American Quislings

U.S. Tech Companies Sidestep a Trump Ban, to Keep Selling to Huawei

By Paul Mozur and Cecilia Kang

A Huawei billboard in Shanghai. The deals with United States companies will help Huawei continue to sell its smartphones and other products.

SHANGHAI — United States chip makers are still selling millions of dollars of products to Huawei despite a Trump administration ban on the sale of American technology to the Chinese telecommunications giant.
Industry leaders including Intel and Micron have found ways to avoid labeling goods as American-made, said the people, who spoke on the condition they not be named because they were not authorized to disclose the sales.
Goods produced by American companies overseas are not always considered American-made. 

The components began to flow to Huawei about three weeks ago, the people said.
The sales will help Huawei continue to sell products such as smartphones and servers, and underscore how difficult it is for the Trump administration to clamp down on companies that it considers a national security threat, like Huawei. 

They also hint at the possible unintended consequences from altering the web of trade relationships that ties together the world’s electronics industry and global commerce.
The Commerce Department’s move to block sales to Huawei, by putting it on a so-called entity list, set off confusion within the Chinese company and its many American suppliers, the people said. Many executives lacked deep experience with American trade controls, leading to initial suspensions in shipments to Huawei until lawyers could puzzle out which products could be sent. 

Decisions about what can and cannot be shipped were also often run by the Commerce Department.

American companies like Intel sell technology supporting current Huawei products until mid-August.

American companies may sell technology supporting current Huawei products until mid-August. 

But a ban on components for future Huawei products is already in place. 

It’s not clear what percentage of the current sales were for future products. 

The sales have most likely already totaled hundreds of millions of dollars, the people estimated.
While the Trump administration has been aware of the sales, officials are split about how to respond, the people said. 

Some officials feel that the sales violate the spirit of the law and undermine government efforts to pressure Huawei, while others are more supportive because it lightens the blow of the ban for American corporations. 

Huawei has said it buys around $11 billion in technology from United States companies each year.
Intel and Micron declined to comment.
“As we have discussed with the U.S. government, it is now clear some items may be supplied to Huawei consistent with the entity list and applicable regulations,” John Neuffer, the president of the Semiconductor Industry Association, wrote in a statement on Friday.
“Each company is impacted differently based on their specific products and supply chains, and each company must evaluate how best to conduct its business and remain in compliance.”
In an earnings call Tuesday afternoon, Micron’s chief executive, Sanjay Mehrotra, said the company stopped shipments to Huawei after the Commerce Department’s action last month. 

But it resumed sales about two weeks ago after Micron reviewed the entity list rules and “determined that we could lawfully resume” shipping a subset of products, Mr. Mehrotra said. 

“However, there is considerable ongoing uncertainty around the Huawei situation,” he added.
A spokesman for the Commerce Department, in response to questions about the sales to Huawei, referred to a section of the official notice about the company being added to the entity list, including that the purpose was to “prevent activities contrary to the national security or foreign policy interests of the United States.”

The Idaho-based Micron competes with South Korean companies like Samsung to supply memory chips that go into Huawei’s smartphones.

A senior administration official said that after the Commerce Department put Huawei on the entity list, the Semiconductor Industry Association sent a letter to the White House asking for waivers for some companies to allow them to continue selling components to Huawei. 

But the administration did not grant the waivers, he said, and the companies then found what they assert is a legal basis for continuing their sales.
Administration officials would like to address this issue, he said, but they do not plan to do so before the G-20 summit in Japan at the end of this week. 

Mr. Trump’s top priority is to discuss the general trade dispute with Xi Jinping and get the two sides to resume trade talks that have dragged on since early 2018, the official said.
The fate of Huawei, a crown jewel of Chinese innovation and technological prowess, has become a symbol of the economic and security standoff between the United States and China. 

Chinese companies like Huawei, which makes telecom networking equipment, could intercept and secretly divert information to China. 

Xi Jinping and President Trump are expected to have an “extended” talk this week during the Group of 20 meetings in Japan, a sign that the two countries are again seeking a compromise after trade discussions broke down in May. 

After the talks stalled, the Trump administration announced new restrictions on Chinese technology companies.

