Hello Interconnected Readers:
I’m flying back to the US from Mexico this weekend, wrapping up my six-week trip. I will organize my learning and publish my thoughts on Mexico’s tech ecosystem (and to the extent applicable, LATAM’s) in the coming weeks. Please stay tuned…
Last Thursday, I wrote “China's ‘Semiconductor Theranos’: HSMC”, which was shared by leading analysts of the semiconductor industry and China tech. Please give it a read if you missed it.
Now let’s jump into this week’s Interconnected Weekly, which has additional news on the semiconductor industry in China.
[If you’d like to skip ahead to the six news stories and commentaries from last week – three from English language sources, three from Chinese language sources -- here are this issue’s items:
- “China, Russia Images in U.S. Hit Historic Lows” (English Source: Gallup)
- “Key details from fifth plenum of China's Communist Party” (English Source: Reuters)
- “U.S. Blacklisted China’s Xiaomi Because of Award Given to Its Founder” (English Source: Wall Street Journal)
- “SMIC purchases $1.2 billion of ASML products; Does not include EUV lithography equipment” (Chinese Source: 36Kr)
- “ASML clarifies SMIC volume purchase agreement: only related to DUV lithography technology” (Chinese Source: IC News)
- “Neil Shen’s six proposals” (Chinese Source: China Venture)]
“China, Russia Images in U.S. Hit Historic Lows” (English Source: Gallup)
My Thoughts: This Gallup poll, along with a Pew Research poll, made news this week by highlighting Americans’ all-time-low opinion of China -- 20% favorable. The previous low points during the last 42 years this Gallup poll was conducted were 1989, 1997, and 2020.
The only two countries that have a lower favorable rating than China are Iran and North Korea. The Pew poll also has an open-ended answer section. Among the people who submitted answers, this 52-year-old man expressed a level of nuisance that few in Congress exhibit regarding America’s China policy. This level of sophistication is sadly few and far between.
“The Chinese people as individuals are no different than other people, but their government is a totalitarian Communist regime bent on conquering its neighbors and land-grabbing, as shown by their takeover of Hong Kong.” – Man, 52
“Key details from fifth plenum of China's Communist Party” (English Source: Reuters)
My Thoughts: This Reuters article provides a good summary of the outcome of China’s Fifth Plenum, which sets guidance for the country’s development direction for the next five years. For me as a technology investor, the most important part is a reaffirmation of technological self-sufficiency as “strategic support” for national development, going as far into the future as 2035. One thing I’ve been thinking about lately is where will the next phase of China’s growth come from. Much of it will come from developing rural China or what Rui Ma calls “developing China.” Another engine of growth could very well be reinventing many of the “technological wheels” -- like semiconductors -- that used to make more sense to buy in a free trade world, but are no longer possible.
“U.S. Blacklisted China’s Xiaomi Because of Award Given to Its Founder” (English Source: Wall Street Journal)
My Thoughts: Xiaomi was blacklisted by the US Department of Defense during Trumps’ lame duck period back in early January. Based on a DoD filing explaining its action, the Department’s rationale was at least partly connected to Lei Jun, Xiaomi’s founder and CEO, receiving an award from the Ministry of Industry and Information Technology. The standard applied to this blacklist has been mysterious and a moving target. If receiving this Chinese government award is part of the standard, applying it consistently could become awkward for US officials. One previous award recipient is Wang Chuanfu, who founded the electric vehicle maker BYD -- a favorite investment of Warren Buffett and Charlie Munger.
“SMIC purchases $1.2 billion of ASML products; Does not include EUV lithography equipment” (Chinese Source: 36Kr)
My thoughts: a SMIC disclosure filing to the Hong Kong Stock Exchange made news by announcing its additional $1.2 billion USD purchase of equipment from the world-leading lithography maker, ASML. In this positive reporting of the news from 36Kr, the purchase is seen as a huge boost to SMIC’s capacity, possibly generating more business during the current global chip storage. That being said, the purchase is only for the lower-end DUV equipment, not the more advanced EUV equipment. As I’ve discussed in a previous post, DUV can only make chips as dense as 25nm, while EUV is capable of making chips denser than 10nm. Yet, SMIC claims in its filing that these new equipment can be used to make chips as dense as 14nm. Another dubious impression from this filing is how “new” this batch of purchases really is. Apparently, it’s not new at all -- something ASML immediately issued a press release to clarify. Please read on...
