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Q'comm-NXP Faces Trump, China Hurdles

2/2/2017 11:10 AM EST
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C.E. PAUSA
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China's repiorted semiconductor values
C.E. PAUSA   2/12/2017 5:54:21 PM
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I have to note that your reported value of the China semiconductor market is significantlyless than that reported by the relevant Chinese authorities (i.e. CSIA and CCID).  They report  the 2015 Chinese semiconductor consumption market as being:                          O-S-D $40.1 bn + IC $175.5 bn for a total of $215.5 bn.  

What does Domestic Supply mean?   Is it relative share of revenue?   Does it include the revenue of the Chinese subsidaries of multinatiolnal semiconductor companies (e.g. Intel Chengdu, and Dalian)?    If it does China's 2016 semiconductor industry revenue and share of market was repiorted as:

O-S-D = $31.8 bn = 79.3%; IC = $57.5bn = 32.8%; for a total of $89.3bn = 41.4%

 

 

sixscrews
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Re: All bets are off when the politicians start getting involved.
sixscrews   2/6/2017 1:09:50 PM
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You are so right - when we were developing the production version of the product I had a number of table banging sessions with the manufacturing and field support people regarding encryption (this was in 2000, I believe).  I wanted to put in a hardware encryption device that was serialized and either had a finite lifetime or had a remote 'keep alive' function that required  communication with a company-controlled server.  Both of these could have been subverted, of course, but they were a heck of a lot better than encryption keys that lived on (unencrypted) flash drives.  Needless to say, an extra $25 worth of hardware and board space wasn't going into a $100k product.  And the field service people just rolled their eyes and gave me a string of 'yeahbuts' about remote access to equipment in China - although it was routine in other parts of the world.

I don't think this ever got to the BOD review group after the 2007 train wreck as I was long gone by then.  But it did cost the CEO/flounder[sic] his job.  And his options were so much toilet paper by then.

There was a (possibly apocryphal) story I heard as a kid in the '50s - during War2 the USN captured a Japanese warship that used a boiler system copied from a ship 'loaned' to the Japanese during War1 when the US and Japan were best buddies against the Germans.  The original USN ship had been repaired and a large plate had been welded to the side of the boiler, I assume to cover an access hole.  This was included in the IJN model - w/o the hole it covered.  Non-functional but part of the prototype, yes?

If I were selling tech in China I would make sure to design in a few surprises for copycats.  Now that would require some creative thinking.  Maybe ripoff device go 'bang' when turned on?  Or maybe after a hundred hours of flawless operation?  The possibilities are endless - and so are the ways to get around it.

 

DMcCunney
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Re: All bets are off when the politicians start getting involved.
DMcCunney   2/6/2017 12:02:14 PM
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@sixscrews: Beyond that, a patent infringment complaint in 'People's Court Number 4' in Beijing went just where you would expect it to.

A tech CEO a while back was commenting about the issues of IP in China, and said "Bring suit for IP violations in a Chinese court, and tell me what you come back with."  (The answer, of course, would be "nothing.")

Smart Western tech outfits doing business in China and having stuff built by Chinese suppliers tend to be circumspect about supplying IP that constitutes trade secrets they rely on to be competitive.  They assume that once it gets to China, it won't be secret anymore.

China seems to divide the world into two categories: Chinese and everybody else.  If you are not Chinese, a different set of standards apply to you, and you may be fair game.  Getting China to recognize that the rest of the world doesn't work that way and they have to play by the same rules everyone else does is an uphill battle, and we are nowhere near doing so.

>Dennis

sixscrews
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Re: All bets are off when the politicians start getting involved.
sixscrews   2/6/2017 11:36:20 AM
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Thanks, Dennis.

A US company I was once associated with sold electronic hardware to China up to 2007 or so (this was several years after I had left the company, BTW).

Their Chinese partner subverted one of the field service people and stole the encryption keys to the underlying software (binary) code that differentiated the equipment from its competitors (and embodied tech my team had developed in the late '90s).  

This killed the US company.

On the other hand it didn't do the field service guy much good either as he had EU citizenship and was prosecuted for industrial espionage in Austria and spent some time in prison.  Boo-hoo.

Beyond that, a patent infringment complaint in 'People's Court Number 4' in Beijing went just where you would expect it to.

It's nice to know that our (stolen) tech now supports many wind farms in China. It's green energy, so who cares?  Of course, the Chinese are putting coal fired capacity on their grid a couple orders of magnitude faster than any other source.  

