Hidden Harmonies China Blog

Despite the nasty trade wars and the recent Huawei ban that is going on, I still think that Trump is the best thing to China since Nixon. Let me explain. One glaring thing about the Huawei ban is that other countries didn’t join on it, instead there’s more of the wait-and-see attitude. Thanks to Trump’s America First policy, he has essentially abandoned America’s leadership in the world, and some of the leadership has been taken over by China. Trump trade wars is not just going after China, but to many of its allies as well. Even when Trump’s nuclear option to start banning Chinese companies to do business in the US, Wall Street did not react thinking that Trump would make some kind of deal by the end of this year. This is more like a negotiation tactic to get favorable concessions from China instead of outright destroying China.

Before Trump, many people within China has high regards to the US and its place in the world. I think Xi’s message to its people about the Long March is a mission is to displace the US because they are no longer a competent global hegemon. The Chinese with its self-determination no longer rely on the US for support. Thanks to its China’s belt and road policy, other non-western countries will be more favorable to China than the US and looks to China for leadership.

I believe that either a Republican or Democratic president will be elected, both of them will be anti-China. Let’s say that Hillary Clinton had won the presidency instead of Trump. The TPP will be enacted against China. Clinton would probably make up some excuse to restrict Chinese companies like Huawei anyways, but the US will get support of other countries also. Many see China’s rise is a threat, but I think US’ decline is a bigger threat than China’s rise and we are seeing that this is being played out.

Since Huawei has been put in the “entities list,” by the US government, many US based companies has stopped doing business with Huawei including Xilinx, Qualcomm, Google, and Intel. Unlike last year’s fiasco with ZTE because of issues with ZTE doing business with Iran, this is nothing to do with Huawei’s wrongdoing by the US government. Since the news of ZTE broke has year, Huawei has developed solutions to mitigate this problem.

1. Huawei has https://www.scmp.com/tech/big-tech/article/3010507/huaweis-day-reckoning-arrives-it-has-been-preparing-almost-year stockpiled on American made parts ahead of this notice for up to 12 months. So Huawei’s 5g equipment disruption won’t be affected in the short term.
2. Huawei has made substantial mitigation in terms of keeping smartphone business alive. Huawei has developed its own Kirin SOC’s for their smartphones and had developed HongMeng OS to replace Android OS as a replacement. HongMeng OS was developed as an Open platform of Android much like Amazon’s Fire OS on its devices. However, being locked out from google’s play store doesn’t mean that you cannot install play store in its OS much like how you can do it on Fire OS. Furthermore, ARM holdings has developed a JV with
   Hou An Innovation Fund so it allows Chinese manufacturers to develop its own version of ARM chips in the future.
3. Huawei’s Matebook’s future is uncertain as Intel has joined the blockade. AMD-China joint venture has produced Hygon Dhyana CPU’s along with Via-China joint venture produced the ZhaoXin CPU’s might come up in the future. As Microsoft did not join in the blockade as of this moment, Huawei can still sell Windows PC on one of these types of CPU’s.

Made in China 2025 policy is designed because they want to reduce on foreign technologies in case of situations like this would occur. It would only further China to re-double efforts for China to ween away from American technology. The only question is would the Chinese government do if trade talks if China and US would further break down.

On the eve of US Commerce Department’s ban on Huawei and 70 affiliates from sourcing U.S. components, He Tingo, the CEO of Huawei’s chip fabrication arm HiSilicon, sent a letter to her employees (original follows translation):

Esteemed HiSilicon Colleagues:

Right now, you may well know Huawei has been listed on BIS’ entity list.

Years ago, while the water is calm, we have evaluated extreme scenarios for the company’s survival; anticipating one day losing access to America’s advanced chip technologies yet still continue to serve our customers. While assuming the day will never come, thousands of HiSilicon employees embarked on the most solemn technological long march in our history in order to create a “spare tire” for the company’s survival. Given the wide range of Huawei products, technology and equipment used, we faced thousands of sleepless nights, countless failures, but never giving up.

In the following years, as we step out of the fog, seeing hope yet with unresolved feeling that many of the chips will never be produced, only to become backup plans locked in a vault.

Today, fate has brought an extremely dark moment. A superpower made an insane decision to ruthlessly cut off a cooperative global technology and production system; without a shred of evidence, placed Huawei on the entity list.

Today, chosen by history, all of our backup plans became “plans” overnight! In a day, years of blood sweat tears became ticket to continuing our promise to our customers. Yes, our hard work will safeguard the strategic safety of majority of the company’s products; majority of our product supply continues! Today, this darkest day, is a day that define the ordinary heroics of HiSilicon employees!

It is Huawei’s mission to create a connected digital world and bring it to everyone, every family, every organization, and that mission continues. To realize this ideal, we need to innovate and more importantly achieve technology independence! The road ahead will no longer have another 10 years to create spare tires, as the buffer have disappeared. Every new product will need to lock step with “technology independence” initiative.

The road is arduous, thru courage intelligence perseverance, under the extreme pressure we will forge ahead! True color of a hero shines under distress; Noah’s Arc was made for difficulty.

