American Business And Chinese Money

February 9th, 2023

Despite increasing sanctions and scrutiny on hostile Chinese business practices and intellectual property theft, private equity firms have previously managed to mostly evade scrutiny for taking Chinese money. That may finally be changing.

Takeaways:

  • “The US is starting to wise up on Chinese investments. It’s been cracking down by closing loopholes But not all the loopholes have been closed, Which means China could be getting US trade secrets.”
  • “Better late than never. This feels like your grandparents finally learning how to unplug and plug back in the WiFi router. Shouldn’t have taken this long to figure out something so obvious, but glad they eventually got there.”
  • “After years of letting China buy up sensitive US technology, property, and companies, the US government is finally putting its foot down. In 2018, Trump signed the Foreign Investment Risk Review Modernization Act, or FIRRMA. This changed how the Committee on Foreign Investment, or CFIUS, screened investments in the US for national security issues.”
  • “Before, CFIUS could only review foreign investments if they resulted in a controlling stake. Now CIFIUS can review any investment.”
  • “When Biden got into office, he ordered CFIUS to look at all investments that affect critical aspects of the US supply chain, or Americans’ personal data, and several other things.”
  • “As you might imagine, this has not gone over well with Wall Street, which loves Chinese money more than Snoop Dogg loves marijuana.”
  • “‘Wall Street now stands as an increasingly lonely voice arguing for more engagement with China.’ This was going on even as China was taking a wrecking ball to its economy with its zero covid policy, committing genocide against an ethnic minority, and selling the organs of political prisoners for profit. Find someone that loves you the way Wall Street loves Chinese money. They’re ride or die…and the people that die are political prisoners.”
  • “Private equity and venture capital firms were able to get an exception granted in FIRRMA for limited partners. That means that if a foreign entity becomes a limited partner in, say, a private equity fund, CFIUS doesn’t have any jurisdiction over it. Should have seen something like this coming. Finding loopholes is what Wall Street does best.”
  • “The type of investments that private equity firms are involved in means that Chinese companies could get access to critical technology. Stuff that could affect national security. Portfolio details could hold national economic or intelligence value.”
  • “The China Investment Corporation or CIC. At $1.3 trillion US dollars, it’s the largest sovereign wealth fund in the world. ‘CIC has said repeatedly that it separates commercial activities from governmental functions and makes its investment decisions independently.'”

  • “CIC’s board of directors includes representatives from the Chinese government.”
  • “CIC’s Deputy General Manager Qi Bin has explained that cooperation with developed economies is to be leveraged to obtain advanced technology.”
  • “CIC is also partnering with large investment companies, like Goldman Sachs, Japan’s Nomura Holdings, and France’s BNP Paribas. CIC’s Deputy General Manager Qi Bin has talked about leveraging these partnerships for the ‘win-win’ ‘mutual benefit’…of Chinese companies. Somehow I’m getting the sense that “win win” has a different meaning in China. I think in English we would call this ‘short-term win for long-term loss.’ I’ll give you my money and you give me your trade secrets.”
  • There’s finally some efforts for CFIUS to close private equity loopholes.
  • Pardon me if I express deep skepticism that the Biden White House will actually constrict the inflow of Chinese money…

    India’s Semiconductor Push: More Smoke Than Fire

    February 8th, 2023

    India has been trying to get into semiconductor fabrication for a while now, and after announcing a $10 billion investment fund, and with China locked out of so much semiconductor technology, there have been a lot of news bubbling up, but I want to focus on the Foxconn/Vedanta fab project.

    The Economic Times is reporting that Foxconn and Vedanta are seeking to bring in European chipmaker STMicroelectronics as their technology partner in their proposed India manufacturing unit. The two companies announced their joint venture February 2021, with Foxconn as lead partner. Vedanta are reportedly seeking to onboard a CXO to head their semiconductor business.

    Snip.

    Vedanta-Foxconn are set to finalize a location for their facility in the next few weeks. The consortium are reportedly seeking a 800-1000 acre land parcel that is also well connected with Ahmedabad. The Gujarat government, as of media reports on September 16, showing sites at Sanand and Mandal-Becharaji in Ahmedabad district, two locations near Vadodara in central Gujarat, Dholera, Himmatnagar, Jamnagar, and Kutch. The plant has to be located at a distance from national and state highways so to cut off any vibration from heavy traffic movement. Further, no other major industry should be located in its vicinity.

