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China, which is still the key <keyword id="6354427" type="General" weightage="20" keywordseo="apple" source="Orion">Apple</keyword> supplier, may lose its tag as leading iPhone manufacturer as Apple looks at India and Vietnam to bolster its supply chain, the media reported on Saturday. Largest Apple supplier <keyword id="6354671" type="General" weightage="20" keywordseo="Foxconn" source="Orion">Foxconn</keyword> has "quietly finalised plans" to relocate some of its Apple iPad and MacBook production to Vietnam, reports The South China Morning Post. Apple has reportedly cut back on orders citing weakening demand in potential blow to its Chinese suppliers amid Covid disruptions. At the moment, China is way ahead on the <keyword id="16061828" type="General" weightage="20" keywordseo="Apple-product-manufacturing" source="Orion">Apple product manufacturing</keyword> global map. According to Bloomberg's analysis of Apple's global supply chain, 121 (17.7 per cent) of Apple's 2022 suppliers were domiciled in China, making the country the second largest global source of Apple's supply chain after the US. India is in eighth spot, with two companies (0.3 per cent) and 278 out of 12,248 global facilities (2.3 per cent). Vietnam was in 14th place with two companies (0.3 per cent) and 160 facilities (1.3 per cent). Apple is eyeing to ramp up manufacturing in India amid Covid-related supply chain issues in China. Apple is fast forwarding its manufacturing plans in India and Vietnam in the wake of unrest in China over zero-Covid policy which has severely disrupted its supply chain, leading to an acute shortage of new iPhone 14 Pro models last last year. The Wall Street Journal had reported that the company is "telling its suppliers to plan more actively for assembling Apple products elsewhere in Asia, particularly in India and Vietnam" in order to "reduce dependence on Taiwanese assemblers led by Foxconn". Apple aims to ship 40-45 per cent of iPhones from India compared to a single-digit percentage currently, according to Kuo. Every fourth iPhone will be made in India by 2025, according to JP Morgan. Buoyed by the ease-of-doing business and friendly local manufacturing policies, Apple's 'Make in India' iPhones will potentially account for close to 85 per cent of its total iPhone production for the country in 2022, according to industry experts. Apple first started manufacturing iPhones in India in 2017, with iPhone SE. The tech giant manufactures some of its most advanced iPhones in the country, including iPhone 11, iPhone 12 and iPhone 13 at the Foxconn facility, while iPhone SE and iPhone 12 are being assembled at the Wistron factory in the country. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/news/13th-gen-intel-core-i9-13900ks-brings-unprecedented-speed-to-desktop-users/articleshow/96967459.cms">13th Gen Intel Core i9-13900KS brings unprecedented speed to desktop users </a><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/apps/news/apps-for-marathon-runners-on-iphones-and-apple-watch/articleshow/96965438.cms">The best apps for marathon runners on iPhones and Apple Watch</a>

Apple eyes India, Vietnam to replace China as its key manufacturer

<ul class="summary-list"><li>The Soviet Union's strategy that precipitated the US exit from Vietnam holds lessons for Ukraine. </li><li>The Soviets and Chinese provided Vietnam with weapons that negated the US's airpower advantage.</li></ul>Ukraine can defeat Russia if it and its Western backers learn from America's failure in the Vietnam War, a Ukrainian security expert argues.That war has parallels with Ukraine's fight today. The North Vietnamese thwarted vastly superior American firepower with strategies backed by massive Soviet and Chinese military aid. They are a playbook for how Ukraine might compel Russia to <a target="_blank" href="https://www.businessinsider.com/trump-advisors-peace-plans-ukraine-demilitarized-zone-no-aid-russia-2024-11">make peace</a> within two years, argues Oleksandr Danylyuk, a former top Ukrainian security official and now an analyst for the Royal United Services Institute, a British think tank."The example of the Vietnam War is important primarily because victory for Ukraine is possible only if Russian troops are withdrawn from its territory," Danylyuk said in an <a target="_blank" href="https://rusi.org/explore-our-research/publications/rusi-newsbrief/lessons-vietnam-ukrainian-victory-plan">essay</a> for RUSI. "The creation of conditions under which Russia cannot and is not willing to continue the war, and therefore is forced to leave Ukraine, should be the strategic goal of the pro-Ukrainian coalition."Danylyuk attributes America's failure in Vietnam to a "protracted multi-dimensional strategy by the Soviet Union, on whose help it was completely dependent." The Soviet Union and China supplied Hanoi with ample weapons and other aid, including anti-aircraft weapons to neutralize the US's airpower advantages. The Soviets sent 15,000 military specialists such as air defense experts, while <a target="_blank" href="https://www.washingtonpost.com/archive/politics/1989/05/17/china-admits-combat-in-vietnam-war/6b9cb8a4-4d18-48bf-80d2-bea80f64057c/">China dispatched 320,000 personnel</a> who mostly handled combat support tasks such as logistics, freeing up North Vietnamese manpower for combat duties.Meanwhile, the burden of the war US economy became intolerable, as the Johnson administration refused to raise taxes or cut social programs, leading to deficit spending and inflation. <a target="_blank" href="https://www.businessinsider.com/largest-marches-us-history-2017-1">Anti-war protests</a> — some incited and financed by the Communist bloc — and war-weariness among the general public led the Nixon administration to withdraw American troops. By the time North Vietnamese tanks entered Saigon in 1975, the US was reeling from recession and high oil prices, with no more appetite to aid South Vietnam.Danylyuk admits that <a target="_blank" href="https://www.businessinsider.com/ukraine-facing-powerful-russian-offensive-in-east-grim-outlook-2024-11">Ukraine's situation</a> differs from North Vietnam's in many aspects. "It does not need the presence of allied troops to repel aggression, is not a technologically backward country, and has proven that it cannot only use, but also produce the most modern types of weaponry."Yet, ironically, Danylyuk believes that the keys to defeating Russia's invasion now can be found in the Soviet Union's multi-pronged strategy in Vietnam.<div type="image" title="US Marines wade through a rice paddy in an assault on Viet Cong positions in 1965." height="1383" width="2000" msid="115358659" hostid="261" sizebytes="304174"></div>The first prong of this strategy would be to "stabilize the frontline and to render any successful offensive actions by Russian troops impossible." This would require stopping the Russian <a target="_blank" href="https://www.businessinsider.com/ukraine-turns-tables-russia-drops-glide-bombs-on-its-territory-2024-8">glide bomb</a> attacks that are devastating Ukrainian frontline positions. Rather than trying to stop the bombs themselves, Danylyuk suggests the West provide more fighters armed with long-range air-to-air missiles — in particular <a target="_blank" href="https://www.businessinsider.com/why-ukraine-needs-gripen-fighter-jets-long-term-f-16s-2024-10">Sweden's Gripen jet</a> with Meteor missiles — to shoot down Russian aircraft before they can release glide bombs. His paper notes that the Soviets provided Vietnam 155 MiG fighters in three years alone.Or, if the West is willing to provide "several billion dollars," Ukraine can produce enough long-range <a target="_blank" href="https://newsukraine.rbc.ua/news/romania-and-ukraine-to-develop-neptune-missiles-1722693809.html">Neptune cruise missiles</a> to destroy the Russian airbases and aircraft from which the bombing runs are launched. These weapons would also force Russia to redeploy air defense systems, such as S-300 and <a target="_blank" href="https://www.businessinsider.com/russia-s-400-formidable-not-quite-up-to-the-hype-2024-5">S-400</a> anti-aircraft missiles, from Ukraine back to Russia. In addition, Ukraine should also try to kill as many Russian troops as possible to force the Kremlin into another mobilization likely to be deeply unpopular. "Accomplishing this task directly depends on Ukraine's ability to achieve fire parity on the contact line, which requires the West, in turn, to produce a sufficient amount of artillery ammunition," Danylyuk said.In 1965, when major US combat operations in Vietnam began, the majority of the American public <a target="_blank" href="https://www.statista.com/statistics/1334328/vietnam-war-us-public-opinion-mistake/">backed </a>US intervention. But a US commitment that swelled to 543,000 personnel by 1969, along with growing resentment over the draft and 58,000 American personnel killed, eroded that support.On the economic front, Danylyuk urges the West to bankrupt the Russian war effort by seeking to lower the price of oil, which provides much of Russia's revenues. He points to the collapse of the Soviet Union, caused in part by falling oil prices in the 1980s. This would require other nations to boost oil production to depress prices."It must be recognized that attempts to apply restrictions on the price of Russian oil alone have not worked, and without replacing Russia's share of the world market by increasing production elsewhere, the situation will remain favorable for Moscow," said Danylyuk. Indeed, Saudi Arabia and some of its OPEC allies plan to <a target="_blank" href="https://oilprice.com/Energy/Crude-Oil/How-Saudi-Oil-Policies-Could-Cripple-Russias-War-Effort.html">produce more oil</a> and cut prices.Psychologically, the West should tap into Russian <a target="_blank" href="https://www.businessinsider.com/russians-resisting-crackdown-war-dissidents-paying-2024-3">anti-war sentiment</a> — heavily suppressed by Vladimir Putin's government, but still simmering. "The only explanation for the lack of a mass anti-war movement and large-scale protests is the absence of an organized and popular opposition in Russia," Danylyuk said. "Under such conditions, there is no alternative to providing organizational and financial support for such a movement from the outside."Danylyuk's plan is ambitious, to say the least. Compelling Russia to make peace on the battlefield seems unlikely at least in the short term, as Russian forces advance slowly, <a target="_blank" href="https://www.businessinsider.com/russia-lost-1200-a-day-highest-since-war-began-intel-2024-5">painfully</a> but inexorably. Whether Saudi Arabia and other oil producers would choose to depress oil prices in the long term remains to be seen. Banking on the Russian public's anti-war sentiment is chancy, given the intense repression and propaganda of Putin's government.But the alternative is even worse, Danylyuk warns. Without a strategy to force Russia to <a target="_blank" href="https://www.businessinsider.com/what-trump-picks-mean-for-ukraine-skepticism-time-pressure-2024-11">end the war</a>, the outcome will be to "exhaust Ukraine and the West and allow Russia to implement its own multidimensional plan to end support for Ukraine, according to which Kyiv would be added to the list of cities that have become symbols of the West's geopolitical defeats: Kabul and Saigon."Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds an MA in political science from Rutgers Univ. Follow him on <a target="_blank" href="https://www.twitter.com/@mipeck1">Twitter</a> and <a target="_blank" href="https://www.linkedin.com/in/mipeck/">LinkedIn</a>.

