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China is trying to kick its foreign tech habit

The fate of Chinese smartphone maker ZTE has highlighted a flaw in Beijing's bid to become a global tech powerhouse: ...

Posted: Jun 8, 2018 12:04 PM
Updated: Jun 8, 2018 12:04 PM

The fate of Chinese smartphone maker ZTE has highlighted a flaw in Beijing's bid to become a global tech powerhouse: a lack of homemade computer chips.

The US government announced a deal Thursday to lift a ban on ZTE from buying parts, including chips, from American companies. The ban brought ZTE factories to a standstill and the company still faces an uncertain future.

President Xi Jinping has made building up a domestic chip industry a key priority. Right now, the country relies heavily on foreign companies for the core technology that powers everything from smartphones to automobiles.

China has a voracious appetite for chips - it buys far more than any other country -- and just under 90% came from foreign companies last year, according to technology consultancy International Business Strategies.

But developing a competitive chip industry is expensive, politically sensitive and takes time.

China has invested tens of billions of dollars in several domestic players over the past few years. Big Chinese companies have also tried to get their hands on technology by aggressively bidding for foreign chip businesses.

But several attempts to buy stakes in American firms failed after US authorities objected to the deals on national security grounds.

China's concerns about its reliance on foreign suppliers came into focus this week when three major memory chip makers - Samsung and SK Hynix of South Korea, and Micron of the United States - said they were under investigation by Chinese regulators. SK Hynix said the probe was about suspicions of price fixing.

Related: China is investigating foreign chipmakers

Xi has made clear the importance he attaches to the semiconductor industry, recently comparing a computer chip to the human heart.

"No matter how big a person is, he or she can never be strong without a sound and strong heart," he said in April, during a visit to a semiconductor factory in central China.

Related: How China plans to beat the US at technology

Chinese memory chips are expected to hit the market by the end of this year or early 2019, but they will be inferior to those made by established foreign suppliers, analysts say.

They will likely only be sold to Chinese companies, which may be willing to buy them because they will be cheaper than foreign chips, according to Avril Wu, senior research director with market research firm TrendForce.

Even as it ramps up production, China will have to rely on foreign suppliers for years to come. International Business Strategies currently predicts that by 2027, they will still account for about 60% of the semiconductors used in China.

Wu said Chinese-made chips may also struggle in overseas markets because of concerns Chinese companies may have violated intellectual property rights.

"It's safer to have those components sold in domestic China," she added.

Related: US-China trade battle: Catch up here

Intellectual property is at the heart of the ongoing trade dispute between the United States and China. US concerns that China is stealing American technology or forcing companies to hand it over are what drove the Trump administration to announce tariffs on $50 billion worth of Chinese goods back in March.

"The US feels China is using 'unfair' means to obtain technological know-how from the US and elsewhere and is 'unfairly' using subsidies and other industrial policies," Louis Kuijs, head of Asian economics at research firm Oxford Economics, wrote in a research note last week.

Analysts have suggested the investigation into South Korean and US memory chip makers could be a way of putting pressure on the companies to share intellectual property and boost Chinese competitors.

Chinese authorities have declined to comment on the investigation.

Related: US cuts a deal with Chinese smartphone maker ZTE

In another high profile move, UK chip designer Arm, owned by Japanese tech conglomerate SoftBank, agreed to sell a majority stake in its Chinese subsidiary this week.

Arm will offload the 51% stake for $775 million to a group of Chinese-led investors, according to reports by the Financial Times and Wall Street Journal.

SoftBank declined to identify the nationality of the investors.

-- Julia Horowitz contributed to this report

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 320174

Reported Deaths: 7390
CountyCasesDeaths
DeSoto22294271
Hinds20755424
Harrison18450317
Rankin13923282
Jackson13733249
Madison10273225
Lee10063176
Jones8473167
Forrest7837153
Lauderdale7263242
Lowndes6523150
Lamar636288
Lafayette6314121
Washington5427138
Bolivar4841133
Panola4671110
Oktibbeha466398
Pearl River4606148
Marshall4574105
Warren4440121
Pontotoc425973
Monroe4162136
Union415877
Neshoba4065180
Lincoln4009113
Hancock387687
Leflore3516125
Tate342586
Sunflower339491
Pike3373111
Alcorn327474
Scott320374
Yazoo314571
Adams308486
Itawamba305178
Copiah299966
Coahoma299084
Simpson298689
Tippah292268
Prentiss284261
Leake272374
Marion271280
Covington267283
Wayne264842
Grenada264087
George252451
Newton249064
Tishomingo232369
Winston230282
Jasper222148
Attala215173
Chickasaw210659
Holmes190574
Stone188733
Clay187954
Tallahatchie180041
Clarke178980
Calhoun174232
Yalobusha167940
Smith164134
Walthall135447
Greene131834
Lawrence131224
Montgomery128643
Noxubee128034
Perry127538
Amite126342
Carroll122330
Webster115032
Jefferson Davis108334
Tunica108127
Claiborne103130
Benton102325
Humphreys97533
Kemper96729
Franklin85023
Quitman82316
Choctaw79118
Wilkinson69632
Jefferson66328
Sharkey50917
Issaquena1696
Unassigned00

Alabama Coronavirus Cases

Cases: 549013

Reported Deaths: 11311
CountyCasesDeaths
Jefferson810461571
Mobile42145831
Madison35718525
Tuscaloosa26179458
Shelby25626254
Montgomery25089614
Baldwin21901314
Lee16287176
Calhoun14724327
Morgan14639285
Etowah14183364
Marshall12454230
Houston10791287
Elmore10301214
Limestone10188157
St. Clair10161251
Cullman9958201
Lauderdale9612250
DeKalb8977190
Talladega8462184
Walker7341280
Autauga7242113
Jackson6953113
Blount6950139
Colbert6415140
Coffee5638127
Dale4930116
Russell454941
Chilton4478116
Franklin431782
Covington4279122
Tallapoosa4144155
Escambia401880
Chambers3728124
Dallas3610158
Clarke353161
Marion3245107
Pike314578
Lawrence3134100
Winston283572
Bibb268564
Geneva258481
Marengo250665
Pickens237062
Barbour234559
Hale227178
Butler224671
Fayette218962
Henry194443
Randolph187644
Cherokee187345
Monroe180641
Washington170739
Macon163051
Clay160159
Crenshaw156357
Cleburne153644
Lamar146937
Lowndes142254
Wilcox126930
Bullock124542
Conecuh113630
Coosa111629
Perry108626
Sumter105832
Greene93634
Choctaw62125
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