“Of course of fucking course the Americans nicked that plane!”
“Who won the last Cold War?… … Israel!” 😀
“And I thought we established a long time ago, that I wasn’t going to work for the NSA!” 😀 (honestly, you people are fucking stupid)
“You’re only serving them up quantum shit!… eat it up China! STUFF YOUR FACE MUCH AS YOU POSSIBLY CAN!”
Shoucheng Zhang, a renowned theoretical physicist at Stanford University, has passed away after a difficult battle with depression. He was 55 years old.
His family also confirmed the news of his passing but did not reveal the cause of his death. Stanford University, where Zhang was a tenured professor, released an obituary to pay tribute to the prominent scientist.
“We are saddened to learn of the passing of Shoucheng Zhang, a distinguished physicist who has made tremendous scientific contributions,” stated Persis Drell, Stanford provost and a professor of physics at the university. “His passing is a loss for his family, his colleagues at the university and for his field.”
A Tremendous Loss Within The Scientific Community
Zhang was a prominent name in the field of quantum physics. In 2005, he and his team proposed a new state of matter called the quantum spin Hall insulator, which stated that electrical current flows only along the edges and in a direction dictated by its electrons’ quantum spin.
More recently, he and his team published a study that predicts where to find the Majorana fermion, a particle that is also its own antiparticle. The study was published in the journal Science.
During his lifetime, Zhang won multiple awards for his work and for several years, has been a favorite by many researchers to win the Nobel Prize in Physics.
A noted Chinese-born physicist and Stanford University quantum scientist who died Dec. 1 was linked to Beijing’s major program to corner the world market in key advanced technologies.
Zhang Shoucheng, 55, died in an apparent suicide and had suffered from depression, according to his family.
However, his death came days after a Nov. 30 report by U.S. Trade Representative Robert Lighthizer linking the Silicon Valley venture capital firm Danhua Capital, which Zhang founded and led, to China’s “Made in China 2025” technology dominance program.
The 2025 program was launched in 2015 and has been cited by the Trump administration to show that Beijing is engaged in a strategic program of stealing American know-how. The program is aimed at helping China dominate world markets in advanced technologies, including aerospace, information and communications technology, robotics, industrial machinery, new materials and automobiles.
Stanford said in a statement that Zhang was involved in quantum physics research related to interacting electrons. The research led to predictions of new phenomena and exotic states of matter. He took part in research on novel materials, quantum gravity and artificial intelligence.
The USTR report said China is using venture capital investment companies, including Danhua, as a new means of securing cutting-edge technologies and intellectual property from the United States. From January to May, Chinese venture capital investment reached nearly $2.4 billion, a record level.
The investment focused on artificial intelligence, robotics, virtual reality and financial technology.
“Chinese [venture capital] investment in the United States can play a significant role in technology transfer,” the report said.
The Lighthizer report said the Chinese government has created and backed a web of companies in Silicon Valley “to further the industrial policy goals of the Chinese government.”
The investments include funding dozens and in some cases hundreds of startup companies that are then exploited by the venture capital companies to gain access to their information technology. The access gives the companies “the ability to influence and potentially coerce management,” the report said.
According to the report, Zhang’s company Danhua Capital, operating under the name Digital Horizon Capital, was funded by a state-owned Beijing government enterprise called Zhongguancun Development Group (ZDG).
“Other notable Chinese companies with state connections and strong interests in technology also allocated funds to Danhua Capital,” the report said.
They include iFlyTek, a voice recognition company, and BOE Technology Group Co. Ltd. The controlling shareholder of BEO is the state-owned Assets Supervision and Administration Commission of the Beijing municipal government.
“In total, Danhua lists 113 U.S. companies in its portfolio, and most of those companies fall within emerging sectors and technologies (such as biotechnology and AI) that the Chinese government has identified as strategic priorities,” the report said.
Zhang’s family denied social media reports of foul play surrounding the death or that the death was related to the release of the USTR report.
“There is no police investigation, and the authorities have no suspicions about Professor Zhang’s death,” a representative of the family told the South China Morning Post. “You will read that he committed suicide, and this is true. But you will also read in the family statement that he had periodic bouts with depression.”
The death is suspicious, however, because of its closeness to the release of the USTR report.
Guo Wengui, an exiled Chinese businessman who in the past had close contacts with Chinese intelligence, said he knew Zhang for years and doubted he died in a suicide.
“I knew this guy very well,” Mr. Guo told Inside the Ring. “The guy worked with the [Chinese Communist Party].”
In a broadcast on his internet video outlet Guo.media, Mr. Guo said Zhang was part of a special Chinese Communist Party program that recruited scientific and technical experts starting in 1995. The secret program was designed to assist China in advancing technology development and involved some 20,000 experts.
