American Chip Makers Stop Supporting ZTE. How Can Domestic Chips Break the Game?

According to foreign media reports, an official of the U.S. Department of Commerce revealed that U.S. enterprises are prohibited from selling components to ZTE, a Chinese telecommunications equipment manufacturer, in the next seven years because of violations of U.S. sanctions.Reuters reported that ZTE pleaded guilty in the federal court of Texas in March last year and admitted that it sold American goods and technology to Iran in violation of sanctions. According to ZTE's previous settlement agreement with the U.S. Treasury, commerce and justice departments, the company agreed to pay a fine of $890 million.In addition, the $300 million fine imposed on ZTE by the Bureau of industry and security of the U.S. Department of Commerce may be suspended, depending on the supervision and audit results of ZTE's implementation of the agreement in the next seven years.

According to the then agreement, ZTE promised to fire four senior employees and punish 35 employees by reducing bonuses or penalties, according to an official of the U.S. Department of Commerce. However, ZTE admitted in March this year that it had dismissed only four senior employees without punishing or reducing the bonuses of 35 employees.In March 2016, the U.S. Department of Commerce imposed export restrictions on ZTE, prohibiting U.S. component suppliers from exporting components, software, equipment and other technical products to ZTE because of or suspected violation of U.S. export control policies towards Iran.The US Department of Commerce once again imposed export restrictions on ZTE, which means that the company's international development will encounter major obstacles. (compiled / Mingxuan)

Today, last year, ZTE admitted that it was a shame for the Chinese peopleIn 2017, ZTE announced to claim the $892 million fine issued by the U.S. government. All relevant senior backbone of ZTE resigned. Tens of thousands of employees basically worked in the United States for one year free, and all the year-end bonuses were lost.ZTE's recognition of punishment is a shame for the Chinese people. Today last year, it was a painful day for the Chinese people to remember: due to the lack of "core", domestic machine manufacturers were choked by the United States.

Just another year later, "the pain of ZTE incident - who took off the emperor's new clothes of China's electronic complete machine industry", stripped away the short boards of domestic complete machine factories and junfen's confidence in domestic chips, which is particularly enlightening today: not only chips, but also the whole integrated circuit manufacturing industry chain, materials, upstream processes, EDA software, operating systemUs chipmakers stop supporting ZTELast year, someone wrote an article to evaluate the sanctions against ZTE. Today, another wave of the same means! Can ZTE escape this time?

On the morning of March 7, 2017, a friend called the author: "ZTE has been suspended, do you know? The U.S. government has banned ZTE's procurement". At this time, the author's attention was also focused on the new banner of this year's girls' day, and replied disapprovingly: "seeing the report, it is estimated that the U.S. government will act like it.".However, two days later, the incident fermented. First, ZTE netizens burst out. In addition to not allowing the purchase of chips, American suppliers have completely stopped their technical support for ZTE: they no longer reply to emails and call. The other party said, "I don't see your email. Don't call later, otherwise I'll be in trouble."Then I saw that ZTE announced that it was cooperating with the U.S. government in applying for export licenses, although such applications are usually rejected. Later, I heard that arm, a British company, was forced to stop its support and business cooperation with ZTE because most of its R & D was in the United States. All these make me take a deep breath. It seems that this American game is really good.

Some people think it's no big deal about the response to this incident. Without Qualcomm, there are ZTE microelectronics in Nubia. Use your own.Some people think it's best to ban all of them. Now is a good opportunity for domestic chips. However, the author believes that if the US government's out of stock sanctions last too long, it will bring the disaster of ZTE and even the whole machine industry.The so-called "no skin, no hair will be attached". For domestic chips, what development opportunities can we talk about if we lose the application support of domestic complete machine manufacturers. Therefore, the top priority now is to let the US government lift the embargo as soon as possible, overcome the current difficulties and plan for the future.

How do domestic chips break the game?For the breakthrough of high-performance key devices of integrated circuits, the author believes that there are three factors: sufficient financial support, full cooperation of the whole machine factory and patient team.

How to solve the problem of funds? The 18th National Congress requires that the market play a decisive role in resource allocation. Chip R & D is high investment and high risk. Finally, good luck leads to high output. At present, the government determines the allocation of resources through large funds, which does not always select the final winner. Moreover, the pressure of maintaining and increasing the value of state-owned assets and moral hazard will make its investment behavior out of shape. In addition, the large-scale investment of state-owned assets will also cause crowding out effect and reduce the investment of private capital in the industry.

The author believes that the best way is to attract private capital. As long as private capital has a large enough market and large enough profits, he will be moved. At the beginning, there was a gap between the technical level of the team and the advanced level, and the team could not participate in the global competition, so the market scale that could be seized must not be so large.At this time, the state should go out to allow domestic chip manufacturers to sell at a high price in the initial stage, obtain excess profits, make up for huge R & D investment and attract private capital by subsidizing and rewarding complete machine manufacturers without damaging the cost competitiveness of complete machine manufacturers.In the later stage, the subsidy will be gradually reduced according to the cumulative number of chip equipment, and finally reach the market pricing, so as to enter the international market and participate in competition. The advantage of this policy is that the money must be spent on competitive market players. Whoever finally equips and makes something that can be used will be subsidized. Of course, we should pay attention to the problem of fraud and compensation.

As for the risk of R & D and wrong choice, let private capital bear it. When private funds spend their own money, they will naturally choose the team carefully, and can accept it calmly even if the R & D fails. Such a state subsidy can attract multiple private investments. As long as one of them is successfully mass produced, the state will make money.Of course, all the premise is that we also have a strong and internationally competitive complete machine industry. Only they have the motivation to try the infant domestic IC.In the process of promoting domestic IC, the author was most moved by the technicians of this group of complete machine manufacturers. They do not need any interest drive. They are willing to help domestic IC from the bottom of their heart. Sometimes their superiors are allowed to give up. They also work overtime to help domestic suppliers find problems.

It's a blessing in disguise. Perhaps many years later, looking back, the ZTE incident is a turning point for the domestic IC industry. But anyway, I really hope he can get through the difficulties.