The Tipping Point?

TSMC & TSMC-AZ in the scales. Image credit: SNi 5/23

Taiwan (Republic of China) and China (People's Republic of China) have been in the news recently as tensions between the two have increased recently. The U.S. ostensibly agreed to a "One China" policy with The Shanghai Communique of 1972.

FOREIGN RELATIONS OF THE UNITED STATES, 1969–1976, VOLUME XVII, CHINA, 1969–1972 203. Joint Statement Following Discussions With Leaders of the People’s Republic of China1 Shanghai, February 27, 1972.

The U.S. has always maintained some level of ambiguity, acknowledging there is only one China while simultaneously expressing opposition to any unilateral changes of the (undefined) status quo. And there are variations on how the U.S. views Taiwan which have varied depending on who is speaking or acting on the subject e.g. see 'The One-China Policy in Transition.'

OK, given this background, let's focus on semiconductors. Here is a backgrounder by McKinsey & Co. One of the most important and valuable companies that designs and manufactures cutting-edge semiconductors is the Taiwan Semiconductor Manufacturing Company Limited (TSMC) with the majority of its facilities located on the island of Taiwan. This items plays an important role in considerations related to Taiwan, China, and any potential military solution initiated by the Chinese leadership. For example, "𝐁𝐫𝐨𝐤𝐞𝐧 𝐧𝐞𝐬𝐭" is the idea that if China invades Taiwan 𝑡ℎ𝑒 𝑈.𝑆. 𝑠ℎ𝑜𝑢𝑙𝑑 𝑑𝑒𝑠𝑡𝑟𝑜𝑦 𝑇𝑆𝑀𝐶 𝑡𝑜 𝑝𝑟𝑒𝑣𝑒𝑛𝑡 𝐶ℎ𝑖𝑛𝑎 𝑓𝑟𝑜𝑚 𝑔𝑎𝑖𝑛𝑖𝑛𝑔 𝑐𝑜𝑛𝑡𝑟𝑜𝑙. This was first mooted in 2021 in a scholarly journal, Parameters (U.S. Army War College); however, this has been picked up and similar thoughts have been expressed by various U.S. officials, politicians, etc.

However, adherents of this supposedly 'deterrent' suggestion appear not to have seriously thought through this scenario! Since China is already cut off from TSMC chips by U.S. sanctions (see here and here), this would only effect China 𝐥𝐨𝐧𝐠-𝐭𝐞𝐫𝐦 while being a huge and immediate blow to the U.S. (and world) economy. As such, this threat may 𝐧𝐨𝐭 be quite the deterrent some think it is! In fact this could, perversely, 𝐛𝐞 𝐚𝐧 𝐢𝐧𝐜𝐞𝐧𝐭𝐢𝐯𝐞 for China to take action sooner!

Meanwhile, there is another 'wild card' at play in this consideration - following pressure by the U.S. government, TSMC is currently building a huge fab/foundry in the U.S. ( in Arizona) which when completed (initial production is forecast to begin in 2024, with a second fab coming online in 2026) would ensure a safe and sufficient supply of chips for the U.S. So, what might be some of the consequences of this new plant (which I will refer to as TSMC-AZ) to the various parties? There are both beneficial and adverse possibilities.

• What effect might this have on the U.S. commitment to and support of Taiwan? With its reliance on Taiwan-based production eliminated, the opportunity cost to the U.S. of a Chinese takeover of Taiwan would be greatly reduced, and it is conceivable that this could lessen the likelihood of the U.S. choosing to take military action in support of Taiwan!

• What effect might this have on the Chinese calculus with respect to their timeline to 'incorporate' Taiwan? This could depend on their forecast of what the U.S. might do. If they come to believe that the U.S. would indeed be more likely to follow through with a 'broken nest' approach once they were insulated by the Arizona-based manufacturing, then China might feel the need to move on Taiwan before TMSC-AZ achieves critical mass. However, if they come to believe that U.S. support for Taiwan would 'soften' after TMSC-AZ comes online and that 'broken nest' would not be implemented, that might cause the Chinese leadership to opt for a longer time frame before taking any action.