According to Mr. Guo, Zhang in the past received research funding from Jack Ma, head of Alibaba, the giant online retailer and conglomerate, and under Chinese President Xi Jinping received a secret national award for his work.
Mr. Guo said he suspects foul play in Zhang’s death because the physicist knew secrets about China’s technology expert program and that he refused to return to China as requested by senior party leaders.
Chinese state media has reported a number of Chinese government officials have died in what were reported as “abnormal deaths,” the official euphemism for suicide.
In October, Zheng Xiaosong, the head of the Chinese government liaison office in Macau, jumped to his death from his apartment building. Beijing said Zheng had been depressed.
In July, Wang Jian, founder and co-chairman of the Chinese conglomerate HNA, died during a fall while sightseeing at a church in southern France.
The loss of renowned physicist Zhang Shoucheng highlights tensions over Chinese venture capital investments in U.S. technology startups.
The death of a prominent Chinese scientist in the U.S. has passed comparatively unnoticed beside the blizzard of global headlines devoted to the Huawei dispute, yet the tragedy bears upon another important aspect of Beijing’s quest for technological leadership.
Zhang Shoucheng, an internationally recognized Stanford University physicist and venture capitalist, died on Dec. 1, the same day that the chief financial officer of Huawei Technologies Co. was arrested in Vancouver. The 55-year-old had been battling depression, the South China Morning Post reported, citing an email from the Shanghai-born scientist’s family. In a later statement, the family said there was no truth in speculation on Chinese social media that Zhang’s death was connected to a possible U.S. government investigation into his venture capital fund, the newspaper reported.
The scientist, who had been tipped as a future Nobel Prize winner for his work on quantum physics, founded a $400 million fund that invests in Silicon Valley startups and was active in helping U.S.-trained Chinese researchers to return home.
His death highlights a deep pool of Beijing-backed money that has been passing under the public radar.
Consider the fund Zhang founded. Danhua Capital was cited in a report last month by the Office of the United States Trade Representative after an investigation into China’s technology policies and practices.
The way the USTR sees it, China is infiltrating Silicon Valley. Between 2015 and 2017, 10 percent to 16 percent of venture capital deals counted Chinese investors as participants.
Chinese investors are increasingly active in the U.S. venture capital world
The report singled out Zhang’s firm as an example of the new tactics China is using to obtain U.S. technology. The fund lists 113 U.S. companies in its portfolio, most falling within emerging sectors that the Chinese government has identified as strategic priorities, according to the report. At least one “has reportedly decided to reduce operations in Silicon Valley and open operations in China,” it said.
For years, China relied on government subsidies to encourage development of key industries. But starting in 2014, subsidies gave way to so-called “guidance funds”, or state-backed funds of funds that act like venture capital and private equity firms. As of the first half, various levels of the government had established 1,171 guidance funds, aiming to raise and deploy a staggering 5.9 trillion yuan ($858 billion).
Venture Capital, the China Way
State-backed guidance funds have exploded since 2014. Here are some of the largest
Danhua Capital, also known as Digital Horizon Capital, is a major beneficiary of China’s shift into guidance funds. It counts Zhongguancun Development Group, a state-backed investment fund with more than 10 billion yuan in assets, as a major investor. The firm invests in artificial intelligence, big data, blockchain and other disruptive technology sectors.
To be sure, there is no evidence that Danhua Capital has been following Beijing’s bidding. And government-backed venture capital funds aren’t a Chinese invention. Beijing may have been inspired by the U.S., where the Small Business Innovation Research program made early investments in Apple Inc. and Intel Corp. The U.S. Small Business Investment Co. has $26 billion in assets under management.
But one can see why these Chinese state-backed funds make the U.S. government nervous.
The scale is unprecedented. For instance, the $21 billion China Integrated Circuit Industry Investment Fund, established in September 2014 and nicknamed the “Big Fund,” is reportedly raising another $47 billion this year. In addition, there’s already evidence that shows China is abandoning fund-of-funds best practices.
In a 2014 interview, Zhongguancun, set up in the early 2000s long before the recent explosion of guidance funds, said that it would contribute to no more than 30 percent of the total capital of venture capital funds in which it invested, and that it would not interfere with fund managers’ decisions. In other words, it would act only as a passive investor.
But the new kids on the block aren’t abiding by the old rules. For instance, this May, China’s largest chip foundry company, Semiconductor Manufacturing International Corp., partnered with the Big Fund to establish a new 1.8 billion yuan venture capital vehicle. The fund is clearly in the driver’s seat: It contributed 49.5 percent of the capital and owns 15 percent of SMIC.
