Biden, China, And Semiconductors -- October 17, 2022

Updates

December 14, 2022: below, Peter Zeihan asks a rhetorical question, what are Beijing's options? His answer. Not many. In fact, there is one. A soft takeover of Taiwan.

Original Post

Chips, semiconductor: link here.

In the short term, what the Biden administration is doing "to" the semiconductor sector with regard to China is going to be very painful, very expensive for Americans. But in the long term, if they don't botch it, their heart is in the right place. This should have been done years ago, by Bush II, or Obama, or Trump, but it finally took "a Joe Biden" to get it done.

From Peter Zeihan today:

The Biden administration's moves against China's semiconductor industry are continuing to have serious consequences, including the largely universal resignation of American citizens working in the Chinese chip industry. 

China will rapidly find itself unable to fill in several critical gaps in terms of skilled workers, design work, technological inputs, etc. 

What are Beijing's options?  

With Europe and Japan largely on board with US action--not many. South Korea and Taiwan could address some needs, but far from all. 

China's future will likely be one where it sources inputs on the grey market--buying components or pulling chips from third-party devices and attempting to insert them in products and industries they were not designed for. It's going to be a time-consuming, ugly, imperfect process, with serious implications for high level computing, China's emerging defense platforms, telecommunications, and more.

For investors, it's another open-book test.