Along with Huawei, the administration blocked a Chinese supercomputer maker from buying American tech, and it is considering adding the surveillance technology company Hikvision to the list.
Kevin Wolf, a former Commerce Department official and partner at the law firm Akin Gump, has advised several American technology companies that supply Huawei. 

He said he told executives that Huawei’s addition to the list did not prevent American suppliers from continuing sales, as long as the goods and services weren’t made in the United States.

The SK Hynix plant in Icheon, South Korea. American companies are worried about losing market share to foreign rivals.

A chip, for example, can still be supplied to Huawei if it is manufactured outside the United States and doesn’t contain technology that can pose national security risks. 

But there are limits on sales from American companies. 

If the chip maker provides services from the United States for troubleshooting or instruction on how to use the product, for example, the company would not be able to sell to Huawei even if the physical chip were made overseas, Wolf said.
“This is not a loophole or an interpretation because there is no ambiguity,” he said. 

“It’s just esoteric.”
After this article was published online on Tuesday, Garrett Marquis, the White House National Security Council spokesman, criticized the companies’ workarounds. 

He said, “If true, it’s disturbing that a former Senate-confirmed Commerce Department official, who was previously responsible for enforcement of U.S. export control laws including through entity list restrictions, may be assisting listed entities to circumvent those very enforcement mechanisms.”
Wolf said he does not represent Chinese companies or firms on the entity list, and he added that Commerce Department officials had provided him with identical information on the scope of the list in recent weeks.
In some cases, American companies aren’t the only source of important technology, but they want to avoid losing Huawei’s valuable business to a foreign rival. 

For instance, the Idaho-based Micron competes with South Korean companies like Samsung and SK Hynix to supply memory chips that go into Huawei’s smartphones. 

If Micron is unable to sell to Huawei, orders could easily be shifted to those rivals.
Beijing has also pressured American companies. 

This month, the Chinese government said it would create an “unreliable entities list” to punish companies and individuals it perceived as damaging Chinese interests. 

The following week, China’s chief economic planning agency summoned foreign executives, including representatives from Microsoft, Dell and Apple. 

It warned them that cutting off sales to Chinese companies could lead to punishment and hinted that the companies should lobby the United States government to stop the bans. 

The stakes are high for some of the American companies, like Apple, which relies on China for many sales and for much of its production.

A FedEx warehouse in Kernersville, N.C. “FedEx is a transportation company, not a law enforcement agency,” the company said in a complaint against the government.

Wolf said several companies had scrambled to figure out how to continue sales to Huawei, with some businesses considering a total shift of manufacturing and services of some products overseas. 

The escalating trade battle between the United States and China is “causing companies to fundamentally rethink their supply chains,” he added.
That could mean that American companies shift their know-how, on top of production, outside the United States, where it would be less easy for the government to control, said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics.
“American companies can move some things out of China if that’s problematic for their supply chain, but they can also move the tech development out of the U.S. if that becomes problematic,” he said. 

“And China remains a large market.”
“Some of the big winners might be other countries,” Mr. Chorzempa said.
Some American companies have complained that complying with the tight restrictions is difficult or impossible, and will take a toll on their business.
On Monday, FedEx filed a lawsuit against the federal government, claiming that the Commerce Department’s rules placed an “impossible burden” on a company like FedEx to know the origin and technological makeup of all the shipments it handles.
FedEx’s complaint didn’t name Huawei specifically. 

But it said that the agency’s rules that have prohibited exporting American technology to Chinese companies placed “an unreasonable burden on FedEx to police the millions of shipments that transit our network every day.”
“FedEx is a transportation company, not a law enforcement agency,” the company said.
A Commerce Department spokesman said it had not yet reviewed FedEx’s complaint but would defend the agency’s role in protecting national security.

Chinese Kleptomania

The U.S. must take action to stop Chinese industrial espionage
The Washington Post

Attorney General Jeff Sessions said trade secrets stolen from an Idaho-based semiconductor company were valued at $8.75 billion. 

SPEAKING IN the White House Rose Garden in September 2015, Barack Obama and Xi Jinping announced a breakthrough. 

The United States and China pledged that neither nation “will conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information for commercial advantage.” 

