Text/Smart things Lina
On the evening of May 13, the US President Trump issued a tweet saying: "We are cooperating and will provide ZTE with a quick way to restore business." (The cause of the ZTE incident.) Many people in China are unemployed. The US Department of Commerce has received instructions to properly resolve the matter. ”
This tweet by Trump means that ZTE officially ushered in a turnaround.
On April 16 this year, the U.S. Department of Commerce announced that it would ban US companies from selling any electronic technology or communications components to Chinese telecommunications equipment manufacturer ZTE. This ban lasted for 7 years until March 13, 2025.
When the ban came out, the industry was upset. ZTE's products and equipment contain a large number of US-made semiconductor chips, many of which are still far from being able to achieve localization. “The ban on sales orders” directly hit China’s second largest telecommunications equipment manufacturer and opened up the pain points of the Chinese semiconductor industry. The domestic substitution process of chips has attracted much attention. Our colleagues in the science and technology industry in China ushered in a great earthquake and set off a wave of public opinion that focused on the “short of core” weaknesses.
At the same time, both China and the United States are also in full swing to carry out a number of negotiations. After 27 days of agitation, things finally ushered in a turnaround.
Since taking office, US President Trump frequently publishes opinions and decisions related to the country’s affairs on the Twitter site (Twitter, similar to Weibo) and has been ridiculed by many netizens as “tweet governing”. For example, in March of this year, before Trump published any official documents, he first announced on Twitter his resignation of Secretary of State Tillerson.
Resumption of events: Ups and downs 27 days
Next, we replayed this ups and downs from the beginning to the end of the 27th.
On April 16th, 2018, the US Department of Commerce’s Bureau of Industry and Security (BIS) used ZTE’s employees to retire bonuses and issue disciplinary letters in a timely manner on certain employees involved in historical export control violations, and on November 30, 2016 and In a letter sent to the U.S. government on July 20, 2017, the company made a false statement and made a decision to activate the refusal of ZTE and ZTE Kangxun.
On April 20, ZTE issued a statement on the US Department of Commerce’s refusal to activate, arguing that BIS ignored ZTE's hard work, huge investment, and long-term progress in complying with export control compliance in the past two years; it ignored the two letters mentioned above. The problem is the company's self-inspection and discovery, timely and active notification; ignore the company's first time to deal with the possible negligence of the responsible person, and quickly correct the problem, and hire an independent US law firm independent investigation. Before the relevant investigation has been concluded, BIS insists on imposing the most severe sanctions on the company. It is extremely unfair and unacceptable to ZTE.
On April 22nd, ZTE issued a renewed announcement stating that the company has learned lessons from its past in export control compliance, established a compliance management committee directly under the leadership of the president, and formed a global team of senior export control compliance experts; it builds and optimizes ZTE's export control compliance management framework, systems, and processes; the introduction and implementation of SAP's Trade Compliance Management Tools (GTS); coordination with independent regulatory compliance auditors; and ongoing investment in export control compliance.
On April 23, a screenshot that purported to be the voice of ZTE’s internal employees also spread widely on the Internet. Regarding the current misunderstandings, the employee stated that the facts were not exactly the same as what was seen in the news. ZTE was fined in violation of regulations in 2016. Since then, a compliance team headed by the president has been established. The company is completely transparent to the United States, and all mail and servers are complete. The open, FBI resident company, this time there is no clear violation of the behavior, are the normal process of compliance inspection.
From May 3rd to 4th, high-level officials from both sides negotiated rounds of economic and trade issues and exchanged views on issues such as expanding US exports to China, bilateral service trade, two-way investment, protection of intellectual property rights, and settlement of tariffs and non-tariff measures. Some consensus has been reached in some areas. The two sides recognized that there are still big differences on some issues and that they need to continue to step up their work and make more progress. The two sides agreed to continue to maintain close communication on relevant issues and establish a corresponding working mechanism.
On May 5, ZTE issued an internal employee letter entitled “Strengthening Confidence and Strive to Solve the Problem in a Short Time”. ZTE stated that it has formally submitted an application to suspend the execution of the refusal order to the BIS and submitted supplementary materials according to the BIS guidelines. The company will not give up its efforts to solve problems through communication and dialogue, but will also use all legal means to protect its own legitimate rights and interests.
