Joint U.S.-South Korea Military Exercises Conclude, With Eye on North Korea & China

With the United States imposing technology sanctions on China, the world’s electronics industry is facing turbulent times. After the sanctions, Huawei has slipped from its number one slot as a mobile phone supplier—which the company held during the second quarter of 2020—to number seven currently. Commenting on this slide, Huawei’s rotating chairman Guo Ping has said that the company’s battle is for survival right now. According to Reuters, Guo in a note circulated internally maintained that Huawei “will not give up and plans to eventually return to the industry’s ‘throne.’” On that count, Huawei is not only surviving but doing quite well. It is still the world leader in the telecom equipment market with a hefty 31 percent revenue share, which is twice that of its nearest competitors Nokia and Ericsson, and profits of nearly $50 billion in the first six months of 2021. But will Huawei be able to retain its market position without China catching up with the latest developments in chip manufacturing and design technologies?

It is not just the Chinese companies alone that are facing tough times. With growing chip wars between the United States and China, the global supply chain for electronic chips has been affected, leading to chip shortages across several sectors. Semiconductor chips are used in almost every product, from household equipment—microwave ovens and toasters—to the automotive and defense industries. The auto industry’s biggest bottleneck today is the chip shortage, which has badly hit their production. If the chip wars continue, the crisis of the chip shortage may affect other industries as well.

This crisis, meanwhile, has raised several questions: Is the crisis of the semiconductor industry the precursor to the fragmentation of the global supply chains? Will it lead to warring blocks, with the United States at one pole and China at the other? With this fragility of the supply chain, are we seeing the end of globalization as a paradigm?

The electronics industry is one of the most capital-intensive and research-and-development-intensive industries. No other industry has this characteristic. Power or steel plants are capital-intensive; pharmaceuticals are R&D-intensive. But no other industry is both. ASML, a little-known Dutch company that produces the lithographic machines for chip manufacturing, is worth more than Volkswagen, the world’s largest car manufacturer. This is due to the high R&D costs of ASML’s lithographic machines: it is the only company that can deliver the machines that the most advanced chips require. In order for a new fabrication facility to make the new generation of chips today, it will cost $20 billion, which is more than the cost of an aircraft carrier or a nuclear plant. Only two fabricators, Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung, have the capability to produce the most advanced chips that the industry uses.

The United States and China compete in areas such as artificial intelligence, computers, mobile networks and phones. The basic building block for all these technologies is semiconductor chips. The more circuity we can pack into a chip, the more computing power it has. The bulk of the market consists of older fabricators using 180 nm to 28 nm level technologies, with only 2 percent of the chips below the 10 nm level. The only fabricators that can make such chips are TSMC and Samsung, the world’s largest chip fabricators. Semiconductor Manufacturing International Corporation (SMIC) of China, the third-largest chip fabricator globally, has only recently moved from the 28 nm level to the 14 nm level. With Chinese government support, SMIC is investing in production lines that can go below 14 nm. Intel, once the world leader in chip manufacturing, is still stuck at the 14 nm level. However, it also has plans for developing the next generation of chips.

The United States has chosen the electronics/semiconductor industry as a battleground for its geostrategic competition with China. It believes that it has a significant technology lead and commands a major market share in this industry. China is a late entrant here. Though it has a comparable market share to that of the United States, it still depends on certain core technologies. The United States and its allies—the European Union, Japan and South Korea—control these core technologies. That is why the United States has chosen Huawei and SMIC, two major Chinese players in the technology and the semiconductor industry respectively, as its target for sanctions. The United States has put more than 250 Chinese companies on the entities list, which require a special license to import equipment or components. However, it is not a blanket ban.

The United States is following up on its sanctions against Huawei and SMIC with a plan to bar China from what it calls “foundational technologies” under its 2018 Export Control Reform Act. The argument that the United States is building is a simple one: they are ahead of China in certain critical technologies required for advanced chip manufacturing; all they have to do to maintain this lead is to deny China access to these technologies; this will ensure the United States lead for the future and its dominance over the electronics industry.

John Verwey, an investment analyst who writes about semiconductor technology on his website Semi-Literate, discusses what can be considered a foundational technology in the electronics industry. At first sight, chip-making could appear as a foundational technology and the target of U.S. sanctions. This is what the United States did when it barred Huawei from buying the latest 7 nm scale chips from TSMC.

SMIC then tried to set up its fabrication line for 7 nm chips and needed to import extreme ultraviolet (EUV) lithography machines from ASML, each costing around $120 million to $150 million. These lithographic machines are the critical part of the production lines of chip fabrication. Though the EUV machines are from the Netherlands, they use software developed in ASML’s U.S. subsidiary and therefore they fall under the U.S. sanctions regime.