In August, the U.S. government signed an update to legislation for the Committee on Foreign Investment in the U.S., broadening governmental scrutiny to vetting VC-backed, and especially Chinese state-funded, investments in U.S. tech startups.
With Zhang’s death, China has lost a valuable connection to the newest technology in Silicon Valley. But my bet is that Beijing won’t ease back on its aggressive tactics. The wall of money is too big and the strategic imperative to upgrade China’s technology is too great.
SAN FRANCISCO — The world’s leading technology companies, from Google to Alibaba in China, are racing to build the first quantum computer, a machine that would be far more powerful than today’s computers.
This device could break the encryption that protects digital information, putting at risk everything from the billions of dollars spent on e-commerce to national secrets stored in government databases.
An answer? Encryption that relies on the same concepts from the world of physics. Just as some scientists are working on quantum computers, others are working on quantum security techniques that could thwart the code-breaking abilities of these machines of the future.
It is a race with national security implications, and while building quantum computers is still anyone’s game, China has a clear lead in quantum encryption. As it has with other cutting-edge technologies, like artificial intelligence, the Chinese government has made different kinds of quantum research a priority.
“China has a very deliberate strategy to own this technology,” said Duncan Earl, a former researcher at Oak Ridge National Laboratory who is president and chief technology officer of Qubitekk, a company that is exploring quantum encryption. “If we think we can wait five or 10 years before jumping on this technology, it is going to be too late.”
Quantum computing is based on quantum mechanics, the science that explains the strange behavior exhibited by extremely small particles of matter.
With traditional computers, transistors store “bits” of information, and each bit is either a 1 or a 0. Those are the fundamental slices of data that tell a computer what to do.
When some types of matter are extremely small or extremely cold, they behave differently. That difference allows a quantum bit, or qubit, to store a combination of 1 and 0. Two qubits can hold four values at once. As the number of qubits grows, a quantum computer becomes exponentially more powerful.
Like quantum computing, quantum encryption relies on the nonintuitive behavior of very small objects. The codes that keep data secret are sent by photons, the tiniest particle of light. With the right equipment it is easy to tell if they have been tampered with, not unlike the seal on an aspirin bottle. If carried out properly, the technique could be unbreakable.
There is no guarantee that a viable quantum encryption network could be built over long distances. But if it does happen, China’s willingness to experiment and put government, academic and commercial resources behind the effort could have a big payoff.
The country has invested tens of millions of dollars building networks that can transmit data using quantum encryption. Last year, a Chinese satellite named Micius, after an ancient philosopher, managed a video call between Beijing and Vienna using quantum encryption. A dedicated quantum communication network between Beijing and Shanghai was also put into operation last year, after four years of planning and construction.
For now, quantum encryption works only over a limited distance. The satellite link between Beijing and Vienna stretched this limit to a record 4,630 miles. On the ground, using optical fiber lines, the ceiling is about 150 miles.
Among China’s investments in quantum encryption, the Micius satellite has received the most attention. The University of Science and Technology of China, the government-backed university that helped launch Micius, led the construction of the ground network, which spans about 1,200 miles — perhaps a hint of aspirations for drastic improvement.
The governments of Anhui and Shandong Provinces, through which the fiber-optic network passes, together invested $80 million in the project. Like all major infrastructure projects in China, the plans have had high-level support from the Chinese government.
This main line is being extended to other cities and regions. The goal by 2030 is a Chinese-built network for sharing quantum encryption keys across the globe.
Some security experts question the effectiveness of quantum encryption. Because it is so new, it has not been put through anywhere close to the rigorous testing that would give it a stamp of approval from skeptical cryptographers.
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But Chao-Yang Lu, a professor of physics at the University of Science and Technology of China, said the Beijing-Shanghai quantum network was a significant upgrade.
With communications sent by traditional means, eavesdroppers can intercept the data stream at every point along a fiber-optic line. A government could tap that line just about anywhere. Quantum encryption cut the number of vulnerable spots in the Beijing-Shanghai line to just a few dozen across 1,200 miles, Professor Lu said.
“We admit that it’s an intermediate solution,” he said. “It’s not the final solution. But it’s already a huge improvement in terms of security.”
In the United States, the government and industry have viewed quantum encryption as little more than a science experiment. Instead, researchers have focused on using ordinary mathematics to build new forms of encryption that can stand up to a quantum computer. This technology would not require new infrastructure.
But now, spurred by activity in China and recent advances in quantum research, some in the United States are playing catch-up.
Qubitekk, a Southern California start-up, is working to secure power grids in Tennessee using the technology. A second start-up, Quantum Xchange, is building a quantum encryption network in the Northeast, hoping to serve Wall Street banks and other businesses. Researchers at Stony Brook University on Long Island are preparing a third venture.