    Vedanta and Foxconn, in a 60-40 joint venture, will be setting up India’s first semiconductor production plant, a display fab unit, and a semiconductor assembling and testing unit over 1000 acres in Ahmedabad, state of Gujarat. The plant will begin production in two years as Foxconn plays the role of technical partner while Vedanta provides financial backing. The investment is worth over INR 1.54 trillion (approx. US$20 billion) and semiconductor manufacturing will be carried out by the holding company, Volcan Investments Limited.

    Foxconn is a serious tech player that has serious mastery over the value-added chain. $20 billion, assuming it actually materializes, is real money, even in semiconductors. It’s right around the threshold to build a state of the art sub-10nm fab, even though it’s apparent that that’s not what they’re aiming for.

    Vedanta, on the other hand, is another matter. They’re “a globally diversified natural resources company. We extract and process minerals, oil and gas.” Yeah, a natural resources company generally isn’t who you want running your fabs. Another strike is their talking about “Net Zero Carbon by 2050,” which suggests they may have their fingers in political scam pies.

    STMicroelectronics is a real chipmaker that runs real fabs, but not the first company I would turn toward to purchase cutting edge process technology from, nor even the tenth. The fact that STM has already announced plans to team up with Global Foundries to build a new 300mm fab next to their existing fab line in Crolles, France in June 2022 makes me even more suspicious. Information on that existing 300mm Crolles fab is sketchy, and I know that for a long time it was a pilot rather than a production line, and I can see no evidence that it was ever expanded to volume production.

    The fact that they plan to set set up a fab, a display fab, and a slice-and-dice packaging facility suggest a certain lack of focus. Flat Panel Display (FPD) fabs use familiar semiconductor steps, but the machines are very different because the substrates are different, and Samsung has huge dedicated display fabs. It’s setting up a modern chip fabrication plant that’s the difficult part, and while this combination could probably put together a solid trailing edge fab, like Bosch’s new 65nm fab. But that only cost $1.2B. Maybe they plan to build something in the 20-10nm range.

    “The plant will begin production in two years.” Yeah, that’s not happening. Even giant players like TSMC and Intel generally take 2.5-3 years to stand up a new fab from breaking ground to starting up the line.

    This could still happen, but the details are very sketchy. The slice and dice operation could be set up without too much difficulty, but it’s a low volume, low tech spinoff operation. A display fab would be more difficult, but it’s doable, though again, probably not in two years. But a real 300mm wafer, sub-65mn node microchip fabrication plant in India? I don’t see this set of players carrying that off well in three years. Five sounds more realistic, and that’s assuming the deal doesn’t fall apart.

    Other India semiconductor plays sound even more nebulous.

    Taiwan’s TSMC is also looking to set up a chip-fabricating factory in India, and is currently speaking to various government agencies to check the viability of setting up factory in India. TSMC already has one of its largest offices outside of Taiwan in India in Bengaluru, Karnataka, from where it provides support to its’ existing customers in Asia, Europe and North America and supports and encourages fabless companies in India in design and growth.

    Ever since news N Chandrasekaran – chairman of the Tata group, announced that Tata Electronics (TEPL) will set up an Outsourced Semiconductor Assembly and Test (OSAT) facility in India, there has a been a lot of speculation, according to which, TSMC and Tata may enter into a partnership.

    Besides TSMC, Powerchip Semiconductor Manufacturing Corporation, a Taiwanese chipmaker, is also in exploratory negotiations with several Indian companies to help establish new chip operations in the country, as per a report by Taipei Times. According to the newspaper, the memory chip maker’s announcement put an end to six months of speculation that it was planning to invest in India to diversify its operations despite Taiwan’s rising geopolitical tensions.

    “Speaking to,” “exploring plans,” etc. These are very wishy-washy terms. Powerchip is a memory manufacturer that’s hardly flush with cash. I’m sure TSMC is talking to a lot of countries about fabs, but their newest one is under construction in Arizona.