The U.S. sanctions mean that ASML cannot sell the EUV lithography machines to China, though it can sell other lithographic machines for lower-end chip production, keeping China out of the high-end under-10-nm technology, and, therefore, a generation or two behind the market leaders.

This brings us to the question of how to define foundational technology. Though chips are the key driver of electronics, they are not as foundational as the machines that produce them. A country at the cutting edge of technology needs to master the technology of chip production and the machines that run such production lines. That is why ASML’s lithography machines are the bottleneck for China.

What then drives the advances in key technologies of the machines and chip production? As Marxists know, knowledge drives the productive forces—in this case, the advances in chip design. This knowledge is captured in the software design tools and the lithography machines. They are both highly knowledge-intensive and require people with very specialized skills.

The United States and its universities are still the major source of knowledge development, the key to the advances in this sector. But here is the long-term problem facing the nation: The research programs of the U.S. universities are mostly staffed by international students, with the bulk of them from China, India and other developing countries. Many of them stay back in the United States and provide the human power required for the advances in knowledge that the United States has today.

If Chinese students and researchers are not welcome in the United States, this source of knowledge development will weaken. Unfortunately, countries like India do not have high-quality education institutions and research laboratories to be a substitute for the stream of Chinese students who enter U.S. universities. China has invested heavily in its universities and research institutions and produces more Ph.D.s in science and technology today than the United States. It is also building a pipeline of innovations from the universities/research institutions to the technology industry.

China is the biggest market for the U.S. semiconductor industry’s chip designs and design software. The U.S. companies also design high-end chips, which are then manufactured in Taiwan and China. In the short run, the U.S. sanctions will damage China’s advanced chip production and the production of electronic devices based on such chips. But it will also mean that the U.S. companies will lose a significant part of the revenues that they now receive from the Chinese market from the sale of their design tools. It will also lead to a loss of revenue for advanced chips that the U.S. companies like Qualcomm and Nvidia design and then manufacture in Taiwan’s TSMC.

For the high-tech U.S. companies, the loss of this income means less money for their R&D and the slow erosion of the country’s position as the global knowledge hub. Suppose the U.S. companies lose the Chinese market and, therefore, a significant part of their revenues. In that case, it will seriously affect their ability to compete in the future. In the short run, they may gain, as they are doing with Huawei losing its number one spot in smartphones. But still, the loss of revenues will mean less ability to produce the knowledge that gives the United States its edge in technology. Less money in research means an eventual loss of leadership because, unlike other countries, the United States increasingly does not produce the chips or the machines, but the knowledge that goes into both of them.

This is what the U.S. semiconductor industry has argued in its submission to the U.S. Department of Commerce. If the U.S. companies delink from the Chinese market, it will mean a significant loss of revenue for them. In the long run, it will lead to a loss of U.S. leadership in electronics. Already, the U.S. sanctions have led the Chinese companies to remove the U.S.-designed components from their product lines. Sanctions are double-edged: they hit Huawei and other Chinese companies and their U.S. suppliers.

How long will China take to erase the lead in semiconductor technologies that the United States and its allies have? Analysys Mason, a leading consulting company, says in its May 2021 report that China will be able to attain self-sufficiency in semiconductors in three to four years. The Boston Consulting Group and Semiconductor Industry Association have modeled the impact of breaking up the global supply chain of China and the United States delinking their supply chain and markets. The model predicts that with such a policy, the United States would still lose its leadership to China. According to the Semiconductor Industry Association, the only way that the United States can preserve its lead is to export to China, except in the strategic military sector. The United States can then use its profits from these exports for developing a new generation of technologies. Of course, the loss for not exporting in the strategic sector must be compensated with hefty subsidies from the U.S. government.

Meanwhile, India missed the semiconductor manufacturing bus when it decided not to rebuild Semiconductor Complex Limited its premiere chip-making facility in the city of Mohali, after it was destroyed in a mysterious fire in 1989. Its policymakers decided that India should leverage its strength in software and systems and not worry about manufacturing chips. Vinnie Mehta, formerly the executive director of the Manufacturers’ Association for Information Technology (MAIT), had said to Mint, “A nation without silicon (technology) is like a person without [a] heart.” That heart is still missing in India’s technology ecosystem.

If the United States wants to retain its position of being a world leader in the electronics industry, it has to match China by investing in the generation of knowledge for future technologies. Why, then, is the United States taking the sanctions route? Sanctions are simpler to implement; building a society that values knowledge is more difficult. This is the pathology of late capitalism.

This article was produced in partnership by Newsclick and Globetrotter.

Prabir Purkayastha is the founding editor of Newsclick.in, a digital media platform. He is an activist for science and the free software movement.