Small start-ups like Qubitekk are unlikely to match the millions of dollars in infrastructure already created in China for quantum encryption. But many experts believe the more important work will happen in research labs, and the Department of Energy is funding a test network in Chicago that could eclipse the kind of systems deployed in China.
The Los Alamos and Oak Ridge National Laboratories are working with Qubitekk to secure power grids with quantum technology, and Quantum Xchange is moving equipment into 60 Hudson Street, the old Western Union telegraph hub, which now serves as an internet hub for Lower Manhattan.
Quantum Xchange is building a quantum encryption link between Manhattan and Newark, with plans to connect big banks operating in the two cities. Eventually, it hopes to extend this network up and down the East Coast.
At places like the University of Chicago, researchers hope to go a step further, exploring what are called quantum repeaters — devices that could extend the range of quantum encryption.
“We’re not there yet,” said David Awschalom, a professor at the University of Chicago who oversees much of the university’s quantum research. “But I am confident this will happen in the next couple of years.”
Quantum communication techniques require new hardware. This includes vast networks of fiber lines — and perhaps satellites — as well as specialized devices capable of detecting individual photons of light.
As Qubitekk worked on quantum encryption networks, it could not obtain the special light detectors it needed to do the work. The start-up originally bought detectors from a small manufacturer in New Jersey, Princeton Lightwave. But in April, this lone American manufacturer handed the detector business over to a company in China, RMY, and Qubitekk’s supply line ran dry.
RMY has promised hardware to Qubitekk but recently told it that, because of production issues, additional detectors won’t be available until March.
Small companies in Europe are selling somewhat similar detectors, and labs across the globe are developing a more advanced type of hardware. But for now, supplies, particularly in the United States, are slim.
WASHINGTON — For years, quantum computing, which leverages the difficult, and, to many, spooky science of quantum mechanics, has been a subject mostly of interest to the technical elite. Yet as scientists and now policymakers point to the rapid progress that China is making in the field, it’s the intelligence community that appears to be the most alarmed.
“Our folks in the intelligence community are completely worried about this,” said Will Hurd, a Republican congressman from Texas and a former CIA officer who has criticized President Trump for his failure to defend the nation’s spy agencies.
Earlier this year, the Trump administration hosted an event focused on quantum science with major companies in attendance, and has demonstrated an appetite for confronting China on issues like trade and economic espionage. Yet researchers working in the field argue that much more needs to be done in advance of China’s progress.
For a great majority of the population, the science behind quantum computing is difficult to comprehend. A quantum computer, like a standard computer, encodes information as bits to process information, but it does so by manipulating the physical properties of the quantum bits, or qubits, allowing them to store and process an exponentially larger amount of data in a far shorter time period.
“Quantum computing is not only a new way to do computing, but is really a new transformation in technology,” said Alessandro Curioni, IBM’s vice president in Europe and the director of an IBM Research Lab in Zurich. “It will make problems that were previously unsolvable … practical.”
The most practical application, and the one of concern to the national security community, regards encryption. However, Curioni says it might take thousands or even a million qubits to break modern encryption keys, a development that could be “decades away.”
Google unveiled its groundbreaking 72-qubit quantum computer, Bristlecone, in March 2018, though scientists are still working to prove today’s product is faster than a modern supercomputer.
Yet if quantum computing’s applications are realized, as many scientists working in the field claim they will be, the national security implications are numerous.
One of the biggest and most widely circulated concerns over China’s quantum computing work is that it could enable powerful new machines to break through the layer of security protecting online transactions around the world, thereby exposing highly sensitive information.
According to one recently retired national security official focused on emerging threats presented by advanced technology, China is on track to be 20 years ahead of the United States in the not-too-distant future. Another national security official said the United States is currently scrambling to defend itself, hoping to find foolproof ways to protect its everyday communications in the worst case.
Congress appears to be taking note. “China is eating our lunch on quantum,” said one congressional staffer. Lawmakers tasked with intelligence and national security issues will be focusing on China in coming months, hoping to inspire quicker progress on the U.S. side.
“A powerful quantum computer will be dangerous to our connected world,” said one senior national security official. “It’s not too early by any stretch to be thinking about quantum resistance,” or ways to defend ourselves.
Yet sufficiently powerful quantum computer capable of solving unthinkably complex equations and shattering some forms of modern encryption may still be years or even decades away.
And critics of the field argue there’s also quantum hype, since no one yet has been able to prove they’ve built a quantum computer with practical applications.