America's defeat in Vietnam offers a game plan for Ukrainian victory  

<ul class="summary-list"><li>The Apple CEO has arrived in Hanoi, Vietnam to meet with Apple suppliers and content creators.</li><li>The company has also announced plans to increase spending on suppliers in the country.</li></ul><a target="_blank" href="https://www.businessinsider.com/tim-cook">Tim Cook</a> has arrived in Hanoi, Vietnam, to start a two-day trip to one of Apple's top manufacturing hubs.During his visit, he's set to meet with content creators, app developers, and students to learn about how they use <a target="_blank" href="https://www.businessinsider.com/apple">Apple</a> products, according to <a target="_blank" href="https://e.vnexpress.net/news/business/companies/tim-cook-arrives-in-vietnam-4734303.html">local media.</a>Apple also plans to boost its ties with local suppliers during the trip as well as help fund clean water projects and education opportunities, local newspaper <a target="_blank" href="https://vietnamnet.vn/en/apple-ceo-tim-cook-arrives-in-vietnam-2270559.html">VietnamNet</a> wrote.In a post on <a target="_blank" href="https://twitter.com/tim_cook/status/1779726553133572251">X</a>, the <a target="_blank" href="https://www.businessinsider.com/apple-ceo">Apple CEO</a> shared a photo of himself drinking <a target="_blank" href="https://www.businessinsider.com/starucks-coffee-ingredients-around-world-spices-oil-egg-ghee-butter-2023-2">egg coffee</a> with two Vietnamese musicians. In <a target="_blank" href="https://twitter.com/tim_cook/status/1779808787085525477">another post,</a> he shared his visit to a workshop where creators were using <a target="_blank" href="https://www.businessinsider.com/apple-iphone-mac-products-great-classic-boring-2023-11">Apple products</a> to create and share their artwork.Apple also announced plans to increase spending on suppliers in Vietnam.Since 2019, the company has spent nearly 400 trillion Vietnamese dong ($16 billion) through its supply chains in Vietnam and has more than doubled its annual spending in the country over the same period, the company said in a <a target="_blank" href="https://affiliate.insider.com?h=458716f4097abeb25e0b192b369908bf6dfa5fb62948f0e68578bcdea492fc9b&amp;postID=661d062e97126ae3b20619aa&amp;postSlug=tim-cook-apple-ceo-arrives-vietnam-key-manufacturing-hub-2024-4&amp;site=bi&amp;u=https%3A%2F%2Fwww.apple.com%2Fvn%2Fnewsroom%2F">statement</a> on its Vietnamese website.The statement added that Apple supports the jobs of 200,000 people in Vietnam through direct employment, via suppliers, and as app developers.In 2020, major Apple supplier Foxconn moved its iPad and MacBook assembly to Vietnam from China at the request of Apple as it attempted to minimize the impacts of <a target="_blank" href="https://www.businessinsider.com/exclusive-foxconn-to-shift-some-apple-production-to-vietnam-to-minimise-china-risk-2020-11">US-China trade tensions.</a>A couple of years later, Foxconn faced issues with Chinese smartphone makers trying to <a target="_blank" href="https://www.businessinsider.com/apples-iphone-maker-says-chinese-rivals-poaching-vietnam-staff-2022-6">poach their talent in Vietnam</a>, attracting them with higher salaries.Apple has faced a recent blow as <a target="_blank" href="https://www.businessinsider.com/iphone-global-shipments-fell-10-percent-first-quarter-apple-problems-2024-4">iPhone</a> shipments fell nearly 10% in the first quarter of 2024, as global smartphone shipments increased.

Tim Cook has arrived in Vietnam for a two-day trip, as Apple boosts ties with its key manufacturing hub 