Editor’s Note: The following opinion was first published in Black Agenda Report.

If U.S. imperialism could only be said to be one thing, it is audacious. Recently U.S. rulers have been making a fuss over Russian troops on their own border with Ukraine, while 1,000 U.S. National Guard soldiers were deployed to the Horn of Africa, in countries where the U.S. shares no borders and is actually more than 7,396 miles away.

Ever since its government was destroyed in 2011 in the first operation of the U.S. Africa Command (AFRICOM), Libya has been the quintessential victim of U.S. audacity in Africa. Now, led by the United States, Western officials have been talking up a UN-led peace process in Libya that insists on “inclusive” and “credible” elections starting on December 24, despite serious disputes over how they should be held.

Of course the Libyan people should have the right to decide their leaders, forms of government, and politics. In fact, however, it is extremely difficult to see through the murk created by the inhumanity of the U.S.-EU-NATO axis of domination.

But what sort of process for nominating candidates are the Libyan people able to exercise? How credible and inclusive can an election be that is cast in the midst of a civil war and with the United States presiding over the country’s affairs like a Godfather?

The imperialist structure responsible for leading the overthrow of the Socialist People’s Libyan Arab Jamahiriya , AFRICOM, just backed  the election efforts of U.S. Ambassador to Libya Richard Norland. This was after Norland took to Twitter to scold those discrediting the elections saying, “We call on all parties to de-escalate tensions and to respect the Libyan-led, legal, and administrative electoral processes underway.”

For these emissaries of empire, such statements are mere words of formality, empty rhetoric meant to minimize the glare of the contradiction: they created a failed state.

Reports have surfaced about the likely re-emergence of violence which has been on pause during a very fragile ceasefire. There have been stolen voter cards , an allegedly politically motivated disqualification of 25 of the 98 presidential hopefuls by the election commission, a chaotic appeals process, and, of course, a delay in the final list of candidates.

Then there were also the road blocks by gunmen backing eastern military chief and former CIA operative Khalifa Haftar to prevent travel to a court in the southern city of Sebha set to examine the appeal by Saif al-Islam Gaddafi to run for president. It is no surprise that Haftar himself is also a presidential candidate.

Initially Saif al-Islam, son of the murdered Libyan leader Muammar Gaddafi, was being excluded from a bid for presidency by the High Elections Commission. Before a Libyan court ruled on December 2 that Gaddafi can run for president, the case had endured an armed attack on the Sebha Court of Appeals followed by a protest in front of the Sebha Court at the end of November, organized by the people of the city of Ghat against the closure of the court by force.

The protesters, in support of Saif Gaddafi, demanding free and fair elections, and an impartial judiciary said, “…there are those who want to occupy the country and restore colonialism again, and who threaten to divide the country according to the interests of the international powers.”

Black and Brown people of the Global South know full well about what the protesters from Ghat are protesting. The capitalist, white surpremacist order has to disparage people-centered projects and legitimize anything in the interest of racist neoliberalism.

Some of the most transparent and participatory elections in the world, in Nicaragua and Venezuela, are denounced and demonized by the same international powers, its institutional extensions like the OAS, and its corporate media mouthpieces. Beneath that newswire is the irony of a Libya literally destroyed by the same forces. Now, ten years later, it is being forced into a largely illegitimate process.

The title “dictator” is bandied around for all leaders not compliant to Western interests, as was commonly done to the late Muammar Gaddafi. A common sense question one might ask is: Why go through such lengths to prevent the candidacy of the son of a dictator supposedly intent on reestablishing his father’s dynasty? 

Once the non-white working class inside the belly of the beast realize that the United States is an undemocratic oligarchy that cannot pretend to offer, to the rest of the world, a nonexistent “democracy,” then it will begin to see that the internationalist fight to support the people of Libya is the same as the domestic fight to liberate those struggling for justice.

Netfa Freeman is an organizer in Pan-African Community Action (PACA) and on the Coordinating Committee of the Black Alliance for Peace. Netfa also is co-host/producer of the WPFW radio show and podcast “Voices With Vision.”

In an emergency United Nations Security Council meeting held on August 16, following the Taliban’s seizure of Kabul, Nebenzia Vassily Alekseevich—the Russian representative—said the main players and wider international community must pool their efforts to help Afghanistan achieve national reconciliation. He pointed to the important role played by his own country, and by China and Pakistan, as well as the potential contribution of Iran.

