August 29th, 2023 - The Breakthrough Day

By now, folks would have read or heard about Huawei’s release of its 60 MatePro smartphone in China. The date was August 29^th, 2023. It was done without fanfare, but at a time when US Secretary of Commerce Gina Raimondo was visiting the country. Huawei’s miseries began 1,566 days ago. As we all know, two of Biden’s Cabinet members – Trade Representative Katherine Tai and Raimondo – were responsible for much of China’s economic woes today. Much to China’s disappointment, Katherine continued where Trump had left off. However, on this trade war front, China has not been too greatly disadvantaged, despite Tai’s hawkishness.

But on the Commerce front, Raimondo is most vicious. (I have written earlier that she had developed a hatred for China after her father lost his job when his employer Bulova watch decided to relocate to China.) She and her deputy who was seconded from CIA executed Biden’s policy of retarding China with a degree of zeal that only someone quite irrational would do. Huawei was only one of the victims; there are hundreds more in China. The entire Chinese high-tech industry was put into jeopardy. Many estimated that the US actions might have set China back technologically by a decade, thanks to its inability to produce high-end chips.

It was indeed a bitter pill for China to swallow. The country was already completely capable or designing the most advanced chips, albeit on US software; Huawei was about to become world’s No 1 smartphone maker. China was putting too much faith in globalisation and manufacturers like Huawei was happy to farm out the production to chip foundries, local or foreign, as long as they could use them to produce their devices competitively to penetrate the world markets. And these foundries depended largely on ASML of Holland for their DUV and EUV lithography machine needs. The tyrant came in and choked China on two fronts: the deprivation of EDA software and all advanced chip-making equipment to China, including those from its allies.

It is therefore most ironical that while Huawei has been the acknowledged world leader in 5G technology, it has not been able to come up with a 5G smartphone for the last four years. And at last!

Huawei has not claimed that its Mate60Pro is 5G phone, neither has it said that the Kirin 9000S chip used is 7 or 5 nm, save to say that it is anchored on its own HarmonyOS platform. But soon users found that its speed well exceeded standard 5G’s. On top of that it could make satellite calls, thanks to its tie-up with China’s BeiDou Satellite Navigation System!

Not surprisingly, the Huawei feat was not given much weightage by the Western and pro-West media, where some went on to speculate that the chips must have been sourced through dubious means. Yes, Huawei has the expertise, but it does not have the software nor the foundries to produce such high-spec chips. So the argument went. Maybe the Arabs are helping them to procure?

But on taking the set apart, they found it is 100% China-made! This simply means that Huawei has overcome the two biggest hurdles: the software and the foundry to do 7nm- or 5nm-equivalent chips!

I am no expert on smartphones. But from the comments made by the more authoritative sources, they are facts.

Any firm in Huawei’s shoes would have yielded under the type of pressure applied by the US government – Toshiba of Japan and Alstrom of France are the classic examples of US tyranny. Huawei’s founder Ren Zhengfei is made of different stuff. He perseveres and Huawei has emerged even more formidable. Ren personifies the best of Chineseness. But Huawei’s breakthrough epitomises a much wider strength of the nation – Chinese preparedness to 吃苦 (chī kǔ) or bear hardship and if push comes to shove, to pull everyone together to fight for a national cause. The phone is selling like hot cakes now. Many buy out of patriotism (and the anger with America’s sanctions). Apple would also be releasing their iPhone 15 soon. The possible impact is not lost on them.

This begs the question Biden and his team have to answer: Does the trade war and all the sanctions they are imposing on China work to achieving their mission of retarding China?

The answer is obviously no. But you can bet that they will even be more vicious in their actions regardless.

Upon her return, Raimondo said the US policy to deny China access to advanced chips would be sustained with more vigour, yet she wanted China to buy their low-end chips. What sort of logic? Jake Sullivan, the National Security Adviser, has also just promised that the administration will tear down the device to find out if any of the bit or piece has breached America’s sanctions.