<ul class="summary-list"><li>The US is ready to push Intel as a national champion in chips.</li><li>The chipmaker has been struggling, causing Qualcomm to reportedly approach Intel for takeover talks.</li></ul>America's future success in chipmaking has a lot riding on <a target="_blank" class="" href="https://www.businessinsider.com/intel-struggles-qualcomm-deal-chip-industry-turmoil-2024-9">Intel</a>.With more than half a century of history in the US chip industry, Intel is a company that commands a huge sense of national pride in Washington — one that US officials would like to maintain well into the future as the country seeks to reinvigorate domestic chip manufacturing.President Joe Biden made that point when he visited Intel's Arizona campus in March and announced the company would receive <a target="_blank" class="" href="https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/20/fact-sheet-president-biden-announces-up-to-8-5-billion-preliminary-agreement-with-intel-under-the-chips-science-act/">$8.5 billion in funding from the CHIPS Act</a>. Last week, Biden awarded Intel a further $3 billion through the same act.As Forrester's senior analyst, Alvin Nguyen, told Business Insider, "Intel's importance to the US in terms of semiconductor manufacturing and products has garnered it significant funding."That point has been reinforced more recently, too. Intel has been presented with different options to fortify its business after seeing its value more than halve this year, following production and strategy woes that have left it well behind in <a target="_blank" class="" href="https://www.businessinsider.com/signal-president-generative-ai-bubble-nvidia-openai-2024-8">the generative AI boom.</a>One option would see <a target="_blank" class="" href="https://www.businessinsider.com/intel-challenges-qualcomm-pros-cons-takeover-2024-9">Intel bought by rival Qualcomm</a>, which has approached the 56-year-old company in recent days, The Wall Street Journal reported. In another scenario, Intel could get a <a target="_blank" href="https://www.businessinsider.com/intel-talks-investment-apollo-qualcomm-2024-9">huge capital injection from investment giant Apollo</a>, which, according to Bloomberg, is willing to put up to $5 billion in.Whether any of these scenarios comes to fruition is uncertain. What does seem certain, however, is that Intel has managed to draw these options as it is still held to be strategically important to the future of the US chip industry.The US needs Intel — a company that both designs and manufactures chips — at a time when reducing reliance on overseas chip manufacturers like <a target="_blank" class="" href="https://www.businessinsider.com/tsmc-power-players-14-execs-leading-worlds-biggest-chipmaker-2024-9">Taiwan's TSMC</a> has become a priority for national security reasons.But fresh efforts to strengthen the embattled chip firm as a national champion will have to contend with the fact that Intel has deep ties to China — the country that is arguably the biggest reason behind the push to strengthen domestic chip manufacturing.<h2 id="49cee0bc-e40f-4d7c-a084-03d8b1438984">A national champion with close ties to China</h2><div type="image" title="Intel" height="1334" width="2000" msid="113642176" hostid="261" sizebytes="83338"></div>One of the key reasons the US launched its CHIPS Act in 2022 was to reduce its reliance on overseas manufacturers for making sophisticated bits of hardware that power the world's electronics.While Nvidia, AMD, and other Silicon Valley players have become global leaders in chip design, manufacturing has typically been outsourced to TSMC, a source of recent tension given the looming threat of a possible Chinese invasion of Taiwan.With computer chips increasingly being used to handle and process vast amounts of data, US officials think there's an urgent need to build manufacturing plants at home that the likes of Nvidia can turn to instead.This is where Intel comes in. As things stand, Intel is the only US chip firm with plants, known as fabs, that are capable of making advanced semiconductors. It has facilities in Arizona, New Mexico, and Oregon. TSMC is set to open a fab in Arizona next year, while reports suggest Sam Altman is seeking to raise funds to create chip manufacturing plants. But even then, Intel is set to remain the main producer of leading-edge chips on US soil.Notably, Intel has operations in China, too. <a target="_blank" href="https://www.exploreintel.com/chengdu">According to its website</a>, Intel's 385,000 square meter campus in Chengdu is home to two factories that "manufacture chipsets and microprocessors for computers all over the world," though Pat Gelsinger, the CEO of Intel, <a target="_blank" class="" href="https://www.nytimes.com/2024/03/29/opinion/intel-gelsinger-chips-biden.html">told The New York Times earlier this year</a> that they "serve the domestic Chinese market."Intel's customers in China include Alibaba and TikTok parent company ByteDance, which have been subject to scrutiny from the US government. Gelsinger noted to The Times that "the business community should be a bridge between the US and China."While Intel <a target="_blank" class="" href="https://www.intel.com/content/www/us/en/newsroom/news/nand-memory-news.html#gs.f3l61x">sold a fab in the port city of Dalian</a> to South Korea's SK Hynix in 2020, investment has continued to pour into the country through its venture capital arm, Intel Capital. A Financial Times report in July said the investment vehicle owned stakes in 43 China-based startups.It's worth noting these ties have remained despite recent efforts from Beijing to become self-sufficient, which have picked up since Washington implemented strict new export controls in 2022 to curb the supply of America's most advanced chip technology to China.China's bid to create a self-sufficient domestic industry, which locals call the "Xinchuang" initiative, could eventually lead to the country bypassing Intel in the supply chain. In March, <a target="_blank" class="" href="https://www.ft.com/content/7bf0f79b-dea7-49fa-8253-f678d5acd64a">the Financial Times reported</a> that Intel's tech would be phased out of Chinese government PCs and servers.As Forrester's Nguyen notes, we shouldn't be so surprised about Intel's links to China. "Intel's ties to key businesses in China are typical for a high-tech firm," he said. "They have production in the country and clientele who benefit from their technology."This much is true. But it's also worth considering what a struggling Intel would mean for China's broader technological ambitions."A weaker Intel and a weaker US semiconductor manufacturing base is probably a positive for China," Stacy Rasgon, an analyst at research firm Bernstein, told Yahoo Finance Morning Brief on Monday.For that reason, Rasgon said he couldn't see "any reason" for Chinese regulators to support the Qualcomm deal, which it would have a say over due to Intel's operations in the country.As Intel and the US consider plans to increase manufacturing capacity at home, the company's China ties will loom large in the global chip race.

Intel matters to US chipmaking. Its tangled relationship with China makes things complicated.