Oh, to see those wind turbines spinning in the grey air.  

ss/wb

 

DMcCunney
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Re: breaking up a monopoly
DMcCunney   2/4/2017 2:05:58 PM
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@junko.yoshida: I think what's important here is to understand that MOFCOM -- increasingly driven by the Chinese government policies -- may not be reviewing the merger strictly on the antitrust angles.

Has MOFCOM ever really been concerned by antitrust angles?

The impression I get is that China is letting companies jump into the water and battle it out, and the winners are the ones that get approval and support.  Antitrust considerations here measure potential ill effect on consumers. Chinese government policy considerations are "How will this make China wealthier and more powerful?" Impact on the Chinese consumer will be rather far down on the list of concerns.

I suspect MOFCOM may put some effort into appearing tp be concerned about antitrust, simply to put on a good face to Western customers.

>Dennis

DMcCunney
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Re: All bets are off when the politicians start getting involved.
DMcCunney   2/4/2017 1:56:36 PM
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Qsixscrews: Mainland China calls itself the 'Peoples Republic of China'  - but it's just a dynastic sucessor to the Qing  - call it the 'Mao Dynasty' - and it's interests haven nothing to do with the 'people' - it's a matter of who is at the top of the pyramid.  At present it is the People's Emperor Xi.

I've been telling people for years that the Communist Revolution did not alter the underlying social structure in China.  It wasn't what he called himself, but the role Mao filled was that of Emperor.  And despite being a nominally classless society, rank, status, and precedence were still critical matters.  An old friend who had been involved in international education said "Don't get me started on the Chinese!"  To do business in China, you had to grease the right palms, as was common anywhere in Asia.  But it was also critical that you grease them in the right order, and the order was based on status ranking that could be opaque to the outsider.

Years back, I read a piece in the Wall Street Journal with an interview with one of the then senior Chinese officials.  China called itself Communist, but had what looked very much like a developing Western capitalist economy, complete with an active stock market in Beijing.  His reply was a classic case of the attitude of Humpty Dumpty in Alice in Wonderland.  "Words mean what I say they mean when I say them."  If it worked, it was a triumph of the glorious People's Revolution.  If it didn't work, it was the fault of the nefarious Western imperialists.  Never mind what it was.

Anyone who expects to see anything resembling what we consider representatitive democracy in China is smoking something really good.  The underlying structures of Chinese society have been in place for millenia, and they aren't changing any time soon.

>Dennis

 

sixscrews
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All bets are off when the politicians start getting involved.
sixscrews   2/4/2017 1:30:02 AM
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No better comment can be made - both China and the USA (or what stands in for the USA in 2017) are more concerned with political decisions than with what matters for the 'people' the purport to represent.

Mainland China calls itself the 'Peoples Republic of China'  - but it's just a dynastic sucessor to the Qing  - call it the 'Mao Dynasty' - and it's interests haven nothing to do with the 'people' - it's a matter of who is at the top of the pyramid.  At present it is the People's Emperor Xi.

Anti-trust law evolved in the early 20th century and we are seeing it decay in the early 21st century, primarily due to the evolution of kleptocratic states like China, Russia, and, I fear, the USA.

As someone said when the Russo-German pact of 1939 was signed 'all people should fear when dictators shake hands.'

wb/ss

junko.yoshida
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Re: breaking up a monopoly
junko.yoshida   2/3/2017 12:53:15 PM
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I think what's important here is to understand that MOFCOM -- increasingly driven by the Chinese government policies -- may not be reviewing the merger strictly on the antitrust angles.

As Ashley Chang told me, "trying to think about whether there is overlap between the parties' product offerings in China, or how MOFCOM will justify its enforcement decisions" may no loner be the right approach to think about this.  Basically the answer we are getting is "that none of that matters. It's all about what China's larger goals are at any given time," she said.

jeremybirch
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breaking up a monopoly
jeremybirch   2/3/2017 7:19:35 AM
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Surely even if MOFCOM do see the new enitity as holding too strong a position there is no argument that then means breaking off a bit and giving it to China? All you need to do is break off a bit and make it a free-standing entity that can potentially compete with its former parent. Of course that new smaller entity might be an acquisition target for a China concern, but that deal would be subject to scrutiny by western agencies.

Handing a part of the company to China would be basically a bribe, surely? If the assets before they were merged were not Chinese, which should part of the merged whole become Chinese?

Of course all bets are off when the politicians start getting involved.

 

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