Chinese are natural tinkerers, and with a huge domestic market, any product innovation will soon spin to all sorts of derivatives. Given the size of China’s population and its middle class, they can easily achieve the critical mass, and the competition is so intense that the lesser ones will soon fade and the good ones go on to become champions in the world. BYD is a case in point. To deny China of any technology will simply make them work triply hard to overcome, and the results are usually beyond the West’s imagination. Failure is just a temporary set-back. The significance of this idiom 卧薪尝胆 (wò xīn cháng dǎn, lying low to fight another day, constantly being reminded of past bitterness) is a cultural trait that is absent with the Westerners.

Chinese are capable of ‘commoditizing’ anything they lay their hands on. Of course, this also means that they will not be able to position themselves in the ranks of BMW, Gucci, Rolex, and what-have-you. But Rome is not built overnight. China has indeed come a long way in just thirty years or so. Give them another ten years, it is not unlikely that they can make it. They know all the MBA stuff, for sure.

America is frantically building the chip-making factories to produce all the high-tech chips. But high-tech chips only account for a small percentage of the world needs. Even in military applications, 14nm will suffice, not to mention chips that are used in motor vehicles and white goods. And China is entirely capable of making these grades at the moment. Who would buy from America then? Without sales revenues, how can they survive commercially, let alone the ability to fund R&D, which is so essential in high-tech industries.

It boils down to the fact that America is led by people who are good in winning elections (like Trump and Biden) or who have obtained pedigree degrees, especially in law (like Blinken or Raimondo) or who ironically are Black or Coloured (like Harris and Austin). Few of these people really understand business and technology.

First Blinken, then Kerry, then Yellen, then Raimondo, every of them wished and had visited China, not on invitation but by asking, but China and the US have not come any closer on trade and technology issues. (Austin has yet to be ‘granted’ the pleasure, but with his ‘sweet potato’ head, will he be able to make any difference on the military front? I doubt.) It is obvious to me that they are not interested to live with China as equals. They just want to size up China and come up with more shackles.

Xi Jinping is not attending the G20 summit in New Delhi. I doubt he will attend the APEC do in California too. With the world so fractured, these meetings are a waste of time, except for Biden, who wants every opportunity to rein in more allies or hoodlums to contain China. On the other hand, BRICS has found new purposes and has accepted new members. But its ability to succeed is still far from certain, for India remains a ‘joker’ in this pact.

Yes, China is facing some serious economic headwinds now principally in real estate debts and export declines and upon her return, Raimondo has been chàng shuā’ing (唱衰 – singing songs that are tuned to belittle an adversary) China’s economy. (IMF Managing Director Kristalina Georgieva, who has also just made a visit to Chia, offers a different take. Her outlook for the country is positive and encouraging. Who do you want to believe? Someone with an axe to grind or someone who has a global responsibility to shoulder?) We all know following all the decoupling and derisking measures taken by the US and its allies and supporters, China is now suffering on many fronts, besides those in high-tech. Many factories have moved out of China. The jury is still out on this; however, this also represents an impetus for China to climb up the value ladder. Fed’s aggressive interest rate rise policy has caused most currencies in the world to depreciate; China’s is not spared.

Nonetheless, China is also plagued by a certain wild west, Ponzi, gung-ho culture amongst its many unscrupulous up-and-coming entrepreneurs. They are giving China a bad name. Xi has done much to weed this out; but greed is always an irrational motivating force.

Be that as it may, this is a phase that China has to go through. It will eventually prevail.

Biden and his team should sit down to do serious soul-searching. Imagining that China is trying to replace them as the hegemon of the world is their Archille’s heel. China wants its citizens to have a tomorrow that is better than today. If America does not send its war ships and planes to East and South China Seas, China will know how to share the seas with its neighbours and prosper together. Given the state America is in at the moment (dilapidated infrastructure, homelessness, drug abuse, gun violence, debt, and lawlessness-amongst-youth culture), they should set to bring their own house in order, instead of making China the bogeyman to win elections.

If all the sanctions and all the alliances (NATO, AUKUS, the Five Eyes, etc) can be removed or dismantled, China will be able to help bring to the world abundant affordable gadgets to make living more pleasurable and affordable. The US can continue to offer Harvard, Yale, MIT, Princeton, etc to the world, and the rest of the world will always be able to find niches in their economy and resources that would allow them to prosper comfortably – if there are no US to sanction or sabotage them.

That will remain a dream, as long as you have leaders like Biden!