<ul class="summary-list"><li>The US has played a key role in countering China in the South China Sea.</li><li>But any intensified US efforts could trigger a confrontation, experts told BI.</li></ul>The US has played an active security role in the South China Sea in recent years, but with China increasingly confrontational in the region, things could come to a head.US ships and aircraft have repeatedly operated within the wide expanse claimed by China to assert international rights to navigation, carried out <a target="_blank" class="" href="https://x.com/US7thFleet/status/1834396679216181394">military</a> <a target="_blank" class="" href="https://x.com/indopacom/status/1836389721502568770?s=46&amp;t=o-gfid_uWzVLqbUuvoCCsg">exercises</a> <a target="_blank" class="" href="https://x.com/INDOPACOM/status/1834577777598894323">with</a> <a target="_blank" class="" href="https://x.com/INDOPACOM/status/1836163226528350500">regional</a> <a target="_blank" class="" href="https://x.com/INDOPACOM/status/1835438447907295450">allies</a>, and <a target="_blank" rel="" class="" href="https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/01/joint-statement-of-the-leaders-of-the-united-states-and-the-philippines/">reaffirmed</a> its <a target="_blank" rel="" class="" href="https://www.defense.gov/News/Speeches/Speech/Article/3836245/track-record-and-trajectory-us-philippine-defense-ties-since-2021-remarks-by-as/">commitments</a> to regional partners.It has also <a target="_blank" href="https://x.com/INDOPACOM/status/1836525608056033674">helped</a> Southeast Asian countries to <a target="_blank" rel=" nofollow" class="" href="https://x.com/TeamAFP/status/1828775660015522069">modernize</a> their militaries and <a target="_blank" rel=" nofollow" class="" href="https://x.com/TeamAFP/status/1828653505885938023">deepen</a> <a target="_blank" class="" href="https://x.com/INDOPACOM/status/1836666038475489463">ties</a> with countries pursuing similar security goals.However, some Asia regional analysts warn that any further attempt to intensify US efforts in the contested waters could agitate regional partners, trigger China's ire, and backfire on the US and its partners."The last thing that any Southeast Asian country wants is for this to spill over into an active conflict," Bill Hayton, an associate fellow with Chatham House's Asia-Pacific program, told Business Insider.On the other hand, a US pullback would enable China to bully its smaller neighbors in ways that could also trigger a military clash.They "want a Goldilocks situation in the South China Sea — not too hot, not too cold," he added.<div type="image" title="A China Coast Guard ship (R) sailed past the Philippine Coast Guard ship BRP Cape Engaño (L) during a supply mission to Sabina Shoal in disputed waters of the South China Sea on August 26, 2024." height="2000" width="3000" msid="114167295" hostid="261" sizebytes="189602"></div><h2 id="9deb4483-b117-443f-9cc5-4db4f72459bc">Keeping a balance</h2>Southeast Asian leaders have tried to keep a balance between the US and China through ASEAN, a political and economic union of 10 countries with the stated <a target="_blank" href="https://asean.org/what-we-do#asean-aims">goal</a> of "promoting regional peace and stability."ASEAN held its annual summit in Laos this week, in part to <a target="_blank" class="" href="https://apnews.com/article/asean-summit-laos-myanmar-south-china-sea-254fe0f7f8b484df5bdb05c0557fccd6">discuss</a> territorial tensions in the South China Sea. China has made expansive and legally dubious claims to nearly all of the sea, which is a major shipping route and boasts natural resources like fish and oil fields.Recent months have seen clashes between Chinese coast guard vessels and ones from the Philippines, including one <a target="_blank" class="" href="https://www.businessinsider.com/philippines-soldiers-bare-hands-fight-armed-china-coast-guard-swords-2024-6">encounter</a> where swords and knives were brandished and a Filipino soldier reportedly lost a thumb.Speaking at the <a target="_blank" class="" href="https://www.state.gov/secretary-antony-j-blinken-at-the-asean-summit-with-the-united-states/">ASEAN summit</a>, US Secretary of State Antony Blinken told Southeast Asian leaders that the US was concerned about China's "increasingly dangerous and unlawful" activities in the disputed waters."The United States will continue to support freedom of navigation and freedom of overflight in the Indo-Pacific," he added.The US is the only military with the size and sophistication to push back on China's forces, however, any US attempt to step up its role in the region could affect the delicate balance.Hunter Marston, a Ph.D. candidate in international relations at the Australian National University in the Coral Bell School of Asia-Pacific Affairs, said all 10 ASEAN countries have their own security interests and different views about the US' role in the region.While countries that keep close ties to the US, like Singapore, the Philippines, and to some extent Vietnam, would be "very" supportive of increased US security in the region, other countries that fear a larger US military presence in the South China Sea, including Malaysia, Indonesia, and perhaps Cambodia, would be "more vocally" opposed to it, he said.Another aspect is that China's wide claims don't directly affect Indonesia and Cambodia, meaning they have less to lose.<div type="image" title="An infographic of the disputed South China Sea on January 06, 2023." height="4138" width="5697" msid="114167294" hostid="261" sizebytes="390018"></div><h2 id="1c59d1ef-370d-4010-a9b6-a8ba1510690f">A bipartisan issue</h2>Ramping up the US security role in the South China Sea without upsetting the balance of power is "a challenge that dates back to at least the Bush administration," Marston said, referring to the administration of George W. Bush.Following 9/11, the Bush administration <a target="_blank" class="" href="https://link.springer.com/article/10.1057/s41311-023-00486-0#Fn5">stepped up</a> its security involvement in the region by strengthening the US military presence there and increasing diplomatic ties with key ASEAN nations.The Obama administration then pursued a policy of strategic "<a target="_blank" class="" href="https://obamawhitehouse.archives.gov/the-press-office/2015/11/16/fact-sheet-advancing-rebalance-asia-and-pacific">rebalancing</a>," with the underlying <a target="_blank" class="" href="https://onlinelibrary.wiley.com/doi/abs/10.1111/pafo.12115">goal</a> of preventing China from becoming the dominant power in the Asia-Pacific region.The Trump administration took a <a target="_blank" class="" href="https://www.fpri.org/article/2020/08/from-pivot-to-defiance-american-policy-shift-in-the-south-china-sea/">harder line</a>, stepping up its freedom of navigation patrols, conducting naval exercises in the region, and at one point <a target="_blank" class="" href="https://www.csp.navy.mil/Media/News-Admin/Article/2186392/pacific-fleet-submarines-lethal-agile-underway/">deploying</a> all of its forward-deployed nuclear attack submarines into the Western Pacific.Marston said the Biden administration has adopted elements of Obama's policy and tried to ramp up diplomatic efforts and strengthen US alliances and security partnerships.Yet, China has remained undeterred in its efforts to dominate the contested islands, and has grown more aggressive in encounters with regional claimants, notably the Philippines."It's really plagued multiple administrations," Martson said.<h2 id="5c410507-89c1-4bdb-b90b-5027be104561">A polarized region</h2>Gregory B. Poling, director of the Center for Strategic and International Studies' Southeast Asia Program and the Asia Maritime Transparency Initiative, told BI that the South China Sea has served as a "wedge" within ASEAN because only four out of 10 countries have a direct stake in it."Frankly, a lot of them would rather the Philippines, Vietnam, Indonesia, and Malaysia just give up their rights in order to make this issue go away so they can get back to trading and investing with China," he said.According to Chatham House's Hayton, increased US intervention could further split the alliance and also potentially drag the US into a conflict with China that jeopardizes Southeast Asian countries' economies.The US might be called in to help enforce <a target="_blank" class="" href="https://ssi.armywarcollege.edu/SSI-Media/Recent-Publications/Display/Article/3738629/war-with-china-a-view-from-early-2024/">freedom of navigation</a> or defend its partners in the event of a military confrontation between China and its neighbors.<a target="_blank" rel="" href="https://www.businessinsider.com/us-warships-could-protect-pacific-allys-ships-from-china-admiral-2024-8">Adm. Samuel Paparo</a>, head of the US Indo-Pacific Command, hinted at this last August, saying the US could send ships to escort Philippine vessels in the South China Sea following clashes with China in recent months.Even without a boosted US presence, the US could be dragged into a regional confrontation via its partners.At a minimum, Hayton said a conflict would trigger disruptions to shipping, supply lines, and supply chains and hurt the region's economic growth, "even before we start to think about military actions."A conflict in the South China Sea — a critical trade route <a target="_blank" class="" href="https://unctad.org/system/files/official-document/rmt2016_en.pdf">estimated</a> to carry one-third of global shipping — could result in a 10-33% loss in GDP for Taiwan, Singapore, Hong Kong, Vietnam, the Philippines, and Malaysia, according to a 2020 <a target="_blank" class="" href="https://www.nber.org/system/files/working_papers/w28048/w28048.pdf">working paper</a> by the US National Bureau of Economic Research.<h2 id="aba6b3de-fedf-479e-9f6f-ff50a1a9a19a">Escalating tensions</h2>Tensions in the region have been escalating over the past few months, especially between China and the Philippines.A month after the armed encounter, China's largest coastguard vessel <a target="_blank" rel="" class="" href="https://www.businessinsider.com/beijings-monster-coastguard-ship-ramps-up-tensions-south-china-sea-2024-7">dropped anchor</a> in the Philippines' exclusive economic zone, and in August, a Philippine Coast Guard spokesperson <a target="_blank" rel=" nofollow" class="" href="https://x.com/jaytaryela/status/1828077854539874574">said</a> China had deployed 40 vessels to block the delivery of supplies to its soldiers stationed in the contested Sabina Shoal.Earlier this week, the Philippines <a target="_blank" class="" href="https://www.bfar.da.gov.ph/2024/10/09/da-bfar-statement-on-the-recent-ccg-water-cannon-incident-in-bajo-de-masinloc/">said</a> three Chinese Coast Guard vessels and a navy ship fired water cannons toward two civilian vessels while they were on a routine resupply mission in the West Philippine Sea.<div type="image" title="A Philippine coast guard vessel and a Chinese coast guard vessel during an incident in&#xa0;the South&#xa0;China&#xa0;Sea on August 19, 2024." height="1125" width="2000" msid="114167292" hostid="261" sizebytes="36066"></div>Poling described these as "the most violent months in the South China Sea since 1988," and added that the Philippines' "natural" response would be to seek help from its treaty ally, the US.Under a Mutual Defense <a target="_blank" rel=" nofollow" class="" href="https://treaties.un.org/doc/Publication/UNTS/Volume%20177/volume-177-I-2315-English.pdf">Treaty</a> signed in 1951, the US must come to the Philippines' aid in the event of an armed attack — something China has carefully avoided by conducting <a target="_blank" class="" href="https://www.businessinsider.com/china-taking-over-south-sea-us-not-stopping-experts-philippines-2024-9">gray-zone operations</a>.In an interview with CBS News <a target="_blank" class="" href="https://www.businessinsider.com/philippines-expects-us-to-intervene-if-china-takes-rusted-warship-2024-9">60 Minutes</a> last month, Philippine Secretary of National Defense Gilberto Teodoro said that there were ongoing discussions about what scenarios would prompt the US to get involved.Meanwhile, according to Poling, China's official position is that everything the Philippines does is because the US made it do it."That's one of the things that makes this so hard to deescalate," he said.A war with China in the South China Sea is a prospect the US would likely want to avoid at all costs, given the ongoing conflicts raging in Ukraine and the Middle East."But there's no world in which the US can sit on the sidelines, watch China potentially kill Filipinos in Philippine waters, and do nothing," Poling added.