Writing last month in IEEE Spectrum, theoretical physicist Mikhail Dyakonov described quantum computing as “something of a self-perpetuating arms race.” Noting that practical applications for quantum computers, even in the more optimistic scenarios, are a long way off, Dyakonov offered an even more pessimistic assessment of a quantum timeline. “I belong to a tiny minority that answers, ‘Not in the foreseeable future,’” he wrote.
Even those who are more optimistic about the prospects of quantum computing warn that the issue is less about an arms race and more about long-term investment.
“The race to quantum computing is more of a marathon,” said Elsa Kania, a fellow at the Center for a New American Security who specializes in China and advanced technology.
“I would say that China isn’t actually ahead in quantum computing, at least for now,” she said, pointing to progress made by American companies including IBM, Microsoft, Google and others. “I try to push back against the fear and the hype.”
Kania and her center colleague John Costello recently published a report detailing the status of the quantum computer race between the United States and China. Kania says China’s dedication to research at the highest levels of government may allow for Beijing to surpass its competitors.
Chinese President Xi Xinping has been a major proponent of quantum computing, and even mentioned it in his 2018 New Year’s address. While it’s difficult to estimate the total amount spent in research, “it appears that the recent and current levels of funding will amount to billions of dollars,” according to the CNAS study.
“Given how much of a priority this is for Chinese leaders, there could be rapid advances beyond what we’re expecting,” Kania said.
This sort of analysis is catching the attention of lawmakers, who say they are concerned by China’s rapid progress in technology that could threaten our national security — and plan to put forward legislation to foster U.S.-based competition.
“The idea that another country, particularly one that is as aggressive as China, would have the ability to rapidly break modern encryption should concern every American,” said Sen. Mark Warner, vice chair of the Senate Intelligence Committee to Yahoo News. “I expect we’ll be spending an increasing amount of time looking at this threat in the coming years.”
And in September, the House of Representatives passed the National Quantum Initiative Act to support research among industry, academia and governmental institutions.
Intelligence officials have publicly lamented that the U.S. is not well prepared to challenge China in physics and advanced technology.
The U.S. needs a better strategy “because China plays the long game,” said George Barnes, deputy director of the NSA, in response to comments about quantum computing and artificial intelligence. “They’re taking steps that may not be realized for 20 years. … They’re bold about it.”
Yet the trade conflict that matters most between America and China is a 21st-century fight over technology. It covers everything from artificial intelligence (AI) to network equipment. The fundamental battleground is in semiconductors. The chip industry is where America’s industrial leadership and China’s superpower ambitions clash most directly. And whatever Messrs Trump and Xi say at the G20, this conflict will outlast them both.
That is because computer chips are the foundations of the digital economy and national security. Cars have become computers on wheels. Banks are computers that move money. Armies fight with silicon as well as steel (see article). Firms from America and its allies, such as South Korea and Taiwan, dominate the most advanced areas of the industry. China, by contrast, remains reliant on the outside world for supplies of high-end chips. It spends more on semiconductor imports than it does on oil. The list of the top 15 semiconductor firms by sales does not contain a single Chinese name.
The chips are down
Superpower politics may start to unravel it
SILICON VALLEY, the heartland of America’s technology industry, takes its name from the chemical element that is the most important ingredient in microchips. Most of the attention it now attracts is directed at companies such as Facebook, Google and Apple, which are better known for their software and nifty devices rather than the chips that make them work. But it was in the Valley in the 1950s and 1960s where inventions like the transistor and the integrated circuit were refined, helping to transform computers from unreliable machines the size of a room into dependable devices that fit neatly into pockets. That in turn enabled the technology titans of today to prosper.
Modern microchips are now embedded into everything from cars and washing machines to fighter planes. World Semiconductor Trade Statistics, a data provider, reckons that the market for chips was worth $412bn in 2017, a rise of 21.6% on the year before. If anything, these raw numbers understate the importance of chipmaking. The global e-commerce industry, for instance, is reckoned to have revenues of over $2trn a year. If data are the new oil, chips are the internal-combustion engines that turn them into something useful.
The ubiquity of chips has led to the growth of a vast global industry. Modern microchips have billions of components and are made in ultra-advanced factories that cost tens of billions of dollars to build. Indeed, that such devices can be built at all is a testament to the power of specialisation and trade.
These hugely complicated products have spawned an equally complex supply chain involving thousands of specialised companies all around the world. The Semiconductor Industry Association, an American trade body, reckons that one of its members has more than 16,000 suppliers, of which more than 8,500 are outside the United States. The raw materials and the parts that are the components of a chip cross and recross the world before eventually ending up as the brains of a smartphone, a car’s anti-lock braking system or thousands of other products besides.