“ASML clarifies SMIC volume purchase agreement: only related to DUV lithography technology” (Chinese Source: IC News)
My thoughts: Apparently this SMIC purchase order is an extension of a previous agreement made back in January 1, 2018. I don’t know enough about the contracting and delivery process of lithography equipment (if you do, please educate me!). However, this clarification is clearly a painstaking step taken by ASML to distance itself from SMIC.
“Neil Shen’s six proposals” (Chinese Source: China Venture)
My thoughts: Neil Shen is not only the head of Sequoia China and one of the most successful VCs in the industry, he is also a member of China’s National People’s Congress. In fact, he is the only representative from China’s VC industry in the NPC. As part of his responsibility during the just-concluded Fifth Plenum, he submitted a proposal of six (very granular) areas of innovation that are important to the country’s future. Here are the six:
- Capping carbon emission
- Farming seed development and farmland preservation
- Digitization of logistics
- Medical device companies going public on the Shanghai STAR market
- Volume purchase of high-value medical supplies
- Policy protection for domestic innovation in information technology applications
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- “中国、俄罗斯在美国人的印象中创历史新低”（英文来源: Gallup）
- “五中全会的主要细节”（英文来源: 路透社）
- “美国把小米列入黑名单，是因为雷军得奖”（英文来源: 华尔街日报)
- “中芯国际12亿美元购买ASML产品，设备不包括EUV光刻机” (中文来源: 36氪）
- “ASML澄清中芯国际批量购买协议：只与DUV光刻技术有关” (中文来源: 集微网）
- “沈南鹏的六份提案” (中文来源: 投中网）】
我的想法: Gallup的这项民调，以及Pew Research的一项民调， 这周上了不少头条。其中的主要发现是美国人民对中国的印象创历史新低 —— 仅20%的认可度。在过去42年中，Gallup这项民调的前几个低点是1989、1997和2020年。
"中国人民作为个人与其他人没有什么不同，但他们的政府是一个极权主义的共产主义政权，一心想要征服邻国和掠夺土地，他们对香港的接管就表明了这一点。" - 52岁男子
我的想法: 路透社的这篇文章对中国五中全会的各大宣布做了很好的总结。对我这个关注科技的投资人来说，最重要的部分是重申了技术自给自足是国家发展的一项 "战略支撑"，目标期远至2035年。我最近一直在思考一件事，就是中国下一阶段的增长将从哪里来。很大一部分会来自于发展中国的农村，也就是马睿指的 "发展中的中国"。另一个增长的引擎很可能是重新制造许多已经有的 "技术轮子"，比如半导体。这些产品在过去自由贸易的环境下买现有的更合理，但现在已经行不通了。
我的想法：早在1月初特朗普的跛脚鸭时期，小米就被美国国防部列入了黑名单。根据国防部最近一份公布的文件，理由至少部分与小米创始人兼CEO，雷军，获得工信部的一份奖励有关。这个黑名单适用的标准一直很神秘，也是个移动目标。如果获得这项奖项是上黑名单标准的一部分，公平地使用这个标准可能会给美国官员带来尴尬。毕竟另一位获奖者是创办了比亚迪的王传福，而比亚迪也是巴菲特和查理 · 芒格的最爱之一。
“中芯国际12亿美元购买ASML产品，设备不包括EUV光刻机” (中文来源: 36氪）
我的想法: 中芯国际向香港联交所提交的一份公告，其中宣布了从全球领先的光刻机制造商，ASML，增资12亿美元购买设备，成为了新闻焦点。在这篇36氪的正面报道中，把这批购买形容为是中芯产量的一大升级，甚至在全球芯片短缺的大环境下会给公司带来更多的订单。但是这次买的仅是低端的DUV设备，而不是更先进的EUV设备。我在之前的文章中提到过，DUV只能制造小到25nm密度的芯片，而EUV则能制造小到10nm密度的芯片。然而，中芯在公告中声称，这批新设备可以用来制造密度为14nm的芯片。这份公告中另一点值得质疑的是，这批采购到底有多 "新"。显然根本就不新 —— ASML也立即发布了自己的新闻稿给予澄清。请继续往下看...
“ASML澄清中芯国际批量购买协议：只与DUV光刻技术有关” (中文来源: 集微网）
“沈南鹏的六份提案” (中文来源: 投中网）