Efforts by the US to counter China in the South China Sea could backfire

<ul class="summary-list"><li>China's economic headwinds won't disrupt its status as a manufacturing powerhouse. </li><li>Strategists don't see another country dethroning China as the world's leading manufacturer. </li></ul><a href="https://www.businessinsider.com/china-economy-us-trade-markets-investors-policy-beijing-finance-outlook-2024-1">China's bearish headwinds</a> range from a <a href="https://www.businessinsider.com/china-economy-beijing-lehman-moment-policy-deflation-economy-markets-property-2023-8">real estate crisis</a> and deflation to weak consumer confidence and <a href="https://www.businessinsider.com/china-economy-global-markets-xi-deflation-property-housing-evergrande-developers-2023-8">crashing stocks</a>. Yet none of that necessarily means another country will be able to take China's place as the world's top manufacturing powerhouse.In a note Monday, Eurizon strategists Stephen Jen and Joana Freire said there's little evidence of de-globalization, even as US-China trade relations have deteriorated amid tariffs and geopolitical strains.Other countries such as Vietnam and Mexico — the latter which surpassed China as the <a href="https://www.businessinsider.com/mexico-us-top-trading-partner-china-economic-nearshoring-trade-agreement-2024-2">US's top trade buddy in 2023</a> — have spearheaded a reordering of global trade flows. To that point, China's market share of total US imports has cratered, but Eurizon said the countries that have exported more to the US in China's place are themselves importing more than ever from China. "[I]n this trade spat, the US may have 'won' but China has not 'lost,'" Jen and Freire said. <h3>China's shifting trade focus</h3>Chinese exports' market share in the US has tumbled from 22% to 14% since 2017, and the Trump administration's policies have indeed had the intended effect of discouraging direct imports from China. Still, China remains the biggest exporter in the world, with a global market share of about 15%, according to Eurizon.Excluding distorted pandemic levels, that marks an all-time high. Beijing has engineered the "surprisingly successful" outcome, Jen and Freire said, despite tariffs and domestic headwinds by making heavy investments in third countries that the US prefers to import from, such as Mexico and Vietnam.China in turn has moved to export components to these countries for final assembly, allowing them to skirt US tariffs on Chinese-assembled products. "Indeed, China has invested and exported more in recent years to precisely the friend-shoring destinations to which the US has shifted its sourcing of imports," the Eurizon strategists said.China has also been able to ramp up exports to Europe, helping compensate for the loss in direct goods to the US. <h3>The 'next China' is China</h3>Eurizon strategists remain doubtful that another country could supplant China's role as the dominant world manufacturer.Not only does China's capacity far outpace its rivals, but export prices have been climbing in Mexico and Vietnam by 30% and 31%, respectively, over the last three years."We believe the fact that export prices have risen more rapidly than general inflation – a remarkable fact in a period of a strengthening dollar – indicates stresses and pressures on the manufacturing capacity in these countries, including shortages of appropriate workers, infrastructure, and transport," Eurizon strategists said. One figure illustrates the point: China has a manufacturing labor force of about 212 million, more than the combined economies of the US, the EU, Japan, Canada, Korea, India, Mexico, and Vietnam. It may be possible the world slowly reorients away from China, but smaller countries wouldn't be able to handle a rapid change that forces them to become manufacturing hubs on par with China. "In sum, we wonder if the 'next China' could actually be China: no other country has the manufacturing capacity to supplant China," Jen and Freire said. <h3>Domestic headwinds</h3>China may not be in danger of losing its trade status, but <a href="https://www.businessinsider.com/china-economy-us-trade-markets-investors-beijing-policy-stocks-finance-2024-2">its economy continues to trend in the wrong direction</a>. "The post-pandemic recovery has been anemic on the back of weak sentiment, and the country is digesting a prolonged period of property overinvestment," UBS strategists wrote in a note Monday, adding that China saw its first-ever deficit in foreign direct investment in 3Q23.In Eurizon's view, that loss of foreign direct investment may have been fueled by Beijing's policy mistakes of the last several years. Its faltering property market has pulled household wealth lower, hurt consumer confidence, and crimped demand and spending. All that manifested in the latest CPI report, which showed <a href="https://www.businessinsider.com/china-economy-deflation-global-markets-investors-beijing-inflation-policy-consumers-2024-2?utm_source=copy-link&amp;utm_medium=referral&amp;utm_content=topbar">the country's deflation problem is still getting worse</a>. Meanwhile, Chinese stocks have severely underperformed global equities, reflecting <a href="https://markets.businessinsider.com/news/stocks/china-outlook-economy-beijing-stock-market-rescue-property-real-estate-2024-1?_gl=1*wz3iev*_ga*MjA5NTAyMzYyOS4xNjYyNDcwMDc5*_ga_E21CV80ZCZ*MTcwNzc1Mzg2OS4xNjA5LjEuMTcwNzc1NjM5MC4xOS4wLjA.">the world's bearish view</a> on China. "Overall investor sentiment toward China remains depressed today," UBS strategists said. "Foreign fund allocations in Chinese assets have been consistently declining, all of which has pushed Chinese stock valuation to very cheap territory."Jen and Freire said Beijing can still use supportive, pragmatic policy to entice foreign investors back into China to eventually help it grow into the world's largest economy. "The world's attitude toward China has changed by as much as China's own domestic policies," they said. "By and large, China has so far managed to retain their dominant position as the world's pre-eminent manufacturing base."

China's economic turmoil won't stop its manufacturing dominance

<ul class="summary-list"><li>The US is desperate to get ahead of China on AI.</li><li>Export controls designed to slowdown Chinese companies seem to be struggling, however.</li></ul>Xi Jinping had a stern message for Joe Biden as the presidents of the world's most powerful nations spoke on the phone in April. If the US is adamant about containing China's tech development, Xi said: <a target="_blank" href="https://www.mfa.gov.cn/mfa_eng/xw/zyxw/202405/t20240530_11332884.html">"China is not going to sit back and watch."</a>For some time now, Washington has been trying to restrict China's access to advanced, US-built hardware needed to power smarter artificial intelligence models.In October 2022, tough export controls were introduced to prevent Chinese chip manufacturers, such as Yangtze Memory Technologies and state-backed SMIC, from acquiring technology made with American expertise.They were further reinforced 12 months later with other measures that drastically limited the ability of top Western <a target="_blank" href="https://www.businessinsider.com/nvidia-earnings-questions-product-delays-2024-8">chip giants such as Nvidia</a> to ship their top-of-the-range gear to Chinese companies trying to keep pace with foreign rivals.This has all been a big problem for China, of course, given that it's spent years relying on partners overseas to source hi-tech equipment needed to bring cutting-edge innovation to its home turf.That said, we're starting to get a clearer picture of what <a target="_blank" href="https://www.businessinsider.com/china-military-loyal-communist-party-purges-xi-jinping-speech-2024-7">China's president</a> meant in his warning to Biden almost five months ago: that China can get its hands on US technology if it wants — and implement devastating restrictions of its own.<h2 id="5a55cfa7-6660-4460-8571-899a1f60cbd5">China strikes back</h2>As AI has come to dominate the technology industry globally since the <a target="_blank" href="https://www.businessinsider.com/everything-you-need-to-know-about-chat-gpt-2023-1">launch of ChatGPT</a>, it's been in China's interest to secure access to chips that offer the computing power needed to power AI applications.But in the face of restrictions that have effectively blocked access through official channels, Chinese companies have been busy finding other means that give them continued access to chips.In part, this has meant trying to buy up supplies of chips that find their way into <a target="_blank" href="https://www.businessinsider.com/china-ai-nvidia-us-bockade-smuggling-2024-8">black markets</a>. According to The New York Times, Shenzhen has been witness to deals involving thousands of chips. But failing to get a hold of them physically hasn't been make-or-break for Chinese firms.This week, <a target="_blank" href="https://www.wsj.com/tech/ai/chinas-ai-engineers-are-secretly-accessing-banned-nvidia-chips-58728bf3">The Wall Street Journal</a> reported that developers in China had managed to gain access to overseas servers loaded with Nvidia chips by hiding their identity from brokers through the "smart contracts" used in the cryptocurrency world to stay anonymous.<div type="image" title="Image of Nvidia semiconductor chip" height="900" width="1200" msid="112871446" hostid="261" sizebytes="44068"></div>Former bitcoin miner Derek Aw, who helps Chinese firms access servers in Australia running on AI chips, told the Journal he often gets "asked if we have Nvidia's chips."The US government is painfully aware of this practice. In January, the <a target="_blank" href="https://www.bis.gov/press-release/commerce-proposes-rule-advance-us-national-security-interests-and-implement-biden">Commerce Department published a proposal</a> to address the use of US cloud services by "foreign malicious actors" who could undermine national security by training powerful AI models. It's all legal for now, though.China has also stepped up restrictions of its own to hurt the West.Last year, the country introduced curbs on the supply of key minerals needed in the chip industry, such as gallium and germanium. Given China is the world's primary producer of these minerals, that has become a bit of a problem.<h2 id="91d560d7-7c96-4b08-846a-545ca61234f8">Feeling the pinch</h2>A<a target="_blank" href="https://www.ft.com/content/9cd56880-4360-4e11-8c22-e810d3787e88"> Financial Times report</a> this week noted that China's rules governing supply threatened to create shortages of the vital minerals and triggered price rises. The implications are being taken seriously.Historian and economics commentator <a target="_blank" href="https://x.com/adam_tooze/status/1828417188665139449">Adam Tooze wrote on X</a>: "China is by far the most important supplier of Gallium that everyone needs for semiconductors. So, when Beijing slaps on controls, the world feels the pinch."Meanwhile, macroeconomist <a target="_blank" href="https://x.com/philippilk/status/1828328572282360178">Philip Pilkington wrote</a> that "Western semis will be slowly choked" in response to the impact of the mineral shortages.Just how much pain this policy will cause in the West over the long term is still uncertain. But it's clear China is not going to just sit back and watch as the West tries to lead the AI race.