But Xi’s promises were always flimsy and short-lived. 

The agreement has collapsed. 

China is again trying to steal its way to greatness, and that calls for a resolute response.
The latest sign of trouble, but hardly the only sign, came in the indictments unsealed last week by the Justice Department. 

The United States charged that a state-owned Chinese company attempted to steal trade secrets from Micron, a semiconductor company based in Idaho that is the only U.S. maker of “dynamic random-access memory,” or DRAM, vital memory chips for computers, mobile devices and other electronics.
According to the indictment, one of Micron’s Taiwanese employees went to work for the Chinese company, then recruited others who brought with them 900 files that included confidential DRAM designs. 

The U.S. attorney for the Northern District of California, Alex Tse, said the haul took “some of the most advanced semiconductor technology in the world.” 

Attorney General Jeff Sessions said the stolen trade secrets were valued at $8.75 billion.
China lacked DRAM technology until recently, and the Micron case is another example of China’s quest to climb the ladder of economic development by stealing overseas technology and copying, re-engineering and manufacturing it, leapfrogging what would otherwise be decades of difficult and expensive work. 

This is not the sort of espionage seeking state secrets that all countries undertake, but a very targeted stealing to help China’s companies profit and conquer markets. 

The companies also receive robust capital infusions from the state. 

After the 2015 Rose Garden announcement, the Chinese stealing subsided for a while, so fewer U.S. companies were hit, but then the pace accelerated again in 2017.
Mr. Sessions insisted that “cheating must stop.” 

Mr. Obama had also insisted: “I indicated that it has to stop.” 

In fact, China’s industrial espionage is not a passing fancy but the pillar of a long-term drive to become a global economic, military and political power, with ambitions to rival the United States. Sadly, the hopes of the past two decades, that Beijing would become a fair competitor playing by international rules, have been dashed.
It is a good first response to indict the perpetrators in the Micron case, and for Mr. Sessions to bolster resources and attention to the threat. 

Beyond that, however, the United States must see the Chinese espionage for what it truly represents: the pursuit of superpower might by stealing the labor and investment of others. 

The economies of the United States and China are inexorably entwined, which will make confronting the espionage threat even harder. 

But it must be done. 

In the end, China will respond only to compulsion.

Taiwan's Double Loyalty

Theft of Micron Chip Secrets Is an Embarrassment for Taiwan
A loss of trust in the technology hub’s ability to protect intellectual property could threaten its economic survival.

By Tim Culpan
An article of faith. 

A U.S. indictment of United Microelectronics Corp. and three executives is a slap in the face for Taiwan.
As a critical partner in the nexus between U.S. clients and the Chinese supply chain, the last thing Taiwan needs right now is to become known as a place that can’t be trusted.
This isn’t the first time its credibility has come into focus.
Weak enforcement is endemic in Taiwan, from insider trading rules to know-your-customer requirements, and that includes many more cases of intellectual property theft.
According to the U.S. Justice Department, UMC executives were the front for a Chinese plan to steal semiconductor secrets from Boise, Idaho-based Micron Technology Inc. 

Even before jumping into bed with state-owned Fujian Jinhua Integrated Circuit Co., UMC had a history of questionable deals in China.
More than a decade ago, the Hsinchu-based company was charged with illegally investing in He Jian Technology (Suzhou) Co. and handed a paltry $150,000 fine. 

Years later, a court overturned an initial guilty verdict. 

That this case even dragged through the courts is a reflection of Taiwan’s weak legal structure and poorly worded regulations. 

In 2009, UMC publicly bought a stake in He Jian in the ultimate show of disdain for Taiwan’s attempts to hold onto locally developed technology.
There’s every indication that UMC takes the Jinhua case just as seriously as it did He Jian (i.e., not very). 

The company said it would halt R&D work for the Chinese client only this week, despite knowing of the case for over a year.
IP isn’t the only area of regulatory weakness. 

Mega Financial Holding Co. was handed a $180 million fine by New York State’s department of financial services in 2016 for money laundering after the regulator found that the bank's compliance program was a “hollow shell.” 