    International Semiconductor Consortium (ISMC), a joint venture between UAE’s Next Orbit Ventures and Israel’s Tower Semiconductor, was supposed to spend $3 billion to get started on a 40-65nm analog fab right about now, but I don’t see signs that’s actually happened. Tower is a real foundry, and the $3 billion pricetag and 4-5 year timeline seems realistic, but I’m not 100% sure they’re still interested in the project after Intel announced plans to buy them about a year ago. And having to bring in Arab petrostate funding for your venture is seldom a sign of strong financial viability.

    There’s no reason you can’t build one or more modern fabs in India, but so far no major chip manufacturer has chosen to do so, despite the supposed availability of $10 billion in government subsidies.

    24,000 Austin Area Residents Still Without Power

    February 7th, 2023

    My own power has stayed on continuously since Saturday morning, but a lot of Austin-area residents are not so fortunate.

    There are still 24,000 Austinites still without power as of Monday morning, with a projected point of resolution still six days away.

    Gov. Greg Abbott issued a disaster declaration for Travis County and six others across the state on Saturday. That opened the door to deploy “all available” state resources necessary to help alleviate the issues. Austin and Travis County officials issued their own disaster declarations last week.

    Across the whole state, 32,600 people are without power, down from the near-half a million in the middle of last week. Marked progress has been made, but Austin Energy continues to struggle to restore power for the remnant after an ice storm downed power lines across its service area.

    Falling tree branches are the foremost culprit of the circuit disruption, and certain areas experienced repeated outages after successive breaks occurred.

    Indeed. In the 2021 ice storm, power outages were due to ERCOT’s over-reliance on renewable energy sources, failure to match supply to demand, and foolishly power-cycling areas (like the Permian Basin) that made things worse by constraining energy supplies, but the 2023 ice storm outages were almost entirely due to power-line being taken out by ice-encrusted branches. (In my neighborhood, pretty much every house had multiple large branches snap off from the ice accumulation, and several people lost entire trees.)

    “Based on current information, we expect to restore power to nearly all remaining customers by Sunday, February 12, with the exception of those in need of electrical repairs to customer-owned or maintained equipment,” the City of Austin said in a Monday morning release. In addition to home outages, there were 36 traffic signals out as of Sunday afternoon.

    But looking ahead to this week’s forecast, the city cautioned, “The expected weather conditions this week may damage power lines and already weakened trees, causing additional outages, increasing the risk for our lineworkers, and slowing progress.”

    Austin Energy, the city-owned utility provider, contracted linemen from surrounding utilities to assist with the repair endeavor.

    Officials stated that the ice accumulation was heavier and more pervasive than during the 2021 blackouts, which were caused mainly by a statewide power grid failure and not local downed power lines.

    One big contributing factor seems to be that tree removal near power lines hasn’t always been a priority for Austin Energy.

    Ice on power lines and nearby branches is to blame for most of Austin Energy’s power outages this week.

    Austin Energy’s website shows tree clearance is based on the type of tree.

    Fast-growing trees, like pecan, have a 15-foot clearance. The slow-growing species, like cedar, have a 10-foot clearance. Any trees near high-voltage transmission cables must be trimmed 25 feet back.

    Austin Energy’s website shows three contracting companies were hired to help clear a backlog of work around the city.

    “Vegetation management is something that we’re very focused on. Over the past several years we have increased our budget and our focus to trim trees. We could really use help in that area with getting our residents to understand the importance of vegetation management, to allow our crews in, to get the vegetation management done. We can always be better,” Jackie Sargent, general manager for Austin Energy, said in a press conference Thursday.

    Before Austin Energy trims any tree, the company considers the seasons that oak wilt peaks at and if any tree contains bird habitats.

    “We make every effort to avoid trimming red oak and live oak trees between February through June when oak wilt is more likely to spread. When possible, we avoid trimming from March to September to protect Golden-cheeked Warbler and Black-capped Vireo habitat areas (applies to undeveloped areas west of MoPac). However, we conduct limited trimming on oak trees during the oak wilt window in areas that are experiencing frequent vegetation-related outages or emergency situations,” Austin Energy’s website shows.

    What are mere tax- and energy bill-paying citizens compared to the safety of the Golden-cheeked Warbler and Black-capped Vireo?

    Looking at the 2022 Austin Energy Annual Report, the words “trees” and “pruning” do not appear anywhere at all, but “Green” shows up 11 hits. Appearing green seems a much higher priority for Austin Energy and the Austin City Council than trimming the actual greenery necessary to ensure the lights stay on.