China is still getting its hands on US chips — and striking back too

<ul class="summary-list"><li>The Philippines wants to buy its first submarine as tensions in the region mount.</li><li>Experts say their money would be better spent on drones and missile boats.</li></ul>Amid rising tensions with China, the Philippines is planning to buy its first submarine.The Philippine government says this reflects a shift from internal counterinsurgency against rebels to external defense of the nation's sovereignty as China's military power grows in the South China Sea. But some experts question whether buying a sub makes sense given more cost-effective weapons to counter China, or whether it will even happen."There are a lot of folks inside and outside of the Philippine Navy saying, 'maybe this isn't the best use of our money," Greg Poling, director of the Asia Maritime Transparency Initiative at the Washington-based Center for Strategic and International Studies think tank, told Business Insider.In February, Philippine President Ferdinand Marcos Jr. <a target="_blank" href="https://www.scmp.com/news/asia/southeast-asia/article/3250570/south-china-sea-philippines-marcos-approves-purchase-submarines-defend-sovereignty-amid-growing">announced</a> that his nation would buy a submarine, as part of a long-term modernization of the Philippine armed forces. A Philippine Navy spokesman added that this reflected the Philippines shifting from internal to external defense. "We may not be a large navy … but we would have a navy that will take care of our territorial rights and sovereignty," he said.China and its neighbors have been at loggerheads for the past decade, after Beijing claimed sovereignty over most of the South China Sea, including islands and resource-rich waters. Multiple nations — including Vietnam, Malaysia and the Philippines — reject those claims, as did an international tribunal in 2016.In recent months, the Philippines and China have clashed over an unlikely prize: the <a target="_blank" href="https://www.businessinsider.com/decaying-ship-stands-as-philippines-defense-against-china-sea-claims-2023-11">Sierra Madre</a>, a rusting ex-American amphibious landing ship from World War II, which the Philippine Navy grounded on the Second Thomas Shoal in 1999 to assert its rights over the area. China has tried to stop the Philippines military from resupplying the small garrison on the ship, including ramming Philippine ships, and using <a target="_blank" href="https://www.businessinsider.com/china-philippines-ship-confrontation-with-water-cannons-video-2024-4">water cannon</a>, <a target="_blank" href="https://www.bbc.com/news/world-asia-64621414">lasers</a>, and even <a target="_blank" href="https://www.businessinsider.com/philippine-general-accuses-china-of-piracy-south-china-sea-clash-2024-6">axes and knives</a>.However, Poling doesn't believe that the sub acquisition is tied to this incident. Plans to buy a sub date back to the administration of former President Rodrigo Duterte, a populist whose attempts to embrace China sputtered. "The Philippines is in the last third of a 15-year military modernization plan to move from an internal counterterrorism-focused force to an external defense force," Poling said. "And that mainly means pumping more money into acquisitions for the navy and air force."Though an American ally, it couldn't afford or operate the nuclear-powered models that the US builds. France, Spain, South Korea and Italy, which build diesel-electric subs, have expressed interest, the Philippine Navy has said. Diesel-electric submarines are relatively tough to detect before they surface to intake fresh air, and a small number of them could complicate China's efforts to encroach on atolls and islands by force.But that leaves the question of how readily the Philippines Navy can operate a submarine. Its combat fleet mostly consists of small missile boats and patrol craft, plus two frigates and a corvette. Other Asian powers, including Indonesia, Malaysia and Vietnam, have subs. But Malaysia experienced major <a target="_blank" href="https://www.defenseworld.net/2010/02/06/malaysias-scorpene-submarine-refuses-to-submerge.html">problems</a> when it received French-built submarines in 2009.Submarines are a "wildly expensive capability for any country to field because it is an entire ecosystem," said Poling. " You've got to build a submarine base. You've got to have trained crews."The Philippines may not even have the money for a diesel submarine, which can cost $500 million apiece. "The key determinant here is the fiscal capacity of the Philippines," Mark Manantan, director of cybersecurity and critical technologies, at the Hawaii-based Pacific Forum think tank, told Business Insider. "According to some individuals within the defense and security establishment, purchasing a submarine will possibly eat up the entire defense budget."Still, there are powerful symbolic reasons for the Philippines to join the sub club. It demonstrates success in ending a 50-year-old <a target="_blank" href="https://www.crisisgroup.org/asia/south-east-asia/philippines/338-calming-long-war-philippine-countryside">Communist insurgency</a>, as well as a more recent rebellion by Islamic militants on the island of Mindanao."There are two complementary things going on here," said Poling. "One is the rise of China as a threat to the Philippines. The other is the pretty rapid advance of the peace process in the southern Philippines, along with the degradation of the Philippine Communist Party."And as with many nations, there is a desire to keep up with the neighbors. "Malaysia, Indonesia and Vietnam have subs, so we should have subs, too," Poling said.<div type="image" title="Chinese Coast Guard holding knives and machetes as they approach Philippine troops in the Second Thomas Shoal at the disputed South China Sea" height="3158" width="3165" msid="111535353" hostid="261" sizebytes="206970"></div>A single submarine would do little to change the power imbalance between the Philippines and China. Nor would it be useful against the sort of low-key, gray zone warfare that Beijing is waging in places, such as harassing the Philippine ship beached on the Second Thomas Shoal.Rather than a $500 million diesel sub, a better option would be to acquire cheap but powerful weapons such as missiles, drones and small missile boats. Indeed, the Philippines recently took delivery of Indian-made <a target="_blank" href="https://www.voanews.com/a/amid-china-tensions-india-delivers-supersonic-cruise-missiles-to-philippines-/7581242.html">BrahMos</a> anti-ship missiles, with a range of around 180 miles."I don't think that you'll find any Philippine naval analysts who would stump for a submarine," Poling said. "They want BrahMos missiles or fast missile boats."Ironically, one country that won't care about a new Philippine sub is China. "I don't think the purchase of submarines would have any deterrent effect at all," said Manantan, who believes China may also be counting on future Philippine governments to cancel the project. "The Chinese understand the volatility of Philippine domestic politics, particularly the in-fighting and rent-seeking dynamics among competing political parties. So Beijing is just biding its time up until a new administration sits that it can persuade or at least influence.Ironically, one country that won't care about a new Philippine sub is China. Beijing is more concerned with alliances that Manila is pursuing, such as a new <a target="_blank" href="https://www.reuters.com/world/asia-pacific/philippines-hopes-seal-troops-pact-with-japan-soon-2023-11-06/">agreement</a> that would allow the Japanese military — whose forebears committed atrocities against Filipinos during their WWII occupation — to use Philippine bases."This would be the first time since World War II that Japanese forces have been able to conduct live-fire training in an Asian nation," said Poling. "That worries China."Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds an MA in political science from Rutgers Univ. Follow him on <a target="_blank" href="https://www.twitter.com/@mipeck1">Twitter</a> and <a target="_blank" href="https://www.linkedin.com/in/mipeck/">LinkedIn</a>.

Eyeing China, the Philippines wants to buy its first attack submarine 

<ul class="summary-list"><li>China just issued draft regulations to rein in solar cell production.</li><li>This shows Beijing knows and is concerned about industrial overcapacity.</li></ul>China and the West are in disagreement over claims that the East Asian giant is <a target="_blank" class="" href="https://www.businessinsider.com/china-economy-overcapacity-dumping-manufacturing-exports-economic-woes-world-yellen-2024-4">producing too much stuff</a> and depressing global prices.<a target="_blank" rel=" nofollow" href="https://english.news.cn/europe/20240507/0606e58b4cec4bb5ac749eacbda8d567/c.html">China has pushed back</a> against this notion, saying the West is trying to contain its economic growth.But Beijing recently released a new set of draft rules that show China knows and is concerned about overcapacity too — specifically in solar cell production.On Tuesday, China's industry ministry released new <a target="_blank" class="" href="https://www.miit.gov.cn/jgsj/dzs/gzdt/art/2024/art_16a86cc6229d4cf8b52c54dd01df7a74.html">draft regulation</a> to promote "high-quality development" in the industry. The draft rules are open for public consultation until Monday.The ministry did not explicitly target excess capacity but said in its proposal that it aims to guide solar cell companies to reduce manufacturing projects that "simply expand production capacity" while improving innovation, production, quality, and reducing production costs.China's industry ministry is looking to increase the ratio of capital that shareholders must invest in projects. This could limit the speed of industry expansion and curb overproduction.The new rules come as the solar industry deals with a glut of panels following years of breakneck growth. The sector is one key pillar of the country's <a target="_blank" rel="" href="https://www.businessinsider.com/china-economy-new-growth-areas-electric-vehicles-batteries-solar-property-2024-1">"new three" economic drivers,</a> so Beijing would want it to be sustainable.<h2 id="6cb67844-d629-4984-8a27-fc784059e960">China is producing more solar panels than the world can absorb</h2>As it stands, <a target="_blank" class="" href="https://www.businessinsider.com/china-solar-panel-supply-overcapacity-power-grid-demand-support-energy-2024-5">China is producing way more</a> solar panels than its power grid can handle. There's such a huge glut of solar panels worldwide that some people are using them as <a target="_blank" class="" href="https://www.businessinsider.com/china-flood-solar-panel-cell-market-garden-fence-overcapacity-yellen-2024-4">garden fencing.</a>China's solar module manufacturing capacity nearly tripled in 2022 alone before gaining another 84% in 2023, commodities consultancy Wood Mackenzie wrote in a report in April.Ed Crooks, the vice-chairman of energy at Wood Mackenzie, called the surge "most dramatic."Last year, China — the world's largest solar energy producer — installed fewer panels than it produced, per Wood Mackenzie.The oversupply caused a plunge in solar cell prices that even Chinese manufacturers are up in arms about.In May, the China Photovoltaic Industry Association called for more mergers and acquisitions, as well as restrictions on domestic competition to control capacity.On Monday, Longi, a major Chinese solar maker, said in a <a target="_blank" rel="noopener" class="media-ui-Link_link-tVkXhPLPofs-" href="https://sns.sseinfo.com/resources/images/upload/202407/202407051955023663989150.pdf">stock filing</a> that 2024 will be a "difficult year" for the company and industry. The company laid off thousands of workers earlier this year."The entire industry does not have the ability to support further price declines in the short term," Longi said on Monday.

