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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: 263023

Reported Deaths: 5752
CountyCasesDeaths
DeSoto17675191
Hinds16813331
Harrison14224204
Rankin11167219
Jackson10839190
Lee9050144
Madison8568168
Jones6668114
Forrest6177124
Lauderdale6097192
Lowndes5518120
Lafayette516298
Lamar503965
Washington4923125
Bolivar4104109
Oktibbeha405982
Panola384881
Pontotoc376258
Warren3674103
Monroe3671108
Union355663
Marshall355270
Neshoba3485154
Pearl River3468105
Leflore3111109
Lincoln305688
Hancock291862
Sunflower291475
Tate279662
Alcorn272354
Pike268981
Itawamba268063
Scott259648
Yazoo255256
Prentiss252553
Tippah249250
Copiah249049
Coahoma248054
Simpson242171
Leake237367
Grenada223272
Marion222073
Covington219973
Adams213671
Wayne212634
Winston207371
George204339
Newton199046
Attala196963
Tishomingo194161
Chickasaw189044
Jasper179538
Holmes171768
Clay165837
Tallahatchie156235
Stone151425
Clarke147262
Calhoun140822
Smith129226
Yalobusha122034
Walthall114337
Greene113529
Noxubee112926
Montgomery111636
Carroll106622
Lawrence106517
Perry104531
Amite101426
Webster96124
Tunica88821
Claiborne88325
Jefferson Davis88329
Benton85623
Humphreys84624
Kemper80520
Quitman7089
Franklin69917
Choctaw63213
Wilkinson59825
Jefferson56821
Sharkey45117
Issaquena1606
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Alabama Coronavirus Cases

Cases: 439442

Reported Deaths: 6657
CountyCasesDeaths
Jefferson644371007
Mobile31435569
Madison28158217
Tuscaloosa21492275
Montgomery19873332
Shelby19248132
Baldwin17128189
Lee13137107
Morgan12594142
Etowah12070181
Calhoun11496206
Marshall10420123
Houston8988164
Limestone832081
Cullman8257124
Elmore8183110
DeKalb7871107
Lauderdale7847107
St. Clair7808130
Talladega6445112
Walker6028183
Jackson599145
Colbert548694
Blount546286
Autauga535862
Coffee460764
Dale409685
Franklin374150
Russell354215
Chilton344373
Covington338580
Escambia334544
Tallapoosa3143109
Dallas312996
Chambers303470
Clarke298036
Pike262431
Lawrence253355
Marion253161
Winston233342
Bibb222348
Geneva210247
Marengo208231
Pickens199531
Hale184944
Barbour180538
Fayette177829
Butler173160
Cherokee165131
Henry159525
Monroe152021
Randolph145536
Washington141727
Clay129746
Crenshaw123745
Macon121937
Cleburne121525
Lamar119922
Lowndes114836
Wilcox107922
Bullock103328
Perry99918
Conecuh97822
Sumter90527
Greene77923
Coosa63418
Choctaw51924
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