He Tingbo

May 17th, 2019

尊敬的海思全體同事們：

此刻，估計您已得知華為被列入美國商務部工業和安全局(BIS)的實體名單(entity list)。

多年前，還是雲淡風輕的季節，公司做出了極限生存的假設，預計有一天，所有美國的先進芯片和技術將不可獲得，而華為仍將持續為客戶服務。為了這個以為永遠不會發生的假設，數千海思兒女，走上了科技史上最為悲壯的長征，為公司的生存打造「備胎」。數千個日夜中，我們星夜兼程，艱苦前行。華為的產品領域是如此廣闊，所用技術與器件是如此多元，面對數以千計的科技難題，我們無數次失敗過，困惑過，但是從來沒有放棄過。

後來的年頭裡，當我們逐步走出迷茫，看到希望，又難免一絲絲失落和不甘，擔心許多芯片永遠不會被啓用，成為一直壓在保密櫃裡面的備胎。

今天，命運的年輪轉到這個極限而黑暗的時刻，超級大國毫不留情地中斷全球合作的技術與產業體系，做出了最瘋狂的決定，在毫無依據的條件下，把華為公司放入了實體名單。

今天，是歷史的選擇，所有我們曾經打造的備胎，一夜之間全部轉「正」！多年心血，在一夜之間兌現為公司對於客戶持續服務的承諾。是的，這些努力，已經連成一片，輓狂瀾於既倒，確保了公司大部分產品的戰略安全，大部分產品的連續供應！今天，這個至暗的日子，是每一位海思的平凡兒女成為時代英雄的日子！

華為立志，將數字世界帶給每個人、每個家庭、每個組織，構建萬物互聯的智能世界，我們仍將如此。今後，為實現這一理想，我們不僅要保持開放創新，更要實現科技自立！今後的路，不會再有另一個十年來打造備胎然後再換胎了，緩衝區已經消失，每一個新產品一出生，將必須同步「科技自立」的方案。

前路更為艱辛，我們將以勇氣、智慧和毅力，在極限施壓下挺直脊梁，奮力前行！滔天巨浪方顯英雄本色，艱難困苦鑄造諾亞方舟。

何庭波

2019年5月17日凌晨

When 2016 election was in full swing I wrote that Hillary will be a good manager for the decline of U.S. while I fear Trump was unpredictable and fear war with Iran and North Korea. Instead now we have possible war with Iran and trade war with China. As most Chinese can predict that Liu He will not surrender to Trump demands and the full effect of tariff rise will be in effect tomorrow unless Trump has one of his unpredictable Tweet storms.
Most observers agree the trade war will hurt both U.S. and China but it will hurt China more and U.S. can withstand the effects easily. I beg to differ here and suggest possible retaliation China can take. I do not take lightly the effects will have on Chinese economy, but I think China will be able to overcome the adversity and come out stronger. The 200 billion tariffs will go up from 10 to 25%. It will mostly affect those high tech intermediate machine parts that firm like Cummin Engine use to assemble diesel engines. Those company will not be able to re-source their supplies to alternative supplies in U.S. or Europe and have to pay the tariffs and raise prices. Of course long term they can close their factories in China and try to move them to places like Vietnam, but that will force them to lose their investments in China and initial investments will be huge. If Trump raise tariffs for the remaining 300 billion, he will cause problems for Apple phones and Walmarts and affect consumers and inflation in U.S..
As for China the worry about labor shortage and population aging will be alleviated by the closing of those supplying U.S. productions and transition to a service economy. Although China doesn’t have as much imports from U.S. as exports for tariff retaliation, China can be creative in semiconductors like memory chips forcing manufacturers using make in China and shut out those from U.S.. China can impose surcharges like 50% ticket price for Hollywood films to reduce the soft power influences of Western values. This may violate WTO rules but if it’s retaliation probably will be allowed. As for financial and insurance China can shut out Wall street and allow European firms in reciprocal equal dealings. As for the 2 trillion holdings in dollars, China can gradually allow the bonds to expire and redeem them rather than sell them but convert them to resource assets from around the globe. China still has plenty of infrastructure works that can mobilize excess capacities of labor, for example the diversion of water from the Himalayas toward Xinjiang and North China for agriculture. With the coming climate crisis China can prepare well ahead of the curve.

Yesterday was the centennial for the May 4th movement. China commemorates it with celebration and Xi’s speech, and everybody else tried to lay claim to be successor for it, even NYT has an article trying to belittle China’s achievement by saying today’s China reminds him of warlords of 1920s China. So we as Chinese whether be in China or overseas Chinese culturally attached to her have to answer the question asked by the leaders of that movement, “Where is China heading?”. We have the hindsight of the history of last 100 years to answer affirmatively when we sing the “Ode to Dear Motherland” that China is heading toward prosperity and peace.
Professor Zhang Wei-wei in his TV program “China Today” repeatedly stated we should have self confidence in facing West in equal term, and not trying to hide behind like Yao Ming crouching behind a short person. The “Belt and Road” initiative is a counter to Trump’s tariff war whatever the outcome of the negotiation. The attack on Huawei and 5G is failing in Europe and elsewhere. The visa restriction of Chinese scientists visiting U.S., not only in physical sciences, but social sciences speaks more on the desperation felt in Washington than any real spying. It’s true both parties in U.S. are increasing hostile toward China because of the increasing economic power of China and influence in the world today. The question on “Mr. Science” is obviously answered. On the question on “Mr. Democracy” quite a few people are still trying to badger China especially some intellectuals. Yet we only have to look at Washington today to see the falsity of pseudo democracy on what people want and the road blocks on real democracy, from gerrymandering to denial of Florida voters will for former convicts’ right to vote, from electoral college with minority candidate winning the presidency to influence of money in politics. From the U.S. dominance of international institutions such as U.N. or World Bank. Yet the Trump withdrawal and wall signals the decline of this monopoly power.