China basically just admitted it's also concerned about solar panel overcapacity

<ul class="summary-list"><li>The US is taking an unnecessarily tough stance on China, Stephen Roach said.</li><li>The Yale professor told the Odd Lots podcast that reducing the deficit is a better way to improve the US economy.</li></ul>The US needs to readjust its approach to China or risk deep and unnecessary fallout between the world's two biggest economies, Yale economist Stephen Roach said.The former Morgan Stanley China chairman blasted each country's mounting antagonism on Bloomberg's <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-07-15/stephen-roach-warns-of-potentially-disastrous-us-policy-towards-china?srnd=markets-vp">Odd Lots podcast</a>, sharing dim views on rising trade barriers. While President Donald Trump was the first to initiate higher tariffs against Beijing in his first term, restrictions have continued to expand under Joe Biden.It's a similar setup to the 1980's face-off between the US and Japan, Roach said. As a manufacturing slump roiled US industry in that decade, Washington incorrectly put the blame on its trade deficit with Japan, he said."I think the end game was quite tough for Japan. Japan went from a growth miracle to a growth bust, went through arguably three lost decades of near economic stagnation, a considerable amount of which was an outgrowth of the currency policy that we and other developed nations imposed on Japan," he said.The same seems to be happening with modern-day China. Throughout the current election cycle, Trump has pushed for much higher tariffs on imports from the country, arguing that this will help <a target="_blank" href="https://www.businessinsider.com/trump-tariff-plan-inflation-policy-impact-trade-war-china-rates-2024-5">boost US production</a> and protect industries. Similarly, Biden has applied new restrictions on advanced technologies coming from China, such as <a target="_blank" href="https://www.businessinsider.com/white-house-joe-biden-hikes-tariffs-on-chinese-made-evs-2024-5">electric vehicles</a> and batteries. He's said the reasoning is to allow US domestic industries to mature.However, there's a better approach to growing domestically than slapping tariffs on competitors, Roach says.Both Trump and Biden should focus on reducing the country's budget deficit. That way, the economy has the proceeds to invest domestically, whether for research and development, domestic infrastructure, or human capital."So there's a lot that we can do, but politically it's not attractive and not palatable to short-term focused American politicians," Roach said. Trump and Biden have each worsened the federal debt trajectory more than all previous presidents combined, he noted.As was the case with Japan, blaming trade deficits for internal issues is a misunderstanding of international economics, Roach said — no one country is at fault. And even when trade is reduced, its manufacturing capacity simply is picked up by other economies that trade with the US.Roach also dismissed talking points that trade restrictions serve as a <a target="_blank" href="https://markets.businessinsider.com/news/stocks/china-economy-us-growth-xi-jinping-biden-national-security-chips-2023-5">national security</a> barrier against supposed Chinese malintent."Our politicians are eager and aggressive to warn of consequences based on the presumption of intent that they have not been able and are unwilling to validate," he said. "And I know that's an unpopular view to hold in this bipartisan era of what I've called Sinophobia, but I've never seen in my adult lifetime an adversary that's been so vilified as we are now vilifying the Chinese."

Slamming China with tariffs is a mistake, and the US can do one big thing to support key industries, Yale economist says

<ul class="summary-list"><li>Biden raised tariffs on China's green tech, but spared graphite for two years.</li><li>China dominates global graphite supply, which is vital for EV batteries.</li></ul>President Joe Biden this week <a target="_blank" href="https://www.businessinsider.com/white-house-joe-biden-hikes-tariffs-on-chinese-made-evs-2024-5">hiked tariffs on China's</a> massive green-tech sector, which includes electric vehicles, batteries, solar cells, and certain critical minerals, touting them as a way to protect American workers.But Gene Berdichevsky saw a gaping hole. The White House decided to delay by two years tariffs on graphite, a key metal in EV lithium-ion batteries that helps them store energy. China mines and processes the vast majority of the world's supply, <a target="_blank" href="https://pubs.usgs.gov/periodicals/mcs2024/mcs2024.pdf">according to federal US data</a>."If our policy is that China is not playing on a level playing field, so we're going to use tools to level them, then we should do it in a way that actually has the outcome we want — which is to develop domestic battery supply chains," Berdichevsky said Tuesday during dinner with reporters in Washington, DC.Berdichevsky is the CEO of Sila, a next-generation battery materials startup that uses silicon instead of graphite. The company's technology makes lithium-ion batteries lighter than what's on the market today, and the firm says it helps store 20% more energy, or up to 100 extra miles for some EVs. Berdichevsky, an early employee at Tesla, said he saw a future where EVs could recharge in 10 minutes, which would rival a stop at the gas station.Sila opened a factory last year in Moses Lake, Washington, with help from <a target="_blank" href="https://www.silanano.com/press/press-releases/u-s-department-of-energy-awards-sila-100-million-to-scale-manufacturing-of-its-next-generation-anode-materials">a $100 million grant</a> from the US Department of Energy. The company aims to make enough battery materials to power 200,000 EVs by 2026, and Mercedes-Benz is already a customer.Manufacturing a new technology in the US is challenging for a number of reasons. In Sila's case, it needs to scale big enough to meet the demand of large automakers, Berdichevsky said. That requires billions of dollars, but it's hard to raise funds between the venture-capital and private-equity stages — a gap he described as the "missing middle." In addition, the US is slow to transform its infrastructure, including power grids and EV charging, which would drive demand for homegrown green tech. Meanwhile, there's the risk that another company copies the technology and tries to compete.Now, the White House is sending a disappointing signal to Sila's investors by exempting Chinese graphite from tariffs and other policies designed to shift automakers away from sourcing batteries and critical minerals from China, Berdichevsky said.He added that if the White House slapped tariffs on graphite, "the market would react and go, 'Oh, there's this new technology that can replace graphite that's made in the US — let me go and invest in that.'"New trade barriers would make EVs sold in the US more expensive, Berdichevsky added. But it would send a strong signal "to get the hell out of Chinese graphite right now, not two years from now or longer."The White House didn't return a request for comment. But a senior Biden administration official said during a call with reporters that some tariffs would kick in in 2026 to allow battery supply chains to transition. Domestic production is beginning to come online but not quickly enough to minimize market disruption.An <a target="_blank" href="https://www.edf.org/media/analysis-finds-us-electric-vehicle-battery-manufacturing-track-meet-demand">analysis by the Environmental Defense Fund</a> found that enough US battery production had been announced to supply all the EVs expected to be sold in 2030. However, those batteries can still source graphite from China until at least 2027 under the Biden administration's policy.Beyond graphite, other tariffs that Biden slapped on China's green tech are mostly symbolic. Existing tariffs already keep Chinese EVs out of the US market, while cheap solar panels are <a target="_blank" href="https://www.businessinsider.com/us-fights-back-china-cheap-solar-panels-2024-4">mainly arriving from Southeast Asia to circumvent trade barriers</a>. But steeper taxes on batteries this year could affect US automakers such as Ford and Tesla, which import from China.