At least six current and former Taiwanese cabinet members were subsequently investigated locally for their lax supervision of Taipei-based Mega.
Cybersecurity is another area of concern, one with global implications. 

The problem was highlighted when an old piece of malware caught out Taiwan Semiconductor Manufacturing Co., UMC’s bigger rival. 

Ongoing attacks by China on local companies show there’s no room for complacency. 

For years, Taiwanese authorities were ill-equipped and largely uninterested in combating the threat, with interference ahead of local elections finally giving the issue some overdue attention.
And let’s not forget insider trading. 

Taiwan is a known hub of industry gossip, tips and non-compliance. 

Eight years ago, I spent months digging up details of its inside information ecosystem, with sources boasting to me about how much they knew and how easy it was to get away with trafficking in company secrets. 

To the best of my knowledge, none of those people have been investigated by Taiwanese regulators.
So when a Taiwanese company gets charged with leaking U.S. secrets to a Chinese government-backed entity, the sad truth is that we’re not surprised – even though we should be.
Taiwan, and its government, has spent four decades and billions of dollars building its technological know-how. 

That’s translated into trust on the part of Western companies that Taiwanese partners will keep their secrets.
With intellectual property at the heart of President Donald Trump’s trade war with China, Taiwan needs to show this hard-earned faith is still warranted. 

In the past few months, numerous companies have indicated a willingness to move production out of China – and in some cases back to Taiwan – in response not only to U.S. security concerns, but also to rising costs and new tariffs.
If Taiwan, and its companies, can’t be trusted to safeguard confidential information then there’s little reason for global clients to keep giving them orders. 

Chinese companies are eager to take over, and its government is ready and willing to spend money to make that happen.
That makes Taiwan’s protection of intellectual property not just a political and security issue, but one of economic survival.

China's Criminal Economic Activity

With new indictment, U.S. launches aggressive campaign to thwart China’s economic attacks

By Ellen Nakashima

Attorney General Jeff Sessions announced a new initiative to combat mounting criminal economic activity by China. 

The Justice Department on Thursday unveiled a broad new initiative to combat mounting criminal economic activity by China, announcing the plan as U.S. officials unsealed charges against several individuals and Chinese and Taiwanese companies for trade-secret theft.
Thursday’s actions follow a series of moves meant to put Beijing on notice. 

The Trump administration has prioritized countering threats to U.S. national and economic security as China seeks to supplant the United States as the world’s dominant economic power. 

The administration already has imposed tariffs on $250 billion worth of Chinese goods, and since September federal prosecutors have brought charges in three intellectual property theft cases involving Chinese spies and hackers.
“Chinese economic espionage against the United States has been increasing — and it has been increasing rapidly,” said Attorney General Jeff Sessions. 

“Enough is enough. We’re not going to take it anymore.”
The initiative is significant in that it fuses ongoing efforts within the FBI, Justice Department and other federal agencies into a single coordinated initiative, and sends a clear message to Beijing that Chinese economic espionage — whether by cyber or human means — will not be tolerated, officials said. 

The Chinese embassy did not respond to a request for comment.
As both countries place greater emphasis on competition and security, the big question, analysts say, is whether the two governments can maintain commercial engagement despite increasing tensions over the quest for technological supremacy. 

In the meantime, Washington is signaling that the gloves are off.
Under the initiative, Sessions said, the department will aggressively pursue trade-secret theft cases, and develop a strategy to identify researchers and defense industry employees who’ve been “co-opted” by Chinese agents to transfer technology to China.
“China wants the fruits of America’s brainpower to harvest the seeds of its planned economic dominance,” Assistant Attorney General John Demers said. 

With this new initiative, he said, “we will confront China’s malign behaviors and encourage them to conduct themselves as they aspire to be one of the world’s leading nations.”
The indictment alleges the defendants conspired to steal trade secrets from Micron, an Idaho-based semiconductor company with a subsidiary in Taiwan. 

Micron is worth an estimated $100 billion and is the only company in the United States that makes “dynamic random-access memory,” or DRAM, high-capacity data storage used in computers, mobile devices and other electronics. 

