitution with Jake Sullivan? Do we trust the "appearances of democracy" on the outside with the real thing on the inside given the gov has a strategic hand in every transistor used, and in all of these fields?

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