On May 8, ZTE issued an announcement saying that the 2017 annual general meeting of shareholders will be held before June 30th.
On May 9, ZTE issued an announcement stating that from the announcement issued on April 20, 2018, it was mentioned that BIS had issued an order to activate a refusal order. Affected by the refusal order, ZTE’s main business activities could no longer be carried out. At present, ZTE has sufficient cash and adheres to commercial credit under the premise of legal compliance. At present, it is actively communicating with relevant U.S. government agencies to promote the U.S. government to adjust or cancel the refusal order.
On May 10, Telstra, Australia’s state-owned company and Australia’s largest telecommunications company, said that following the US’s ban on preventing ZTE’s production of products for Australia Telecom, the company will stop selling ZTE’s branded ZTE mobile phones and mobile broadband devices.
On May 13, US President Trump issued a tweet saying: "We are cooperating and will provide ZTE with a quick way to restore business." (The cause of the ZTE incident.) Many people in China are unemployed. The US Department of Commerce has received instructions to properly resolve the matter. ”
“ Lack of core ” weak influence
ZTE is not an example. Although domestic chip design companies have achieved certain results in recent years and have become one of the world's leading companies in some subdivided areas, the market share of domestically produced chips is in the core chip areas such as MPU, FPGA/EPLD, DSP, DRAM, and NAND Flash. Very low.
▲ China's core IC's domestic chip occupancy
China Semiconductor Industry Association (CSIA) statistics show that in 2017 China's integrated circuit product demand reached 1.40 trillion yuan, but domestic self-sufficiency rate was only 38.7%; in 2017, IC imports exceeded US$260 billion, which has replaced crude oil. It became China’s largest importer; the IC’s trade deficit reached a record high in 2017, reaching US$ 193.2 billion.
The Sino-US trade friction has three main influences on the substitution process of the domestic semiconductor industry: the probability of shortening foreign technology gaps through mergers and acquisitions will become smaller and smaller, hindering Chinese enterprises from quickly obtaining advanced manufacturing-class technologies and processes through mergers and acquisitions. Experience in R&D, management, etc.; the cost and difficulty of importing parts and raw materials for key equipment may increase; the global competition for industrial talents will be fiercer.
The huge market for chip growth
From the chip industry, it can be divided into two parts: design and manufacturing. According to Ni Guangnan, an academician of the Chinese Academy of Engineering, China's design level is also acceptable, with the largest short board being manufactured. In the past, we did not invest enough in chip manufacturing. It may take 10 years for the developed countries to catch up, and at least several hundred billion RMB in continuous investment.
▲ Wafer Plant Investment Distribution (Semiconductor Industry Development Needs a Large Number of Initial Investment)
Founder Securities estimates that the market size of domestic chips in 2018 will be more than 45 billion yuan. Considering the stock market substitution in the past five years, the total market size will be more than 225 billion yuan, and the replacement space is huge. The huge market space, coupled with the strategic significance of the industry, local semiconductors in the short term by the Sino-US trade friction, but will continue to see good in the long term. Ivy Capital Fu Lei once said in an interview that in the next five to ten years, Chinese companies’ R&D and production of chips will maintain a very high growth rate, at least 30% per year.
▲ Sensitivity analysis of domestic chip market space (chip import substitution market perspective)
At the time when the third global semiconductor industry was relocated, the mainland semiconductor industry, supported by national policy funds, through technology accumulation and early deployment, took wafer foundry as a breakthrough point, and was able to grasp potential replacement opportunities, becoming the third semiconductor industry. Secondary migration.
Conclusion: Enlightenment from the ZTE Incident ——Self-sufficient, autonomous and controllable
▲China-US trade frictions recently
The ZTE incident undoubtedly sounded a wake-up call for China. Just as Ni Guangnan, academician of the Chinese Academy of Engineering, pointed out: In the past, we did not invest enough in chip manufacturing. It would take 10 years for the developed countries to catch up and continuous investment of at least several hundred billion RMB.
As the core of information technology, semiconductors/chips are industries with slow return, long industry chain, high capital, technology, and patent barriers. China's existing advantages lie in policy dividends and huge domestic demand, and the third industry based on the information revolution. Transfer tide.
Therefore, we have to incubate giants from the existing industrial ecology, and gradually improve the semiconductor industry chain, self-sufficiency, self-control, and will not let the next ZTE incident stuck in the throat.