Alekseevich’s stress on regional cooperation is important. It echoes past attempts to solve the Afghan problem in a peaceful manner. From 1996 to 2000, Central Asia had witnessed the fomentation of Islamic radicalism in Uzbekistan, Tajikistan and Kyrgyzstan, with the Taliban taking full control of Afghanistan. The free flow of weapons and drug trafficking worsened this murky state of affairs. Russia remained concerned about the formation of inter-jihadist linkages between the Islamic Movement of Uzbekistan (IMU) and Hizb-ut-Tahrir (HT), which aimed to topple the regime of Islam Karimov in Uzbekistan. China experienced internal turmoil in the Xinjiang region—bordering Afghanistan—which witnessed ethnic extremism and anti-government violence; Islamic separatists were using arms smuggled from abroad.

 

Closer Eurasian Ties

In the turbulent context Asia faced in the late 1990s, regional states formed the Shanghai Cooperation Organization (SCO). SCO is the largest grouping in the world in terms of geographical coverage and population, with its territory spanning three-fifths of the Eurasian landmass and nearly half of the human population, encompassing China, Russia, Pakistan, India, Iran, Kazakhstan, Kyrgyzstan, Uzbekistan and Tajikistan. Afghanistan, Belarus, and Mongolia subsequently participated as observer states.

In July 2001, the SCO stated that the “cradle of terrorism, separatism and extremism is the instability in Afghanistan.” Member nations agreed to work together to contain the Taliban and the various political Islamists in the area. The process would be protracted, but potentially effective. None of the countries wished the consolidation and expansion of the Taliban; their national interests hung in the balance. Further, they commanded sway over a country whose only benefactor was a Pakistan deeply wedded to China.

 

The U.S. Invasion’s Impact

The 9/11 attacks and the subsequent U.S. invasion of Afghanistan shifted the needle of the regional compass toward the United States; China, Russia, and the SCO were pushed aside. All of the Central Asian states—except Turkmenistan—signed military cooperation and base access agreements with the United States; the Central Asian states saw the security and economic benefits of the sudden U.S. engagement with the region as a bonanza.

While both Moscow and Beijing endorsed the U.S.-led invasion in Afghanistan, an important precondition for the support was the understanding that U.S. and NATO bases in Central Asia would be short-term. With the prolonged stay, the countries developed an increasingly mutual irritation toward Washington. To neutralize Western influence, they attempted to revive the SCO process.

At the SCO foreign ministers’ meeting in Beijing on January 7, 2002, the Russian and Chinese foreign ministers put forward proposals to improve the organization’s anti-terrorism and security capabilities, maintaining the group should assume responsibility for regional security. These plans fell on deaf ears as Central Asian states were busy welcoming the U.S. empire.

In 2005, however, the SCO called for the United States to withdraw from bases in Central Asia. The statement read:

“Considering that the active phase of the military anti-terrorist operation in Afghanistan has finished, member states… consider it essential that the relevant participants in the anti-terrorist coalition set deadlines for the temporary use [of military bases in the region].”

This was the first indication that the military directives of Western powers would not unilaterally dictate the regional Afghan strategy. Afghanistan soon signed a protocol establishing the SCO-Afghanistan contact group. In 2012, Afghanistan became an observer in the SCO. Three years later, Kabul endorsed the Regional Anti-Terrorist Structure (RAT) of the SCO, later applying for full membership in the group. These arrangements have continued to this day, providing an alternative to belligerent tactics. On July 14, 2021, the Contact Group met in Tajikistan’s capital of Dushanbe where, inter alia, it was demanded that Taliban pledge a clean break with terrorist outfits.

 

What’s at Stake for China and Russia?

Regional agendas for Afghanistan will likely be sustained because the SCO heavyweights—China and Russia—continue to have a stake in the happenings of Kabul. Moscow is worried about a) the emboldenment effect that Taliban’s battlefield victory would have for its historically explosive Muslim regions; and b) the possible relocation of U.S. troops to the countries neighboring Afghanistan, which would weaken the Russia-led Collective Security Treaty Organization (CSTO) in Central Asia.

Beijing is anxious that religious militancy in Afghanistan will fuel a domestic Islamist insurgency by invigorating the East Turkestan Islamic Movement (ETIM)—an ethnic Uighur extremist group responsible for past terror attacks in China and which seeks to transform Xinjiang region into an independent Islamic state. This could negatively affect China’s One Belt, One Road Initiative, also known as the Belt and Road Initiative (BRI)—a project to build a network of overland road and rail routes, oil and gas pipelines, and other infrastructure projects from West China through Central Asia to Europe.

As the Taliban retakes control of Afghanistan, China and Russia won’t make timid pleas to Washington to place forces on the ground in the country. The militarist path has been deemed a flawed move by both sides. In the coming days, the Sino-Russian bloc will likely prioritize political solutions, thereby promoting a more proactive position for the SCO and emphasizing the importance of regional frameworks.