The Chinese government is willing to spend what it takes to win and this is the reason why they will win. The US government is way too reluctant to spend in this regard. The Chinese government is investing hundreds of billions in artificial intelligence, hundreds of billions more in renewables, and so on. I don't see Congress giving a blank check to scientists and engineers, like China does.
Maybe eventually, but at the moment they lag some generations behind US/Japan/Taiwan/Korea. This, in spite of the fact that China has been dumping money into the industry for years.
There’s a narrative in the west that China is “willing to spend what it takes to win”, but at the same time, China’s spending is tied up by internal politics (also, corruption, pork, kickbacks) as much as US spending is. China is also, for example, willing to spend as much money as it takes to make a mega-blockbuster movie and yet keeps churning out flops (again, due to causes that are intimately connected with internal Chinese politics).
If you look at major US boondoggles like the F-35 program you might think of it as a partial success (the plane works) and yet a massive waste of money (we could have spent the money better), and some of these massive initiatives in China suffer from the same problems.
Exactly. Most narratives hang everything on simplifications like “willing to spend what it takes to win.” Reality is more complex and there are serious drawbacks to any real life examples.
A better comparison mould have been circa 2000 "asian tiger" policies of south korea, taiwan, etc. The idea was to subsidize industries with massive growth potential... on a 20-50 year horizon. On that sort of a timeline, F-35 program might be considered an ok success. More expensive than necessary, but better than not having invested. For this to make sense, fighter jets need to be a massive growth industry, and adjacent to other massive growth industries. Not sure if the US has appetite for generational investments in industries.
A lot goes into success and failure at something like this than the "correct theory" though.
Part of the idea behind letting the semiconductor industry decline is that it frees up capital and human resources to work on higher ROI stuff. It's hard to get a high ROI manufacturing, because manufacturing has a high "I." Building factories is capital intensive.
It's possible to make a decent case that it succeeded too. The US absolutely dominates the high ROI, high margin industries: Software, financial services, pharma. Design... Intangibles. You can't make a money machine like FB, Pfizer or JPMorgan if (a) marginal costs are real or (b) you need to invest capital in order to grow.
> Part of the idea behind letting the semiconductor industry decline is that it frees up capital and human resources to work on higher ROI stuff.
Yeah. That’s a very good point, something I haven’t really thought of. I think we could also invest more in semiconductor design, both in making more sophisticated designs and in making semiconductor design accessible to more people (both of which are already happening). I’m talking about “design” in contrast to manufacturing/process concerns. If the process changes slow down a bit, I wonder if we can get ASICs with lower NRE.
> The Chinese government is willing to spend what it takes to win and this is the reason why they will win.
But it's Taiwan that is doing the chip fabs in TSMC, not mainland China. While they do have some capacity in the mainland, it's best to not conflate the two when discussing the geopolitical situation.
I dont think the parents meant TSMC. China is indeed spending a hundred billion on establishing a Semi Conductor supply chain industry. If you count from 2013 ish, they expect to spend a total of $150B+ in 2025. From NAND, DRAM to General Fabs and other up and down stream in the supply chains. That number was projected in 2017/2018. I would not be surprised if they are pouring in even more resources now.
Luckily the Moat around leading edge, cost competitive DRAM / NAND and Modern Foundry is much much larger than I thought. Hopefully the world is not too late to react to it.
Do note that there is also plenty of pork/corruption in China. Massive amounts. We just understand the US pork/corruption better because we can read English-language news sources.
The F-35 seems to be selling like hotcakes, from looking at the orders american allies have for the plane. Lockheed is essentially a wing of the department of defence and lot of the "project overruns" are actually dollars spent on R&D and technology development. Defense pork is bad, but giving billions of dollars to aerospace, electronics, and radar engineers is a fantastic way to maintain an economic edge, especially when Lockheed, SpaceX, and Boeing dominate the global market thanks to US government funding
The problem is that when you have political allocation of capital, you create a very inefficient economy. Sure, if the goal is to copy someone else that has proven a successful approach you can make good progress with subsidies. But after you drive them out of business, you are stuck with this politically directed R&D agenda that has no one else to copy but is not able to innovate on its own. You quickly lose your way with inefficiencies.
