Japan, the Netherlands back U.S. sanctions on China's chip, tech sectors | Fortune

2023-01-08 00:30:30 By : Mr. Pancheng Li

It’s always better in geopolitics to move in packs—and the U.S. just picked up some welcome company in its aggressive assault on China’s tech industry.

Bloomberg reported Monday that Japan and the Netherlands have agreed in principle to join the U.S. in placing chip-related export controls on China, further restricting the communist republic’s ability to obtain cutting-edge semiconductors. Electronic Components Active And Passive

Japan, the Netherlands back U.S. sanctions on China's chip, tech sectors | Fortune

The news comes two months after President Joe Biden’s administration banned American companies from selling many types of advanced chips to organizations in China and blocked the global export of chips made with U.S. equipment. With Japan and the Netherlands now on board, all three of the world’s primary producers of chipmaking machinery have now taken aim at China. 

The Biden administration hopes the export controls will further hobble China’s development of advanced artificial intelligence, computing, and weapons technology. China’s semiconductor industry already lags many years behind the Western world and some of its democratic neighbors in Asia, though President Xi Jinping has pledged tens of billions of dollars in government aid to prop up its domestic chip sector.

“There’s no way China can build a leading-edge industry on their own. No chance,” Sanford C. Bernstein analyst Stacy Rasgon told Bloomberg.

For U.S. officials, bringing Japan into the fold is something of a mini-coup.

As the Japan Times reported last month, the island nation’s chip equipment and machinery industry will feel a decent amount of pain from losing one of its primary customers. China accounted for about 40% of Japan’s $24 billion in chip manufacturing equipment exports last year.

Japanese officials also faced last-minute lobbying from executives at two of the country’s largest tech giants, Sony and NEC, who argued that the impact of chip exports has been overblown. 

Sony Chief Technology Officer Hiroaki Kitano told the Financial Times that he was “not sure what kind of long-term impact” the export bans can have on China’s artificial intelligence aims. NEC’s chief executive, Takayuki Morita, argued the controls might temporarily slow the republic’s technological progress, but the “overall trend will not change.”

“It’s not possible to ignore China’s competitiveness in technology, and it will become one of the forces (to reckon with) in the long run,” Morita said, according to the Financial Times.

With the Japanese and Dutch in tow, however, the Chinese will be virtually self-reliant on advanced chipmaking for years to come. While the U.S. export controls choked off vast swaths of the semiconductor sector, Chinese officials could have taken the next several years to re-engineer their foreign supply chains, primarily relying on the two U.S. allies for equipment.

“U.S. technology is irreplaceable over the near and medium term, so the immediate consequences of this policy are essentially guaranteed to be disastrous for China,” Gregory C. Allen, director of the Artificial Intelligence Governance Project and a senior fellow at the Center for Strategic & International Studies, wrote in Time last month. “However, if China succeeds in persuading U.S. allies to assist China by developing and providing alternatives to key pieces of U.S. technology, then the long-term outcomes of this policy could be disastrous for U.S. national security and economic competitiveness.”

China, meanwhile, has proven particularly inept at competing on the global semiconductor stage. 

As Bloomberg reported in August, the upper echelons of China’s government “are angry at how tens of billions of dollars funneled into the industry over the past decade haven’t produced the sorts of breakthroughs that emerged from previous national-level scientific endeavors.” Those struggles likely will be exacerbated by an exodus of Taiwanese semiconductor experts, who will be less likely to venture across the Taiwan Strait to assist a nation with substandard equipment and technology.

China’s political leadership remains a wildcard in its escalating tech cold war with the U.S. and American allies. Xi has huffed and puffed about chip export controls, but he’s yet to take decisive retaliatory action.

If Xi does strike back, the U.S. can now feel more comfortable in its strength through numbers.

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Plenty of room for more. Private equity firm Thoma Bravo plans to acquire cloud business management company Coupa Software in a $8 billion deal, adding to the investment group’s growing roster of tech outfits, the Wall Street Journal reported Monday. Coupa shareholders will receive $81 per share under terms of the deal, a 77% premium on the company’s share price the day before reports of a potential acquisition emerged in late November. Thoma Bravo has announced four software company acquisitions in the billion-dollar-plus price range this year.

A split filing decision. Federal prosecutors are divided over whether to seek criminal charges against Binance and some of the cryptocurrency exchange’s top executives, including Changpeng “CZ” Zhao, amid a years-long inquiry, Reuters reported Monday. The investigation centers on allegations of facilitating unlicensed transactions, conspiracy to commit money laundering, and violating sanctions laws. Some prosecutors believe there is enough evidence to file charges against Zhao and other high-ranking Binance officials, while other federal lawyers argue more time is needed to gather and review evidence, sources familiar with the probe told Reuters. 

More power to them. U.S. researchers have reached a major technological milestone in their decades-long effort to harness the power of clean energy through fusion reactions, the Washington Post reported Sunday. Department of Energy officials are expected to announce Tuesday that they have produced a fusion reaction that generates more energy than is required to produce the reaction. Scientists hope fusion energy could eventually deliver inexpensive power to the world while producing no carbon emissions or radioactive waste, though commercialization of the technology likely remains decades away.

Blue, take two. Twitter is expected Monday to relaunch its Twitter Blue subscription service following last month’s calamitous rollout of the revamped feature pushed by new owner Elon Musk. Twitter Blue subscribers will pay $8 per month if they subscribe online and $11 per month if they sign up through an Apple device, an implicit critique of Apple’s App Store fees. Company officials announced Saturday that they planned to unveil the updated Twitter Blue service on Monday, though it did not appear to be available as of early Monday afternoon.

They continue to excel. Microsoft once again topped a closely-watched list of the world’s best-run companies, though its tech brethren lost some ground this year. The Wall Street Journal reported that Microsoft ranked first for the third straight year in the annual Management Top 250, produced by Claremont Graduate University’s Drucker Institute. Tech companies dominated the top 10, with Apple, IBM, Nvidia, Intel, and Amazon all securing high marks. Yet other tech firms slipped in the rankings, including Alphabet, Uber, and Salesforce. Meta took a particularly dramatic tumble in the Big Tech crowd, falling from 31st to 130th. The rankings evaluate each company’s financial strength, customer satisfaction, and innovation, among other attributes.

Microsoft ranked in the top 10 in each of the five component categories except customer satisfaction, where it ranked 519th. The company, which got the top mark for innovation, unseated Amazon for the No. 1 spot overall in 2020 and has held the position since.

Microsoft has benefited greatly from a big bet it made on the cloud in recent years, focusing on its Azure business since Chief Executive Satya Nadella took over in 2014.

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One step ahead of the law. Where in the world is Do Kwon? Apparently, southeastern Europe. CoinDesk reported Monday that South Korean authorities believe the TerraForm Labs co-founder, currently wanted on criminal charges related to the multibillion-dollar collapse of two linked cryptocurrencies, recently escaped to Serbia . Officials in Seoul believe Kwon left South Korea in April, one month before the TerraUSD and Luna tokens disintegrated into worthlessness, and traveled to Singapore. From there, authorities suspect Kwon traveled to the United Arab Emirates in October, then migrated to Serbia at an unspecified time. It’s unclear how Kwon is moving between nations, given that his passport has been invalidated. South Korean prosecutors are working with Serbian officials to secure Kwon’s arrest, though they believe he might have already fled to another country.

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Japan, the Netherlands back U.S. sanctions on China's chip, tech sectors | Fortune

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