    Some adjustment seems in order.

    Follow-Up on Ukraine’s Kamikaze Drones

    February 6th, 2023

    Given that the original video generated doubts as to its veracity, I thought I would post this followup that goes into more detail about Ukraine’s low-cost suicide drone/loitering munition.

  • These look considerably less jury-rigged than the previous drones.
  • “These are publicly funded…Ukraine’s Ministry of Defense made a public appeal for donations to buy 1,000 of these.”

  • There seem to be different types with different warhead sizes. “The technical details are a bit vague. I’ve seen mentioned ranges of just two kilometers to over 10 kilometers.”
  • We see the successful attacks, but not the failures.
  • “These cost around 200 to manufacture, so they’re also extremely cost effective.” Indeed, even more cost-effective than my original estimates.
  • Two Videos About Velma

    February 5th, 2023

    Velma, if you haven’t heard, is HBO Max’s “re-imagining” of the animated Scooby-Doo TV show. And by “reimagined” I mean “mangled and mutilated to fit the angry, narrow confines of social justice warrior ideology.”

    Since I don’t have cable, I can’t go out of my way to watch it for the sake of reviewing it, so let’s let The Critical Drinker take a whack at it:

    If that weren’t enough, let’s let Ryan George of Pitch Meeting also take his turn at bat:

    The original Scooby-Doo is hardly going to go down in the annals of television as a classic on the order of Hill Street Blues or I Love Lucy, but it was a solid, wholesome kid-vid TV show that made good use of its limited animation budgets to produce solid, fondly remembered shows that the franchise was strong enough to survive decades of tweaks (“with special guest Don Knotts”), soft reboots, a series of unlikely direct to video movies…

    …two “meh at best” live action movies, and even inflicting The Vile Abomination on American viewers.

    Even apart from the social justice idiocy, throwing away that legacy for derisive belittlement is just wrong. Moreover, these projects never seem to be profitable or even well-received (remember the disasterous Land of the Lost remake with Will Ferrell?). If you don’t treat the source material with a due amount of respect, all you’re doing pissing off generations of people that grew up watching the originals.

    This sort of thing is natural meat for The Critical Drinker, who delights in tearing into Social Justice crap. But the pointed Pitch Meeting takedown seems far more significant, as George has never been one to wade in culture war commentary.

    Velma seems to be the show that everyone hates.

    Power Back On After 60 Hours

    February 4th, 2023

    The power came on back here about 6:30 AM. Now I need to take a long hot shower after giving the water time to warm up, then go through the fridge and freezer to determine what gets thrown out.

    Expect slow and/or lazy blogging this weekend, followed by maybe a LinkSwarm on Monday on Monday, and then maybe a lessons learned post later in the week.

    Edited to add: And now it’s off again…

    And on again.

    And then off for a few minutes.

    And now (1:08 PM) it’s on again.

    It would be nice if Austin Energy could get this sorted out…

    Power Out Day 2

    February 3rd, 2023

    Day 2 of being without power.

    I was recharging my iPhone on different laptops, but that stopped working. I have been able to recharge it using my car charger, so I drove around the neighborhood looking at the damage. Almost every house has a limb or tree down.

    ETA is still 6 PM tonight, but I don’t think anyone believes that. A good number of my friends are still without power as well.

    The cold was trivial compared to the last ice storm, but the king freezing rain this time made the tree damage absolutely devastating.

    Whatever lessons Austin Energy learned after the last I’ve storm, “Stay on top of tree branch trimming near power lines” doesn’t appear to be among them…

    Power Out Here

    February 2nd, 2023

    Since 6:08 yesterday evening. Much of Austin is also so afflicted. Expect slow blogging and much shivering…

    Update:

    The forecast brings additional risks of power outages and downed trees, which plagued the city yesterday and still impacts over 155,000 Austin Energy customers who don’t have power. A spokesperson with the utility company said it expects full restoration by Friday at 6 p.m.

    Update 2: 24 hours and still out. New Austin Energy ETA for all outages is Friday night

    The Flying Yeet of Death

    February 1st, 2023

    I’ve previously covered suicide drones and drones dropping RPGs. Now Ukraine is evidently cutting out the middleman and passing the savings on to Ivan by just strapping RPGs to light drones and guiding them in.

