Competing against China

Hating China has become de rigueur in today’s America. Everyone is on the train. Some people are so agitated that you would imagine that they want us to invade Shanghai. And everyone believes that since China is evil, we will inevitably win out in the civilizational clash with China. 

Obviously, the Biden administration has decided that the best way to compete is to spend the country into bankruptcy. And to train our children in anti-racist woke ideology. As everyone with a lick of sense knows, our social justice warriors will never compete against armies of computer engineers. One notes that the American children who can compete against their Asian peers are invariably Asian-Americans. Obviously, the educational establishment is trying to dumb them down, to what end, God only knows.

Then again, we have democracy and democracy is the most superior form of government. And yet, when democracy produces leaders like Alexandria Ocasio-Cortez, you should not be too surprised to see that countries around the world are not emulating the American example. For reasons that remain mysterious they do not want their countries to be run by bug-eyed buffoons. Go figure.

Among those who assesses the facts on the ground is David Goldman. Writing in the Asia Times Goldman occasionally tries to shed the light of reason on the current state of play in the latest clash of civilizations. 

You may know that I have no expertise whatever in 5G technology or the future of semiconductors, but Goldman does. I find his analysis to ring true, especially since the tone is so contrary to the ranting that more often passes for discourse in our declining republic.

You will recall that the Trump administration slapped sanctions on Chinese companies. They want to put those companies out of business. They had the chief financial officer of China’s largest company, Huawei, arrested in Canada. They imposed tariffs and so on, the better to punish China. And then they wonder why China is not more cooperative or why it is forging a closer alliance with Iran.

Anyway, here is Goldman’s assessment of the state of play in 5G:

Chinese manufacturers have installed about 5,000 private 5G networks and will add tens of thousands more this year as 5G broadband enables Fourth Industrial Revolution applications, according to mainland industry leaders.

China already has 70% of the world’s installed 5G base stations and 80% of the world’s 5G smartphone users.

The global chip shortage and US sanctions against Chinese telecom equipment firms such as Huawei and ZTE have slowed China’s 5G buildout to some extent but 5G infrastructure already covers all of China’s major cities. 

China will add between 500,000 to 800,000 new 5G base stations to the 792,000 in place at the end of February, according to industry sources. 5G’s impact on productivity as well as profitability will come from downstream applications, not the network buildout as such. 

“It doesn’t make any sense for the West to pour billions of dollars into alternatives to China’s 5G technology,” one Chinese executive told Asia Times.

“It’s too little too late, and it focuses on the wrong areas. Trying to invent an alternative ecosystem isn’t going to work. I would have expected the United States to say, ‘Let’s transform industry, let’s be more competitive.’

If you are like me, the only thing you know about semiconductors is that there is a worldwide shortage. This is impeding manufacturing and industry. As for the nitty gritty of the problem, Goldman explains aspects of the semiconductor war that others more often ignore:

The speed of further 5G buildout will depend in part on China’s ability to manufacture chips with transistor gateways of 28 nanometers or less, according to a semiconductor industrial executive. Most observers believe that China has mastered 28 nanometer process node production and will be able to fabricate most of its own requirements by the end of 2021.

To emphasize, the end of 2021 is merely a few months away.

Media attention has focused on the newest chips with gateways of 7 nanometers or less, which power high-end smartphones, crypto mining workstations and other high-powered devices. But the workhorse of semiconductor applications is the previous generation of chips in the 14 to 28 nanometer range, which will provide the bulk of chip demand during the next five years, especially for wireless connectivity.

Although US carriers offer what they call 5G service, the American version provides download speeds barely above the older-generation 4G LTE broadband, at around 60 mbits/second. The average speed in China is five times higher, at over 300 mbits/second.

In other words, what passes for 5G in America is vastly slower than what is already installed in China. Put that one in your pipe, and puff on it.

Consider the practical consequences. Consider them in terms of the current supply chain disruptions, in large part a function of the fact that our major ports, especially on the West Coast, are not at all as automated as Shanghai. The latter is run by robots, controlled by a 5G network. Our ports are far slower-- about a fifth as efficient, but then again, they have unionized workers, all of whom will never allow the ports to be automated, their jobs replaced by robots. Obviously, the Biden administration will never invest in such infrastructure:

Private networks support industrial robotics as well as “smart” logistics, including automation of major ports. A 5G network supports the automation of the Shanghai Port, which handles 44 million containers per year, compared to 8 million containers at America’s largest facility in Long Beach, California, where more than twenty ships are waiting offshore to unload.

China opened its first 5G-enabled fully-automated port a year ago in Xiamen, with automated cranes stacking containers on driverless trucks. Shanghai’s Yangshan port began fully automated, 24-hour operations in August 2020.

It’s not just ports.

In late 2020, Shandong Energy Group began operations at an automated coal mine controlled by a 5G network. 

Automated warehouses, autonomous vehicles and drones promise to transform e-commerce, with firms like Alibaba and JD Logistics offering same or next-day delivery from computer-controlled storage facilities where packages are sorted and sent by drones or autonomous vehicles.

JD Logistics’ $3.2 billion IPO launched in Hong Kong this week, promising a new level of productivity in delivery. JD still depends on 200,000 delivery personnel but its warehouse management makes Amazon look primitive.

By contrast, Western companies are still evaluating whether they should install private 5G networks to support factory automation, according to a 2020 report by the Capgemini Research Institute. Some German companies, including Audi and BASF, are testing private networks.

In May 2021, Ericsson installed a private network for Airbus, Europe’s premier manufacturer of civilian aircraft, but the network will run on 4G until the 5G network is launched next year. In Silicon Valley, Hitachi and Ericsson have built a 5G research network.

With few exceptions, Western investment in enterprise 5G networks is tentative and experimental, while China’s factories, mines and ports have put 5G into full operation.

Goldman concludes:

The critical difference between 5G and older broadband isn’t speed, but rather carrying capacity and latency (speed of response). Industrial operations require near-instant response time among machines controlled by the network, and 5G, which reduces response time by a factor of ten, opens up possibilities for industrial automation that formerly were unimaginable. 

If you still believe that diversity is our strength and that we are going to compete more effectively by being more inclusive and more democratic… I have a bridge to sell you.