Two forces are now thrusting the semiconductor industry firmly into the spotlight. The first is geopolitics. Chips are caught up in an increasingly bad-tempered rivalry between America, the incumbent techno-superpower, and China, the aspiring one. The second is physics. This brewing technological struggle comes at a historic moment. For 50 years progress has been driven by Moore’s law, which states that the number of components that can be crammed onto a chip doubles every two years and thus, roughly, so does its computational power. But the law is breaking down, leaving the future of the industry looking messier and less certain than at any time in the past.
Start with geopolitics. America has long seen its lead in chipmaking as a vital strategic asset. One of the earliest uses for the chips coming out of Silicon Valley, which owes its existence to the patronage of the Pentagon as much as it does to venture capitalists, was in guidance systems for nuclear missiles. A White House report published in 2017 does not mince its words: “Cutting-edge semiconductor technology is…critical to defence systems and US military strength.”
China also sees chips as crucial to its future. In 2014 it established the National Integrated Circuit Industry Investment Fund, to channel cash to research and development in the semiconductor industry. One of the targets of “Made in China 2025”, a national programme designed to boost high-tech industries, is to increase domestic production. China wants the revenues of its home-grown chip industry to grow from $65bn in 2016 to $305bn by 2030, and for most of its demand for chips to be supplied domestically (today only around a third is).
America has not welcomed China’s incursion onto its patch. It has reacted by trying to slow its rival’s progress. In 2015, for instance, it banned the sale of high-end chips made by Intel, the world’s second-biggest semiconductor firm, to Chinese labs that design supercomputers. It has thwarted acquisitions of American companies by Chinese firms.
This year the Trump administration briefly banned American firms from selling components to ZTE, a Chinese maker of smartphones and telecoms equipment, after it breached the terms of a settlement to do with illegally exporting technology to Iran. ZTE has revenues of $16bn and sells its products all over the world. But the Chinese company licenses its chip designs from several American firms and, when that supply was cut off, it was paralysed overnight. Bankruptcy was only averted when Donald Trump, America’s president, unexpectedly agreed to lift the ban.
Chips in the windscreen
America has also levelled allegations of industrial espionage at China. On November 1st prosecutors indicted Fujian Jinhua Integrated Circuit, a Chinese chipmaker, and United Microelectronics Corporation, its Taiwanese partner, accusing them of stealing trade secrets from Micron, a big American firm. Officials have kept up a drumbeat of warnings about the risks of using equipment made in China, for fear that it may be funnelling sensitive information homeward. On October 12th two senators publicly warned Canada not to let Huawei, a big Chinese electronics firm, become involved in plans to build speedy 5G mobile-phone networks in the country. This week, New Zealand blocked a mobile-network operator, Spark, from using Huawei’s equipment in its forthcoming 5G network. And chips are a front in Mr Trump’s tariff-led trade war with China. They are among a range of goods on which America raised duties in August.
China has toughened up in retaliation. A planned takeover by Qualcomm, an American firm that designs chips, of NXP, a Dutch one, was abandoned in 2018 after heel-dragging by competition regulators in Beijing. Chinese authorities are also investigating price-fixing among American and South Korean manufacturers of memory chips, including Micron.
America’s efforts to frustrate China may only serve to make it more determined. Until recently China boasted the world’s fastest supercomputer. Named “TaihuLight”, and based at the National Supercomputing Centre in Wuxi, near Shanghai, its 40,960 ShenWei 26010 chips are of an entirely Chinese design, says Jack Dongarra, a supercomputing specialist at the University of Tennessee. The main result of the Intel ban, he says, is “that China has put even more money into high-performance computing research”. Successor machines to the TaihuLight, using more advanced chips, are in the works.
A trade war and the growing sense of an unfriendly rivalry between America and China is having unwelcome repercussions on one of the world’s most complex and globalised industries. “These [chip] companies have been told that globalisation is great for the past 30 years,” says Paul Triolo of the Eurasia Group, a political-risk consultancy. “And now all of a sudden this has become a national-security problem, and they have to try to adjust to that.”
Refashioning an industry that is vast, fast-growing and vital to the global economy will not be easy. In the early days chipmakers handled every part of the process in-house. That began to change in 1961 when Fairchild Semiconductor began assembling and testing products in Hong Kong, where skilled labour was cheap. That trend has accelerated as chips have become more complicated and more of the manufacturing process has been outsourced to specialised firms. The result is a confusing constellation of thousands of companies. These can be lumped into three rough categories (see diagram)—design, manufacture, and assembly and packaging.