The company has a 20 to 25 percent share of the world’s supply of DRAM, prosecutors said.
According to the indictment, the Chinese government set up a state-owned company, Fujian Jinhua Integrated Circuit Co. Ltd., for the express purpose of developing DRAM technology and sought to learn trade secrets through the criminal acts of former employees of Micron’s Taiwan branch.
In July 2015, the president of Micron’s Taiwan subsidiary, Chen Zhengkun, also known as Stephen Chen, left to join United Microelectronics Corporation, a semiconductor foundry headquartered in Taiwan. 

Some months later, in early 2016, Jinhua, the Chinese company, began discussions with United Microelectronics to forge a technology cooperation agreement, according to the indictment. 

Chen helped negotiate the agreement, and in early 2017 became president of Jinhua in charge of its DRAM factory, prosecutors said.
It was Chen, who orchestrated the theft of trade secrets from Micron worth up to $8.75 billion.
Chen is said to have recruited former colleagues, including defendant He Jianting, or J.T. Ho, a Taiwanese national, who before leaving Micron stole confidential DRAM materials.

Chen also brought on defendant Kenny Wang, a Micron manager and Taiwanese national who stole more than 900 files, some containing confidential DRAM designs.

Wang downloaded secrets from Micron’s servers in the United States and stored them on his Google Drive account, the indictment said.
“This was,” said U.S. Attorney for the Northern District of California Alex Tse, “some of the most advanced semiconductor technology in the world.”
If convicted, the defendants face up to 14 years in prison and $5 million in fines. 

The two companies, United Microelectronics and Jinhua, could face fines worth more than $20 billion. 

The three men charged Thursday are in China, U.S. officials said.
This week, the Commerce Department added Jinhua to its “entity list” to prevent it from buying goods and services in the United States, effectively cutting it off from the U.S. market. 

Without equipment sold only in the United States, Jinhua cannot build the DRAM chips.
The Justice Department on Thursday also filed a civil suit in San Francisco seeking to stop the further transfer of these stolen trade secrets and to prevent the defendants from exporting to the United States any products resulting from the theft.
“We are not just reacting to crimes — we are acting to block the defendants from doing any more harm to Micron,” Sessions said.
The attorney general outlined a number of laws that prosecutors would use, including the Foreign Agents Registration Act, to identify unregistered agents seeking to advance China’s political agenda.
Congress in August passed the Foreign Investment Risk Review Modernization Act to expand the government’s power to review investments from foreign countries — a response to China’s efforts to obtain U.S. technology through mergers, acquisitions and takeovers. 

Last month, the Treasury Department released interim rules to implement the new law. 

Sessions said the Justice Department will work with Treasury on further developing those regulations.
The Justice Department also will target Chinese threats to U.S. companies that provide components for sensitive technologies, especially those in the telecommunications sector as it readies for the transition to 5G networks.
“This is consistent with the state of confrontational actions over the last couple of weeks taken by the administration to tackle everything China’s trying to do,” said Samm Sacks, a senior fellow at the Center for Strategic and International Studies. 

“It’s bigger than intellectual property theft. It’s supply chain risk. It’s China’s efforts to be global leaders in 5G. It’s traditional espionage. It’s influence operations. This is part of a much broader whole-of-government approach to countering China’s efforts to gain strategic advantage, particularly in emerging technology.”
Sessions noted that earlier this year, U.S. Trade Representative Robert E. Lighthizer found that Chinese sponsorship of hacking into American businesses has gone on for more than a decade. 

By some estimates, the cost to the U.S. economy is $30 billion annually. 

Chinese pledge

In September 2015, Chinese dictator Xi Jinping pledged that China would not target U.S. companies for the economic benefit of nonmilitary Chinese companies.
“Obviously that commitment has not been met,” Sessions said.
Dmitri Alperovitch, a cyber expert and chief technology officer at the cybersecurity firm CrowdStrike, said the Chinese military curtailed its commercial hacking in 2016 but that over the past year, operatives affiliated with China’s Ministry of State Security have increasingly taken up the slack, stealing military, medical, agricultural, high-tech and other secrets.
For months, the Trump administration has been considering ways to decouple the U.S. and Chinese tech sectors: restricting visas for Chinese students in the scientific, engineering and math fields, banning Chinese telecommunications equipment companies from U.S. 5G networks, expanding export controls on U.S. tech firms, and increasing official scrutiny of Chinese investments and joint U.S.-Chinese research, Sacks said.
“This initiative is an important set of hammer blows against China’s efforts to disadvantage American companies, steal their intellectual property, and exercise unwanted influence in our universities and political system,” said James Mulvenon, a China expert and general manager of SOS International’s Special Programs Division, which provides consulting services to intelligence and defense agencies.

