U.S. suppresses China's chip industry insider exposure

[The United States has suppressed the insider exposure of the Chinese chip industry] ZTE turmoil is undoubtedly a profound education for China's semiconductor and even the Internet technology industry.

Yesterday, Jingdong CEO Liu Qiangdong said publicly that the ZTE incident has hit all Chinese Internet companies with a slap in the face; Alibaba also recently announced the acquisition of Tianwei, a wholly-owned chip company, and invested in six chip companies. For a time, it was necessary to “catch up with the power of the nation”, and the cries for catching up with the US chip industry were buzzing.

However, we are determined to be very good. We should also fully understand the fierce competition in the semiconductor industry represented by chips.

Recently, the island received a report entitled "Ensuring US Leadership in Semiconductors" issued by the US President's Science and Technology Advisory Committee. Although the article was published in January 2017, it repeatedly mentioned it to China. Let us glimpse the logic of the United States "cutting off" Zhongxinghoulu to curb the development of China's semiconductor industry.

Kaki Island made a combing excerpt and looked at:

logic

Since it is necessary to comprehensively criticize "China, then it must be famous. As a result, the article began with a judgment: From a historical point of view, the global semiconductor market has never been a completely competitive market. The so-called imperfect competition is that there are institutional interventions. Sure enough, the article states that it is based on research conducted by the government and the academic community. Due to the consideration of national defense security, some of these technologies are highly restrictive.

Based on this, the report made a second judgment: “If we can innovate quickly, it can reduce the threat posed by China. But once the innovation in the United States is hindered, competitors can easily keep up. So stay ahead. The fundamental way is to surpass all competitors."

In order to make its own practice more reasonable, the report also "reproached" some of China's practices. For example, "We believe that China's competitive approach is to distort the market. They destroy US market share by destroying innovation, and let the United States face homeland security." Danger."

From this, the report concludes that the U.S. government should not remain silent or pessimistic in the face of the threat of China’s rise. In the process of innovation, the U.S. government should try its best to stop China’s destruction and influence.

How to do it? -

The United States should hold talks with China, understand China’s true intentions, consolidate internal investment security and export controls through alliances, and impose restrictions on certain forms of Chinese violations of international agreements. The United States also needs to adjust its homeland security related agreements to prevent possible security threats from China.

Complaint

On this basis, all things China has done in this area have become very threatening actions for the United States.

For example, although they also admit that: China's pursuit of semiconductor technology lags far behind the United States. China's advanced manufacturing technology is also much less than that of the United States, Taiwan, and other advanced semiconductor players. There are many semiconductor fabs in China, but they are 1 to 1.5 generations behind the current mainstream process.

But backwardness is acceptable. You can't accept it if you catch up. Therefore, actions such as China's promulgation of the "IC Promotion Program" in 2014 to promote the development of China's semiconductor industry have all become a series of negative actions.

The report pointed out: China's semiconductor strategy relies on its huge financial support. This is an investment that includes state funds and private equity, with a total amount of up to 150 billion U.S. dollars and a ten-year cycle. The main purpose of China is to obtain the technology through investment and acquisition of advanced companies. The U.S. $23 billion in mergers and acquisitions over the past five years is a comparison of its scale.

In fact, in the view of the United States, China’s overall semiconductor construction strategy (the United States divided it into two points: subsidy and zero-sum game) is “with ulterior motives”.

First look at subsidies. As we all know, in order to support the development of the industry, China often provides various subsidies, and the semiconductor industry is no exception. But this point, the United States can not tolerate, they said:

In the short term, China's subsidies are good for US companies and consumers. The money can help reduce costs and product prices. But in the long term, these subsidies will weaken their ability to innovate. For the United States, because China will expand the scope of sales of its products, it will increase the risk of US homeland security. Excess production will affect direct competitors. These subsidies will also directly erode the market share of U.S. companies and affect their employment status and innovation.

Let's look at the so-called "zero-sum game" strategy in the report.

Enforcing or encouraging local consumers to purchase products from Chinese semiconductor suppliers, China's performance in this area is very prominent. This will reduce the power of global innovation. For those non-Chinese suppliers, the market is even smaller.

Forcing the use of technology for market changes to reduce the innovation power of U.S. companies. This will also lead to the possibility that advanced technology can be quickly copied by all companies, thus concentrating the market on China. With the highly concentrated Chinese market, China has the ability to promote technology transfer. This is a vicious circle.

Theft IP. According to media reports, China often secretly steals IP technology, and through inspections, checks which safe and controllable technologies are used to obtain the technical details of related semiconductors.

Look, what a serious accusation. Not to mention that there are no real hammers. Just look at this wording and this term, people feel very scary.

Strategies

If there is some sense of “pretty good” in front, when the report mentions the tactical part, it is naked in the fight against China.

For example, it is obvious that the best way to win is to "run faster on your own," but they still care about China: In the process of reducing China's catch-up speed, we will face many temptations. Once the United States ceases to innovate, China’s lead in the semiconductor field is inevitable. Therefore, the key to maintaining U.S. leadership is continuous innovation.

In this regard, the United States can feel quite good about its own feelings: The United States advocates opening up global transactions and investment, which will benefit consumers and the global economy; China is more willing to invest subsidies in mature companies and industries and continue to help them. Growth and growth, and eventually excess production capacity, have caused the economy to suffer; China has benefited from the global opening, but seldom undertakes corresponding obligations. In many cases, China has hindered normal marketization.

Not only that, the report has also come to a conclusion that is "very different": Do not oppose China's progress conditionally. How should that be opposed? The report suggests that the U.S. government needs to identify those special semiconductor technologies and companies and protect them, rejecting mergers and acquisitions and avoiding possible security threats. Oh, the island sister finally knows why Ziguang’s acquisition of the American chip company has repeatedly failed.

Even more ambiguous is still behind.

The United States has many ways to limit China's actions. This includes formal and informal trade and investment regulations, as well as similar CFIUS unilateral review tools based on homeland security considerations. It seems that these restrictions are still very significant.

The United States should use defense security as a starting point for making relevant decisions. In certain fields, China should not give any possibility of negotiation, for example, China's so-called "security and controllability" in the field of information technology.

If Chinese enterprises receive government support and obtain advanced technology products from the US side and eventually push them to the consequences of overcapacity, then for our policy makers, we need to consider whether or not to agree to the Chinese merger.

Speaking of this, it seems that the United States will not move its decision to contain China's semiconductor development. For us, recognizing reality and then pursuing it is a necessary step.

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