With TMSC-AZ coming along, we might know sooner rather than later!

On a side note, simply destroying the main fabs/foundries in Taiwan, while certainly dealing China a major setback, would not necessarily eliminate the associated knowledge, expertise, and know-how. To really cause a decades-long setback it would be necessary to also destroy all the design facilities, online documentation, knowledge repositories, etc., and also the associated human capital. If I were a Taiwan-based semiconductor engineer/expert, I might be more than a little uncomfortable in the near future.

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The second map above uses "... historical data to show the world's "economic center of gravity" over time. The map plots the center point in three-dimensional space, which renders the north-south aspect somewhat less interesting, but the east-west movement over time is fascinating. A thousand years ago, economic activity was centered near the middle of the Eurasian landmass. By the early 20th century, the Industrial Revolution in Europe and the growth of the United States pulled the center way to the west. But since 1980 or so, Asia has been growing faster than the US and Europe and dragging the middle back to where it was centuries ago. By 2025, McKinsey thinks the global economy will once again be balanced around the middle of Eurasia..."

Check out the other 36!

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Foolishness

Last week saw the U.S.-Africa Leaders Summit 2014 in Washington , D.C. "... President Obama welcomed leaders from across the African continent to the nation’s capital for a three-day U.S.-Africa Leaders Summit, the first such event of its kind. The Summit, the largest event any U.S. President has held with African heads of state and government, built on the President’s trip to Africa in the summer of 2013 and aimed to strengthen ties between the United States and one of the world’s most dynamic and fastest-growing regions..." 

Well, after six years in office, President Obama finally turns his attention to Africa... The continent had been energized and expected big things when President Obama, son of a Kenyan economist,  was elected and sworn into office, only to find themselves relegated to the back-burner.  Perhaps better late than never!

However, despite the pomposity and high-minded talk about gender equality, global health, investing in the future, shared ideals, etc. the administration apparently couldn't help itself, with various members seeming to let it slip that this was as much about competition with China and China's involvement in Africa as about the future of the continent....

First up, National Security Adviser Susan Rice, who opined: "Typically, the nature of China's engagement is it brings in thousands of Chinese workers and uses Chinese to build roads, build buildings, rather than giving jobs and opportunity and capacity building for Africans which is a real distinction between the American approach and the Chinese approach. The American approach is not to bring in a bunch of foreigners to take jobs from Africa, but it's actually to build African capacity." 

NPR fact checked this with Howard French, the author of  a book on Chinese investment in Africa ("China's Second Continent") - transcript, audio. Unfortunately this turned out to be not quite on the mark, with the U.S. apparently using many of the same Chinese companies for its construction in Africa:

"... The fact is that the United States builds very little in China. So there's no way of making a very meaningful, direct comparison between the American way of doing business and civil engineering or construction and the way that China does business in this sector. However, one can say that until recently when Congress changed the law to change the eligibility to bar Chinese companies, the United States was spending lots of money to pay for Chinese companies to do contract work on its behalf in Africa...  You know, the United States just a few years ago spent $230 million to pay a Chinese company called Sinohydro to build an irrigation and waterworks system for an American project. The United States spent $71 million for the expansion of the Bamako airport, giving those funds to the same Chinese contractor, Sinohydro. And the problem was that American companies, as I was told by U.S. diplomats, couldn't be interested in this kind of contract work..."

Next up, President Obama : From Obama suggests US is better partner than China to African leaders: "... President Obama took a swipe at China in a speech to a summit of African leaders in Washington on Tuesday, claiming that the US is interested in the continent for more than just its minerals and oil. “We don’t look to Africa simply for its natural resources. We recognise Africa for its greatest resource which is its people and its talents and its potential,” he told the largest gathering of African leaders ever held in Washington. “We don’t simply want to extract minerals from the ground for our growth. We want to build partnerships that create jobs and opportunity for all our peoples, that unleash the next era of African growth,” Although the president did not mention China by name, the comments were clearly aimed at Beijing as his administration uses the summit to promote the US as a better partner in its efforts to catch up with the rapidly expanding Sino-Africa trade..."