US concerns grow over Chinese chip expansion

President Trump threatened new tariffs as China's semiconductor sector receives massive subsidies 
By Louise Lucas in Hong Kong

Seldom have such small chips carried such a heavy load.
China’s fledgling semiconductor industry, after a messy birth, now finds itself in the crosshairs of conflicting political goals in Beijing and Washington.
Chips are a key plank of China’s industrial plans, attracting a massive $150bn government subsidy. 
This reflects national angst over reliance on overseas markets — it spends more on importing semiconductors than oil — and a fear, as one banker puts it, of being left in the dark “in case the US flips the switch”.
Washington harbours its own fears: that these subsidies will distort the market, dent its own domestic industry, jeopardise the edge it has held in the technology and threaten security. 
 “Chinese industrial policies in this sector, as they are unfolding in practice, pose real threats to semiconductor innovation and US national security,” wrote the President’s Council of Advisors on Science and Technology in a letter to Barack Obama earlier this month.
China consumes more than $100bn worth of semiconductors, or roughly a third of total global shipments, but produces just 6 to 7 per cent by value, according to consultancy Bain & Co.
Many of the imported chips go into PCs, smartphones and other gadgets that are then exported, but there is still a yawning gap between the semiconductors made by domestic chipmakers and the number consumed by a gadget-hungry Chinese public.


Early efforts to narrow this gap failed: a scattergun approach resulted in a highly fragmented sub-scale industry.
McKinsey, the consultancy, calculates Beijing had invested in 130 fabrication plants across more than 15 provinces at one point.
But lessons have been learned, says Mark Li, semiconductor analyst at Bernstein, pointing to Hong Kong- and New York-listed SMIC.
Initially, he says, it wanted to be as good as the top manufacturers and invested heavily in high-end equipment, racking up losses as a result. 


 “They adjusted their strategy to be a follower, and stay one to two steps behind Taiwan’s TSMC [the industry leader as a foundry making chips for others] and lowered investment a bit and reduced their R&D investment.”
SMIC, the fifth-biggest semiconductor foundry by revenues in 2015, according to Gartner, produces chip wafers mainly for communications and consumer devices.
Roughly half its revenues come from overseas.
This has served SMIC well.
Its shares have generated a total return of 27 per cent in the past 12 months, massively outperforming the benchmark Hang Seng index.
Of the 28 coverage analysts tracked by Bloomberg, not one recommends selling and 22 have a ‘buy’ rating.
“Normally size gives you better margins, but SMIC defies this,” says Mr Li.
“And that’s why it’s remarkable.”
He estimates SMIC will lift revenues 30 per cent this year, compared with a 2 to 3 per cent rise predicted for UMC, Taiwan’s number two player. 
But at a national level, SMIC is just one of China’s champions.
More ambitious is Tsinghua Unigroup, which in July merged its memory chip operations with government-run XMC.

Tsinghua has sought to plug another gap — a lack of leading-edge technology — by trying to buy overseas companies, including Micron of the US, for some $23bn.
Yet it has been largely stymied by US regulators.
Other attempts have met a similar fate.
In February, Fairchild Semiconductor turned down a $2.6bn bid from Chinese state-backed enterprises over fears that the deal would be blocked by the US authorities. 
Failure to buy-in technology is one of the biggest stumbling blocks to Beijing’s efforts to become a global power in chips, say analysts.
“Buying technology from the US will be more and more difficult,” says Mr Li of Bernstein, who alludes to a blocked attempted acquisition of Aixtron to show that even European deals fail.
“But I think China will continue trying.”
Roger Sheng, analyst at Gartner, says: “Without technology acquisition via [takeovers, joint ventures] or technology licensing, Chinese local companies still lack the capabilities to produce high performance processors and DRAM/flash [memory chips].”
Kevin Meehan, who heads Bain’s Asia technology practice, adds: “They can make progress in total production capacity. But they don’t have a clear path to obtain leading-edge process technology.”
Nor is it just acquisitions at which the US is balking, as testified by this month’s report to Obama.
In November, Penny Pritzker, US commerce secretary, attacked China’s $150bn plan, designed to ramp up Chinese-made integrated circuits at home to 70 per cent in 2025. 