A typical journey from raw silicon to completed chip gives an indication of how elaborate supply chains can be. It may start in the Appalachian mountains, where deposits of silicon dioxide are of the highest quality. The sand may then be shipped to Japan to be turned into pure ingots of silicon. These are then sliced into standard-sized wafers, 300mm across, and sent to a chip factory, or “fab”, perhaps in Taiwan or South Korea. Here the slices will be imprinted with a particular pattern using photolithography equipment made in the Netherlands.
That pattern will be determined by the overall design of the chip. This design might come from ARM, a company based in Britain. But it can be tweaked for specific applications by one of the company’s many licensees. Once finished, it must be assembled into a package, in which the etched silicon is placed inside the familiar ceramic or plastic containers that are dotted across any circuit board, and then comes testing. That might take place in China, Vietnam or the Philippines.
Slices both ways
This is then integrated into a circuit board, which could happen somewhere else again. The result will be one of the many components that arrive at factories from Mexico to Germany to China, for assembly into an industrial robot, smart electricity meter or one of the millions of computers that crunch data in the cloud.
China’s domestic industry started at the lower-value end of this process, says Jiang Xu, a professor of electrical engineering at the Hong Kong University of Science and Technology. Its strength still lies in assembly and packaging chips. Dozens of firms around the Yangzi delta near Shanghai, for instance, specialise in this sort of work. Their names may be unfamiliar—JCET, Tianshui Huatian and TFME—but their revenues are counted in billions of dollars.
Now, with Western firms reliant on it for this work, and fuelled by a fast-growing home market, China is turning to design and manufacturing. It has already made inroads at the lower end of the market. Firms such as Samsung, Intel, Apple and Taiwan Semiconductor Manufacturing Company (TSMC) design or make powerful, expensive chips for smartphones or cloud computing. But “between 75% and 80% of semiconductors are not bleeding-edge products,” says Len Jelinek of IHS Markit, a research firm. Chips that go into LCD televisions, home routers and smart devices that make up the internet of things, which adds sensors and internet connections to everyday objects, “can absolutely be manufactured by firms in China”.
Chinese firms are beginning to succeed further up the value chain, too. HiSilicon (owned by Huawei) and Tsinghua Unigroup, a state-owned firm, are rated among the world’s top ten chip-design firms by revenue. HiSilicon’s “Kirin” series of smartphone chips is on a par with anything Western companies can design.
Through these efforts China has reduced dependence on foreign expertise, but not yet eliminated it. Mr Xu points out that Chinese firms still rely heavily on modifying designs from ARM. Its chips already dominate the mobile-computing business and are poised to do the same with the array of smart devices that will make up the internet of things. The firm is also trying to break into the market for high-powered cloud-computing chips. Yet ARM is based in Britain, and was recently bought by SoftBank, a big Japanese firm. Both are close allies of America.
China has found it harder to make progress in cutting-edge manufacturing, which is the most demanding part of chipmaking. Chinese upstarts must compete with incumbents that have intimidating technological leads and engineers with decades of hard-won know-how. “The semiconductor [manufacturing] industry is really about repetitive cycles of learning,” says Mr Jelinek. The Kirin 980 was the first smartphone chip to be produced on the 7-nanometre node—the current state of the art for squeezing in computing power. Since no fab in China has the required technology, HiSilicon—like Apple and Qualcomm, its American competitors—had to have its chips made in Taiwan, by TSMC.
The demise of Moore’s law could offer a means to restrict China’s ambitions. It has always been clear that it cannot go on indefinitely. Each time components in a chip shrink, manufacturing gets fiddlier and more expensive. Leading-edge fabs have become eye-wateringly pricey. Samsung is spending $14bn to build one near Pyeongtaek, in South Korea. Chipmakers jokingly refer to Moore’s second law, which says that the cost of a chip factory doubles every four years.
The result has been consolidation at the forefront of chipmaking. In 2001 there were 29 companies offering the most advanced fab facilities, according to McKinsey, a consulting firm (see chart). Today there are five. That could make it easier for Western techno-hawks to slow China’s progress. These fabs are owned by companies based in America, or in Taiwan and South Korea, both of which are its allies. Another lever might be the firms that supply equipment to those fabs. One in particular—ASML, a Dutch firm—has, after over a decade of trying, finally commercialised “extreme ultra-violet lithography”, a manufacturing process needed for the most advanced chips. That could offer Western policymakers a pinch-point.
But the end of Moore’s law offers China hope, too. One of its side-effects used to be that, as components shrank, chips were able to operate faster. But that effect—called Dennard scaling—broke down in the mid-2000s, which meant that shrinking a chip’s components offered fewer benefits than it used to. For that reason, says Linley Gwennap, a chip-industry analyst, being a pace or two behind the leaders in manufacturing matters a bit less than before.