This must be weighed against the fact that subsidized businesses will outcompete less subsidized businesses, and so if you want to bankrupt your foreign competitors you can do that by subsidizing your own domestic firms.
One approach is to not trade or impose targeted tariffs on government subsidies to help balance the scales. That was basically the idea of the 90s era trade agreements, which hasn't worked out so well, as targeted tariffs don't work. You apply a broad, long lasting blanket tariff on all goods coming from the offending country or nothing.
Another approach is to jump in with massive subsidies of your own and create a race to the bottom where every government has to subsidize any industry that some other government is subsidizing.
I'd like to throw restrictions on foreign capital inflows into the mix. A combination of banning capital inflows, some subsidies, and some broad, permanent tariffs against bad actors like China might be the best option to deal with the "spend anything to win" problem. Really we don't know.
What I don't want to see is governments rushing in to subsidize industry in a race to the bottom. That is bad for innovation as well as for democracy.
What the free trade crowd needs to realize that free trade is vulnerable to the subsidize-attack which can destroy your own industries, and right now they have an ideological commitment that is blinding them to this reality.
Yeah, for all the worry about (digital) semiconductors, the US’s solar cell capacity has atrophied. There are a few large thin film fabs, like First Solar, but NO operational large silicon cell fabs now that Panasonic has pulled out of the Tesla Buffalo factory (I hope Tesla replaces them) as part of their global reorienting away from cell manufacture. Violet Power is hoping to change that, but it’s remarkable how much the US relies on imported solar cells, with almost no domestic capacity.
Makes sense as the cells are a commodity and extremely cheap (7¢/Watt...). They’re a minority of solar panel costs (15-30¢/Watt) which are themselves a minority of installed solar costs (70-100¢/Watt utility, above $2/Watt residential), but it leaves the US heavily reliant on imports for the Green New Deal or related initiatives.
Violet power is interesting as they’re setup across the street from a shuttered polysilicon plant in Washington state IIRC. They’re planning to be vertically integrated in panel manufacture (& eventually use that silicon plant) for cells with extremely high efficiency (20 and eventually 30%) cells with a 50 year warranty lifetime (double the normal 25). It’s a good approach for a US company, IMHO. They want to eventually get to 5GW/year output capacity. Which sounds like a lot but is minuscule compared to what we need.
To transition to electrified everything, the US needs 1TW average electricity. We currently produce ~500GW average, 300GW of which comes from fossil fuels. Nameplate solar capacity is only about 10-20% of average electricity output (depending on lots of factors including seasonal effects), so to replace the 300GW average of fossil fuel electricity, we’d need 1500-3000GW of solar nameplate. To electrify everything, we’d need an additional 500GW average, for a total of 4-8 Terawatts of additional nameplate solar.
To do that over 20 years would require 200-400GW per year of solar cell and panel capacity output. And this is just the existing US demand. We need to be investing a ridiculous amount in solar factory capacity RIGHT NOW if we’re serious about climate action.
(Luckily solar panel factories only cost about 20¢/(Watt/year) in capital cost even in the US... maybe about the same for combined cell/wafer/silicon capacity for a total of 50¢/(W/year), so 200GW/yr vertically integrated factory capacity may only cost $100 billion to build out which is not that much when you think about it... Except we aren’t doing it.)
The US has never won any fight by their government being great. They've won a lot of fights by US capitalists grinding their opponents into powder and selling the remains for fertiliser.
If the governments go head to head, China wins easily. Their government is stuffed with PhDs, scientists and engineers. The US government has lawyers.
Just hours ago [1] H.R.5 — 116th Congress (2019-2020) was passed in the house. Also known as the Equality Act. It appears well intentioned, great name, but some of the demands are gonna be a challenge, specifically, bathroom accomodations, and potential to disrupt traditional women's programs.
Yep, I work in hardware design for defense. They dropped the Cadence license (no RFIC design for me), but I got to take Unconscious Bias training yesterday.