    Here’s a screen-grab of this masterpiece of redneck engineering:

    The is a great application of one of Murphy’s Military Laws: “If it’s stupid but it works, it ain’t stupid.” For the Russians, it must be quite embarrassing to get yeeted into the afterlife by Doogie Howser’s science fair project.

    I’m somewhat surprised that drones that small can carry the RPG rounds effectively, but presumably they’re replacing camera gear or something close to the same weight.

    An RPG-7 costs about $2,500 each, while a BMP-3 costs about $800,000 each. Even if you double the price for the quadcopter ($2,500 is a bit pricey, but not out-of-line for some pro rigs), you still get a hugely useful loitering munition for less than 1/100th the cost of the target you’re taking out…

    Japan, The Netherlands Join China Semiconductor Ban

    January 31st, 2023

    Japan and The Netherlands have evidently decided to sign onto the Chinese semiconductor ban.

    The talks between the US, Japan, and the Netherlands over wider bans on exports of semiconductor technology to China have reportedly seen the three agree to concerted action.

    As The Register has often chronicled, the US has restricted exports of critical chipmaking and silicon technologies to China, hoping to prevent its economic and strategic rival from developing military technologies – and to protest human rights abuses.

    While the Home of the Brave has spawned many of Earth’s most significant chipmakers and designers – Intel, AMD, Qualcomm and many others have headquarters stateside – other nations also export semiconductor tech to China. The Land of the Free would rather put a stop to that if possible.

    The Biden Administration also recognizes that its bans could be seen as creating an opportunity for other nations to cash in on the absence of US vendors in the Chinese market. The three-nation talks therefore have the extra dimension of making sure America’s policies have their desired effect against China and don’t harm the home team.

    Those twin desires saw Japan and the Netherlands in talks with the US last week, and according to numerous reports the meetings produced a unified approach to restrict semiconductor exports to China.

    Without equipment from the US, Japan and The Netherlands, you can’t equip and run a modern semiconductor fabrication plant.

    Peter Zeihan (him again), who has evidently lost a bet requiring him to dress as Gimli, discusses the ramifications.

    This is one case where Zeihan gets the generalities right, but is wrong on some specifics.

  • Right: The idea that China can just forge a complete “alternative” semiconductor supply chain out of thin air to replace western alternatives is indeed “hideously wrong.” “The nature of the semiconductor industry is more of an ecosystem. There are there’s very few places that without, significant industrial build out, could even pretend to do more than two or three steps of it, much less than a dozen or so steps that are necessary.”
  • However, in conflating semiconductor manufacturing and semiconductor equipment manufacturing (possibly to avoid contracting hypothermia) he’s muddied things up a bit. There are five essential semiconductor equipment manufacturers:
    • Applied Materials (USA)
    • ASML (The Netherlands)
    • KLA (USA)
    • LAM Research (USA)
    • Tokyo Electron (Japan)

    If you’re building a modern, sub-10nm fab, chances are pretty good you need all five. You have to have an ASML EUV stepper, or else you have to go with trailing-edge machines from Canon and Nikon and deal with the computational pain and complexity of self-aligned quadruple patterning. You need KLA inspection tools to raise and maintain yields, and you need, at the very least, one of AMAT, LAM or TEL to provide the rest. Take away all three and you can’t equip a fab, period.

  • “We now have an agreement, and very soon the Dutch will formally be joining the sanction system against the Chinese.”
  • “The best [chips], these are 10 nanometer and smaller. This is typically what’s in your cell phone or in your high-end computers and servers those about 80% percent of them are actually fabricated in Taiwan, with another 20% in South Korea.” No. Although TSMC and Samsung are indeed leaders in this space, Intel has had 10nm processes running in their advanced fabs is Hillsboro and Chandler for a while, even though they’ve suffered yield problems.
  • His assertion that only China does legacy 90nm and above processes is false, as a look at this list of wafer fabs will attest, as there are a lot of companies (TI, TowerJazz, Oki, Mitsubishi, etc.) still profitably running older nodes, though many are comparatively funky technologies like BiCMOS, Analog, GaAs, etc.
  • Some quibbles about the details, but he gets the big picture right.

    As for his suggestion that companies stick to over 10nm nodes, well, I don’t think much of it. Those that can do >10nm nodes will and push the technology forward, and those that can’t afford to won’t…