Some interesting news in the semiconductor wars:
BREAKING: Netherlands firm ASML's stocks have been falling since China's Huawei unveiled a new patent in Extreme Ultraviolet Lithography, confirming the worst fears of the firm's executives who have opposed US restrictions (Motley Fool).
— SGM World News (@SGMWorldnews) December 31, 2022
Now, ASML had indeed opposed US restrictions. They said explicitly that in the case of sanctions, China would learn how to make the machines themselves.
Europe’s technological lead is being destroyed by following US policies. Energy intensive firms are fleeing Europe because US energy prices are much lower (this is due to sanctions on Russia and the sabotage of the Nord Stream pipelines) and following US sanctions on China means that China just learns how to make what Europe supplies them now.
It’s sort of rocket science, actually. As you may remember, the US banned China from the International Space Station, so China just built its own and now looks likely to have a base on the moon before the US.
Woops.
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China, to repeat myself, is the world manufacturing floor. Mercedes moved their auto-design center to China. When the US took the lead over the US in manufacturing, the UK retained its tech lead for about 20 years, but it did lose it.
Repeated sanctions on any area where the West has the lead, whether space, aerospace, semis or anything else only provide a perfect complete tariff to a country with millions of engineers and scientists and more manufacturing capacity than any other country in the world. They speed up, not slow down, the day when China will both have the tech lead and the manufacturing base.
Back in the late 90s and the early 2000s I warned, repeatedly, against transferring the manufacturing floor to China. That was the decision point, that was when it could have been stopped.
Sanctions against key points only make sense if you’re going to either go to war or move massively back to industrial policy, and the West is not going to do either of those things. I’m not sure a full move to industrial policy would even work, but it’s certainly what should be done. However, it could only be done if you were willing to crash real-estate and securities prices by about two-thirds, because the cost-structure matters.
What Europe should be doing is aligning itself with the rising power, China, or remaining a neutral bloc and negotiation places where they will keep the tech lead with China, as part of specialization. China wants trading partners and they see benefits in not having to rush every tech sector out of fear of sanctions. The US is both going down and fundamentally, at a policy level, willing to feast on Europe to slow its decline. Euro elites though they were part of a trans-Atlantic elite, but they only sort of were. When push comes to shove, American elites will let Euro elites swing. Generations of dominance have created an American elite willing to almost anything, or perhaps even anything, to retain dominance.
Europe has hitched itself to the wrong ship, and trusted the wrong nation, thinking that being a satrapy is the same as being an equal ally, and they have joined a cold war that will hurt them more than help them.
They will pay the price.