Quite apart from the gratuitous swipe at China, what exactly does U.S. trade with Africa consist of? Well from the Office of the United States Trade Representative mostly imports of raw materials and exports of more value-added, 'finished' products (as would be pretty typical of trade with a less-developed country).

Exports: "U.S. goods exports to sub-Saharan Africa in 2013 were $24 billion, up 6.9% ($1.5 billion) from 2012, and up 250% from 2003. U.S. goods exports to sub-Saharan Africa accounted for 1.5% of total U.S. goods exports in 2013. Roughly 30% of U.S. exports to sub-Saharan Africa went to South Africa in 2013. The top U.S. export markets in sub-Saharan Africa for 2013 were: South Africa ($7.3 billion), Nigeria ($6.5 billion), Angola ($1.5 billion), Ghana ($1.1 billion), and Togo ($956 million).
The top export categories (2-digit HS) in 2013 were: Machinery ($4.9 billion), Vehicles ($3.6 billion), Mineral Fuel (oil) ($3.5 billion), Aircraft ($1.3 billion), and Cereals (wheat and rice) ($1.3 billion)."

Imports: "U.S. goods imports from sub-Saharan Africa totaled $39.3 billion in 2013, a 20.8% decrease ($10.3 billion) from 2012, but up 53% from 2003. U.S. imports from sub-Saharan Africa accounted for 1.7% of total goods imports in 2013. Approximately 30% of U.S. imports from sub-Saharan Africa were from Nigeria and 22% from Angola. The top U.S. import suppliers from sub-Saharan Africa for 2013 were: Nigeria ($11.7 billion), Angola ($8.7 billion), South Africa ($8.5 billion), Chad ($2.5 billion), and Congo ($1.2 billion). The five largest import categories in 2013 were: Mineral Fuel (crude) ($26.3 billion), Precious Stones (platinum and diamonds) ($3.2 billion), Vehicles ($2.3 billion), Cocoa ($1.0 billion), and Ores, Slag, Ash (titanium, chromium, and uranium) ($968 million)..."

Good grief! Is this silliness really necessary?  To this blogger it seems rather juvenile and amateurish...

Other links:

The US-Africa Heads of States and governments jamboree
The big shift — and opportunity — in America’s ties to Africa
American and Chinese trade with Africa: Rhetoric vs. reality
Building Democracy, Economy, and Security Through Partnership

 

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Source: Why China's new air zone incensed Japan, U.S.

Recently in the news, China declared an Air Defense Identification Zone (or ADIZ) in the Easy China Sea, and started a kerfuffle... with neighbors Japan and South Korea, and with their backer the U.S.

Alarming, or alarmist?

Photo credit:

Recently ran across an article 'Chinese Military Engaged in Political Warfare Against the United States.'At first blush it looked extremely alarming, full of "warfare," "propaganda," "front groups," "disintegration," and the like... However, by the time the article was read it really didn't appear to have any real or serious substance to it. In fact if you substituted some less alarming or inflammatory language (e.g. "attempting to influence U.S. policies..." as opposed to "... using covert political warfare operations to influence U.S. policies...") it turned out to be rather dull! 

You be the judge, here is part of the article, reformulated with a few less alarmist terms (words in  red added, words and phrases in red strike-through deleted): 

"China’s military is attempting using covert political warfare operations to influence U.S. policies and opinions toward Beijing while working to defeat perceived enemies like the United States and Taiwan, according to a report on the sub-rosa activities   

The activities of the People’s Liberation Army (PLA) General Political Department (GPD) include funding pro-China activities abroad, recruiting intelligence sources, spreading propaganda, engaging in media activities, funding front groups that promote Chinese strategy and goals and supporting perceived “friends” of China.  