Despite setting a bold goal, Beijing has been less clear on how it plans to get there or how the spending will be directed.
But multinational chipmakers have spotted the momentum shift and have begun setting up manufacturing and partnerships in China. 
The authors of the report to the US president, while noting that the $150bn spend is below the average $23bn spent annually on M&A by US semiconductor companies in the past five years, said acquisitions would help advance China’s aim.

Massive subsidies and intellectual property theft
They identified two further strategies: “subsidies and zero-sum tactics”.
Three examples were listed of the latter, including “forcing or encouraging” domestic buyers to only purchase from local suppliers, “forcing” technology transfer in exchange for market access and intellectual property theft. 
Analysts add a further risk, one that has repercussions across the globe: pricing.
As one analyst baldly puts it, “China is good at getting into businesses,” as it did with solar panels. “They are also good at shrinking profit pools” — alluding to the consequent oversupply and collapse of prices.  
President Donald Trump heightened concerns in December, when he raised the prospect of levying duties of up to 45 per cent on Chinese goods to level the playing field for US manufacturers. 
Such tariffs could hurt not just Chinese companies, but also the multinational players such as Qualcomm, Intel and Samsung that have set up shop in China, through joint ventures or partnerships. 
Some analysts point out that this co-operation, together with an ecosystem of suppliers on the ground, means China is closer to its goal of creating a globally competitive industry. 
“They’ve done it in PCs, in high-speed rail — but haven’t done that yet in semiconductors,” says Mr Meehan.
“They are certainly closer than they were, but they are going to face obstacles.”

Regulators prove a stumbling block 
The graveyard of failed semiconductor deals is littered with Chinese names that have fallen foul of US regulators.
Most recently, the Obama administration last month blocked Fujian Grand Chip Investment’s proposed €670m acquisition of German chip equipment maker Aixtron, which has a US subsidiary making products that have military applications.
The US Committee on Foreign Investment in the United States blocked the deal after flagging up security concerns to Aixtron, whose technology is being used to upgrade US and foreign-owned Patriot missile defence systems.
Berlin earlier withdrew clearance amid similar concerns that chips made with Aixtron equipment could be used in China’s nuclear programme.
Before Aixtron, there were Micron, Fairchild and Lattice Semiconductor — all of the US, and all targeted for bids or investments.
Some were thwarted by the threat of a Cfius red light, rather than a veto per se.
Take Fairchild Semiconductor, which cited the threat as reason to reject a $2.6bn Chinese bid in favour of a lower bid from ON Semiconductor of Arizona.
Chinese companies too have called a halt on proceedings ahead of Cfius reviews, the reason given by Tsinghua Holdings’ Unisplendour for pulling the plug on its $3.8bn bid for a stake in Western Digital, a US data storage company.
Not all blocked deals were obvious security threats: many bankers questioned the quashing of Philips’ planned $3.3bn sale of its US-based Lumileds lighting division to a consortium of Chinese private equity buyers.
But while China’s outbound hunt for chips may be stymied by politics and regulation in the short term, bankers — who have their own interests in robust M&A appetites — do not see mainland buyers giving up.
“This is going to be relevant for the next 10 years,” says one banker.

China's Dirty Money

Nose to the Window for China
By Nisha Gopalan

No matter who becomes the next occupant of the White House, it's already clear that it will be tougher for Chinese companies to make acquisitions in the U.S. and elsewhere in the West.
Chinese companies have ramped up outside purchases amid a slowing economy at home, but they are finding a bigger push-back from politicians in their target markets. 

U.S. lawmakers have expressed strong concern about Chinese acquisitions in Hollywood and urged the Treasury Department to reject the $1.1 billion takeover of Aleris Corp., a Cleveland-based aluminum firm, by China Zhongwang Holdings Ltd. 