At the same time, says Andrew Huang, a hardware designer, the slowing of Moore’s law has left the industry as a whole casting about for other ways to build better chips. Attention is gradually shifting, in other words, from refining manufacturing towards cleverer design and new ideas. If that changes the way the chip industry operates, Chinese firms could try to move into this new, relatively unclaimed territory.
HiSilicon’s chips offer an example. They include super-specialised silicon designed to speed up calculations that are useful for artificial intelligence, another focus of “Made in China” and an area into which the country is ploughing cash. Quantum computing is another promising avenue. It uses the effects of quantum mechanics to speed up enormously some sorts of calculations. China has made big bets on quantum computing, reportedly spending $10bn to build a big research lab in Hefei, the capital of Anhui province. But it will require the mastery of unconventional physics such as superconducting wires and ion traps, technologies that are very different from what chipmakers use today.
As China advances at the boundaries of chipmaking, America is trying to push them further out of reach. American firms, including Google, Microsoft and IBM, have quantum-computing projects of their own. A report in 2017 from the President’s Council of Advisors on Science and Technology advised that America’s best response to China’s rise would be to invest to maintain its technological lead. With that in mind DARPA, an American military research agency, is running a project called the Electronics Resurgence Initiative (ERI), which aims to develop new technologies to the point where they can be commercialised by private firms.
Picking up the pace
Some of its projects are tweaks that aim to improve existing processes. One example, says William Chappell, who runs the ERI, is technology to allow small chip-design firms to integrate more easily their specialised silicon into bigger designs from larger companies, which should help cut costs. But ERIis also investing in more speculative areas. It has projects looking into optical computing, which aims to build chips that run on light rather than electricity; spintronic transistors, which rely on quantum effects to function; and approximate computing, which sacrifices precision in calculations to save energy.
Making chips even more high-tech could keep America in the driving seat. In any case, says Mr Triolo, it may prove easier than trying to unwind the industry’s global supply chains. Indeed, freezing out China is not something welcomed everywhere in America. Qualcomm, for instance, derives two-thirds of its revenue from China; for Micron the figure is 57%. And a trend towards collaboration, with the likes of Microsoft and Amazon opening research centres in China, has kept investment flowing both ways across the Pacific. A turn to protectionism to keep China in check would inflict damage far beyond its borders.
State newspaper makes no secrets about the military application of the “unhackable” network
An extension of the quantum communications landline connecting East China’s Anhui province and central Hubei province is now up and running. The project is the latest in a slew of its kind as China expands a quantum communications network that is reportedly impossible to crack.
The new, 609-kilometer line connects the two provincial capitals, Hefei and Wuhan. It was built by the state-owned China Aerospace Science and Industry Corp, which develops and produces missiles and carrier rockets and also invests heavily in laser research and development as the base technologies for quantum communications.
The new line is now connected to the existing Beijing-Shanghai line that was inaugurated in September 2017.
China is devoting billions to the cutting edge network linking key cities. Governmental organs and vital agencies, from the military to research institutes, are being enticed by its ultra-high security. Information sent through the quantum network is almost impossible to be tapped, intercepted or cracked.
The Global Times noted that the network could help transmit classified information to a command center of the People’s Liberation Army, which could in return instantly instruct a combat unit during wartime.
The nation’s quantum communications ground network is connected to the world’s first quantum satellite, the Mozi (aka Micius), launched by China in August 2016.
Data encryption based on quantum computing, or quantum mechanics, was pioneered by the Los Alamos National Laboratory in the US, which announced in 2014 that it had created a secure network. Other nations including Germany, Japan, Australia and Sweden are known to be working on similar projects.
Traditional cryptographic systems use the factors of a number that is itself the product of two very large prime numbers to encode signals. This is done on the premise that it would take too much time, and too much computer processing power, for an algorithm to crack the system.
Quantum computing takes a more minimalist approach by limiting data communication to just two parties, the sender and one receiver. Entangled photons, or visible light particles, are sent to the two stations encoded with specific polarizations (the direction of the light wave’s wobble) as a security layer.
The satellite creates security keys using measurements of polarizations, which the stations can use to encrypt and decrypt the data. It is technically “unhackable”, as users can quickly detect the presence of a third party: anyone eavesdropping would be unable to look at the photons without changing or even destroying them.
“The laws of quantum mechanics make it physically impossible for the (transmission) to be intercepted and read without eavesdropping being detected by the sender and receiver,” an expert told the Beijing-based tabloid Global Times.
Such a secure system for transmitting encrypted voice calls, faxes and emails containing classified information would be of immense value for the top brass of the People’s Liberation Army and intelligence networks at a time when cyber warfare is taking on ever-greater importance.