The report is the first public study of Chinese military political warfare and was produced by the Project 2049 Institute, an Arlington, Va. think tank focused on bringing democracy to China and other Asian countries by 2049. 

The report identifies one of the PLA political operations as the Sanya Initiative. That initiative brought together retired senior Chinese and U.S. military officers, including former Vice Chairman of the Joint Chiefs of Staff retired Adm. Bill Owens, that have lobbied the Pentagon and Congress using the propaganda theme that China poses no threat to the United States.  

The Free Beacon first disclosed last year that a draft report by the congressional U.S.-China Economic and Security Review Commission had identified the Sanya Initiative as linked to the China Association for International Friendly Contact, described in the draft as “a front organization for the International Liaison Department of the PLA General Political Department.”  

China’s military also calls this its political warfare operations “liaison work.”  

"The PLA General Political Department—managed exchanges with foreign senior retired military officers, such as the Sanya Initiative, are only one part of a much broader campaign to manipulate influence perceptions and policies of foreign governments, particularly regarding Taiwan,” said Mark Stokes, Project 2049 director and co-author of the report. 

Stokes said that “for decades, the GPD has effectively conditioned foreign audiences to accept Beijing’s narrow interpretation of One China,” which asserts Taiwan is part of Beijing-ruled China. “The objective reality is that Taiwan, under its current Republic of China constitution, exists as an independent, sovereign state,” he said. “Two legitimate governments—authoritarian [People’s Republic of China] and democratic [Republic of China]—exist on both sides of the Taiwan Strait.”  

The report urges U.S. policymakers to develop countermeasures to Chinese political warfare. 

“U.S. policy makers may find value in a reinvigorated capacity to counter those who promote visions for an international order that are contrary to American interests and ideals,” the report said. “Citing the stagnation of U.S. political warfare skills since the end of the Cold War, prominent opinion leaders have indeed advocated in favor of enhancing our ability to win hearts and minds in the Middle East context. China’s experience in political warfare may be instructive as well.  

”During the 1980s and early 1990s, the FBI had as one of its missions the countering of such political influence operations. However, as successive administrations adopted pro-China trade-dominated policies toward Beijing, U.S. counterintelligence against China diminished significantly.

Frequent cases of prosecutions of Chinese nationals or sympathizers for illegal exports to China are uncovered regularly. However, the FBI has not arrested or uncovered a single Chinese spy during the Obama administration.     

The report states that while all governments seek to shape international opinion, China’s political warfare operations go far beyond traditional public diplomacy. “Chinese political warfare seeks to shore up legitimacy domestically, reframe international rules of the road, and promote their alternatives to widely accepted universal values,” the report said.  

Unlike public diplomacy, China Chinese political warfare involves uses both intelligence and influence operations under the strategy of “aligning with friends and disintegrating countering enemies,” according to the report. Operations to counter disintegrate enemies differentiate Chinese political warfare approaches from other propaganda and publicity programs, the report said. “Leveraging propaganda and other means, disintegration work seeking to undermine an opponent’s national will through targeting of ideology, psychology, and morale,” the report said.

“Contemporary political warfare public relations augments people-to-people, government-to-government, and party-to-party relations to promote [the Chinese Communist Party’s] political legitimacy and defend against perceived threats to state security,” the report said.  

Among the targets groups are “international elites” who are used to undermine the integrity of groups and people Beijing views as anti-China.

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Report (76-page) by computer security firm Mandiant, which has tracked hacking activities around the world and has concluded that "... hundreds of investigations convince us that the groups conducting these activities are based primarily in China and that the Chinese Government is aware of them."

There is some skepticism about the report (e.g. see here and here), but for the most part it is getting good press... Make of that what you will - either because it is spot on (charitable explanation), or because vested interests such as infosec companies see it as good for business (the less charitable explanation). 

A primer on APT by ISACA (registration required) can be downloaded here....

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