That came a week after once-welcoming Germany withdrew its support for the 670 million euro ($743 million) purchase of chipmaker Aixtron SE by a unit of Fujian Grand Chip Investment Fund LP.
Even as Chinese companies hone their sophistication in global dealmaking, it's looking as if there's not much left beyond Switzerland and Mediterranean markets like Italy and Portugal.
Scrapped Chinese overseas acquisitions are hitting levels not seen since 2009, when the world was reeling from the global financial crisis and mainland buying of overseas commodities and related companies was on a tear. 

On the Scrap Heap
The value of rejected Chinese acquisitions overseas is approaching the record level it hit in 2009, when China was on a commodities buying spree

Note: Several big China commodity deals were scrapped in 2009, including the Aluminum Corp. of China's $4.1 billion bid for a majority of Rio Tinto and Sinochem's $3.7 billion bid for Australia's Nufarm. Cnooc's $19 billion Unocal bid was rejected in 2005.

The U.S. has always been a tough market for China, which was made clear when regulators spurned oil giant Cnooc's almost $19 billion bid for Unocal more than a decade ago. 

But that hasn't stopped companies from trying, even as the list of spurned deals this year grows. 

For example, Anbang Insurance Group Co.'s $14 billion offer for Starwood Hotels & Resorts Worldwide Inc. earlier this year, scuttled in large part by opposition in Washington, is the second-biggest terminated Chinese transaction in the U.S.
As that deal indicates, opposition is moving beyond military-related, energy and infrastructure purchases. 

Technology options are also increasingly out, led by Tsinghua Unigroup’s $23 billion rebuffed attempt to acquire Micron, which would have been the largest Chinese overseas takeover at the time. The company also backed out of a $3.78 billion deal to invest in disk-drive maker Western Digital Corp. 

Other abandoned deals include a lighting unit put on the block by Royal Philips NV and Silicon Valley stalwart Fairchild Semiconductor International Inc.
The U.S. push-back has even expanded into so-called soft power like media. 

Tycoon Wang Jianlin, who has set his sights on Carmike Cinemas and finalized his acquisition of Golden Globes producer Dick Clark Productions, faces political accusations of being the vehicle for China's takeover of American cultural trophies.
Opposition isn't limited to the U.S., either. 

Until the approach for Aixtron, Germany, while increasingly sensitive to Chinese purchases, seemed ready for China's business despite rumblings about the sale of robot maker Kuka AG. 

That openness is going to be increasingly rare.
Australia, long a source of cheap commodities and utilities and highly dependent on trade with China, joined the chorus this year, blocking a bid last month from mainland Chinese buyers for Ausgrid, the country's largest electricity network, as public opposition to the sale of everything from farmland to Sydney real estate heats up.
Even Britain, one of the most popular destinations for Chinese investing, is partly cooling to Chinese money after its vote to leave the European Union. 

After a brief delay, Britain approved the controversial 18 billion pound ($22.4 billion) Hinkley Point nuclear power project funded by Chinese money in September but attached new conditions on foreign investing in U.K. infrastructure. 

That leaves just three relatively wide open big markets: Switzerland, home to agricultural giant Syngenta AG, which China National Chemical Corp. is looking to buy for $46 billion in its hunt for seed technology; Italy, where the Chinese chemicals giant acquired tiremaker Pirelli last year; and Portugal, whose largest insurer is now in Chinese hands.
But narrowing the potential Western geographies that are open for business means that access to the kind of technology knowledge or global brands the Chinese covet is becoming much more difficult. While strapped Greece or emerging markets like Pakistan open their smaller ports and utilities to Chinese money, the really big Western targets could be off the table. 

Shopaholic
Of the top 10 bids for overseas assets made by Chinese acquirers on record, five were this year, and all but Spanish firm Repsol's sale of its Brazilian assets were of Western companies

Chinese bidders are going to have to either narrow their focus to targets in other parts of the world or focus on minority stake purchases if they want to keep buying overseas. 

Though unlikely to fizzle, China's M&A boom is definitely beginning to sputter.