This is What The “Trade” War With China Is Really All About

this-is-what-the-8220trade8221-war-with-china-is-really-all-about

11-12-18 03:50:00,

Forget soybeans, auto imports, iPhones, crude oil, and cheap Chinese gadgets. Also forget tariffs, duties, and subsidies. Even forget weapons.

The real reason behind the US-China “trade” war has little to do with actual trade, and everything to do with what China’s president, Xi Jinping, said when he visited a memory chip plant in the city of Wuhan earlier this year. In a white lab coat, he made an unexpectedly sentimental remark, comparing a computer chip to a human heart: “No matter how big a person is, he or she can never be strong without a sound and strong heart”.

What is really at the basis of the ongoing civilizational conflict between the US and China, a feud which many say has gradually devolved into a new cold war if few top politicians are willing to call it for what it is, are China’s ambitions to be a leader in next-generation technology, such as artificial intelligence, which rest on whether or not it can design and manufacture cutting-edge chips, and is why Xi has pledged at least $150 billion to build up the sector.

But, as the FT notes, China’s plan has alarmed the US, and chips, or semiconductors, have become the central battlefield in the trade war between the two countries. And it is a battle in which China has a very visible Achilles heel.

Even with the so-called truce between the two sides signed last weekend, and which promptly unraveled after the Huawei CFO’s arrest was unveiled last week, Washington plans to ramp up export controls next year on so-called foundational technologies — those that can enable development in a broad range of sectors — and the equipment for manufacturing chips is one of the key target areas under discussion.

This is a concern for China as the $412 billion global semiconductor industry rests on the shoulders of just six equipment companies, with three of them based in the US. Together, these companies make nearly all of the crucial hardware and software tools needed to manufacture chips, meaning an American export ban would choke off China’s access to the basic tools needed to make their latest chip designs.

“You cannot build a semiconductor facility without using the big major equipment companies,

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