Biden's tariffs don't loosen China's grip on one key mineral in the EV economy

<ul class="summary-list"><li>The high demand for advanced semiconductors is increasing tensions between the US and China.</li><li>Production power is key to the conflict, but tensions have shifted to the supply of raw materials.</li></ul>In the race against the US for global tech supremacy, China has the upper hand in at least one critical area: rare earths.The term refers to a group of 17 elements required to make tech products ranging from semiconductors to industrial magnets and some solar panels — the same items embroiled in the US-China trade war.For more than a year, Beijing has slowly been tightening its grip on critical minerals and rare earths.In December, <a target="_blank" href="https://m.mofcom.gov.cn/article/zwgk/gkzcfb/202312/20231203462079.shtml">China banned</a> the export of a range of rare earth processing technologies. Last month, <a target="_blank" href="https://www.gov.cn/zhengce/content/202406/content_6960152.htm">China</a> further tightened its grip on the sector. Citing resource protection and national security, Beijing made it mandatory for exporters to track how rare earth minerals are used in supply chains.Now, there are fears that China could tighten the global rare earths supply chain even more.Here's what you need to know about rare earths, what makes them so valuable, and how they play into the tech war between the US and China.<h2 id="3f9ba9c5-7a71-4e19-80b7-4398490d1924">China's rare earth dominance</h2>China has long dominated the rare earths market due to supply, low labor costs, and <a target="_blank" href="https://www.reuters.com/markets/commodities/chinas-rare-earths-dominance-focus-after-mineral-export-curbs-2023-07-05/">lax environmental standards.</a>The country produces<a target="_blank" href="https://www.iea.org/reports/energy-technology-perspectives-2023/clean-energy-supply-chains-vulnerabilities"> 60% of the world's rare earth mineral supply</a> and accounts for <a target="_blank" href="https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/executive-summary">90% of global refined output.</a>The late Deng Xiaoping — the Chinese leader who spearheaded the country's economic reforms in 1978 —<a target="_blank" href="https://nm.cnr.cn/nmzt/60dq/tjnmg/200704/t20070412_504442760.html"> recognized their strategic importance</a> in 1992, saying, "The Middle East has oil, China has rare earths."Under the new regulations introduced last month, China's rare earth resources now belong to the state. Two Canadian-owned rare earth refineries in China are also being acquired by state-owned companies.This is not the first time Beijing has placed restrictions on rare earths. In 2010, China imposed strict rare earth quotas, citing environmental concerns and resource preservation. The move sent prices up sharply and prompted the US, the European Union, and Japan to file a complaint against China for unfair trade practices at the <a target="_blank" href="https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm">World Trade Organization</a>. China lost the case and lifted exported quotas in 2015.Various countries tried to <a target="_blank" href="https://www.circularise.com/blogs/the-rare-earth-problem-sustainable-sourcing-and-supply-chain-challenges">diversify</a> their rare earth supply chains in the wake of China's quotas in the 2010s, but success has been limited due to the high cost of investment and environmental concerns.There are renewed efforts to boost global production in the face of rising tensions.In 2022, the US <a target="_blank" href="https://www.whitehouse.gov/briefing-room/statements-releases/2024/09/20/fact-sheet-biden-harris-administration-takes-further-action-to-strengthen-and-secure-critical-mineral-supply-chains/">Department of Defense</a> awarded $45 million to MP Materials for rare earth oxide processing, and in 2023, it awarded over $288 million to <a target="_blank" href="https://www.businessdefense.gov/news/2023/DoD-Awards-Key-Contract-for-Domestic-Heavy-Rare-Earth-Separation-Capability.html">Lynas USA</a> to set up commercial-scale rare earth oxide production facilities.<h2 id="c8073b51-666c-4b37-8da2-99bb4249c25d">How is China leveraging rare earths?</h2>Beijing's moves to control critical minerals and rare earths are part of a toolbox Beijing has developed over the last four years, Rick Waters, the managing director of Eurasia Group's China practice, said at a press briefing.During President Donald Trump's first term, the US and China slapped retaliatory tariffs on each other. However, China has less leverage in a tariff fight because it exports more to the US than it imports, so it came up with another regulatory framework — this one involving rare earths — that it can use in a trade dispute."They're experimenting with its use, and I think, in a way, they could go further — if they perceive they need to," said Waters.Any further tightening of rare earth supplies — which are a subset under critical minerals — could leave the US vulnerable to supply shocks."China has cornered the market for processing and refining of key critical minerals, leaving the US and our allies and partners vulnerable to supply chain shocks and undermining economic and national security," the White House said in a<a target="_blank" href="https://www.whitehouse.gov/briefing-room/statements-releases/2024/09/20/fact-sheet-biden-harris-administration-takes-further-action-to-strengthen-and-secure-critical-mineral-supply-chains/"> statement</a> in September.<h2 id="a846860e-2bcb-4815-adc9-5f8fef9eaa09">What do the restrictions on rare earths mean for TSMC and Nvidia?</h2>China's control over rare earths could weigh heavily in the trade war between Washington and Beijing, with chips in the center of the conflict.Chips are found in everything from computers to cell phones, cars, and<a target="_blank" href="https://www.businessinsider.com/us-rare-earth-minerals-stockpile-mystery-opacity-worries-experts-2024-6"> defense equipment</a>. Taiwan dominates the market, producing over 60% of the world's chips and over 90% of the most advanced ones.One company — Taiwan Semiconductor Manufacturing Company — is responsible for most of the output and is the key supplier to AI chip giant Nvidia, which is in the thick of the tech rivalry.The US has already moved to block the export of advanced chips and chipmaking equipment to China.If the trade tiff escalates — such as in the form of higher tariffs — China could pull its rare earth card, Oxford Economics wrote in a report published in July."China's dominance in the battery supply chain accords policymakers with leverage to withhold industry-specific inputs from Western manufacturers, which could prove inflationary and economically disruptive," wrote Louise Loo, the lead economist for Greater China at Oxford Economics.This could involve further controls on critical commodity exports, particularly in rare earth minerals, Loo added.As happened with China's rare earth export curbs in 2010, prices are likely to spike if supply is tightened, so any prolonged supply crunch could drive up inflation for end products.<h2 id="41f10c92-fd52-4452-af13-c2607b378399">The tech Cold War</h2>The US and China's moves to outmaneuver each other in the tech race have some analysts drawing parallels to the Cold War.Zongyuan Zoe Liu, a senior fellow for China studies at the Council on Foreign Relations, told Business Insider the idea that the US ought to out-compete China and prevent the nation from developing advanced chips plays into a "bigger power competition narrative."She said the tensions are similar, though not identical, to the tensions between the US and Soviet Union that began after the end of World War II.As<a target="_blank" href="https://www.bloomberg.com/news/articles/2024-10-15/us-weighs-capping-exports-of-ai-chips-from-nvidia-and-amd-to-some-countries"> Bloomberg</a> reported last month, the US is considering limiting export licenses for both Nvidia and AMD chips in an unfolding trade war that has also hit several sensitive industries, including<a target="_blank" href="https://www.businessinsider.com/white-house-joe-biden-hikes-tariffs-on-chinese-made-evs-2024-5"> electric vehicles, batteries, and some solar panels.</a>The US imposed similar trade limits, embargoes, and economic sanctions on the Soviet Union, North Korea, China, and North Vietnam during the Cold War."I think the heart of the issue is concern about how China will use AI chips for military applications and surveillance," Chris Tang, a UCLA professor and expert in global supply chain management and the impact of regulatory policies, told BI. "It's a different type of Cold War."Beyond a tense relationship, the dynamics between the US and China are also creating parallel systems, with the US and its allies on one side, and China and its allies on the other, Nick Vyas, the founding director of USC Marshall's Randall R. Kendrick Global Supply Chain Institute, told BI.Vyas said he's concerned the tension could escalate from this new Cold War to a hot one between global powers."When we stop transacting horizontally with each other, that's only creating a larger conflict," Vyas said. "And then with a<a target="_blank" href="https://www.businessinsider.com/seal-team-6-fight-with-china-over-taiwan-2024-10"> South China Sea conflict</a>, the geopolitical conflict could turn into a larger conflict, which can lead to a major situation that leads up to a war."Representatives for Nvidia declined to comment for this story. Representatives for AMD and the Bureau of Industry and Security didn't respond to requests for comment from BI.

The US-China tech race is moving from chips to the raw materials they're made of

<ul class="summary-list"><li>China's thrifty consumers are boosting Asian companies with wallet-friendly offerings.</li><li>Companies like Japan's Saizeriya, Yum China, and Fast Retailing have recently reported strong sales.</li></ul>China's consumers are tightening up their belts, but not everyone's a loser. Some companies are riding the frugal wave.Saizeriya, a restaurant chain from Japan — a country well familiar with a prolonged downturn — is one company making bank from China's downturn.In its fiscal year that ended August 31, <a target="_blank" class="" href="https://www.saizeriya.co.jp/PDF/irpdf001505.pdf">Saizeriya</a>, which serves Italian food at budget prices in several Asian countries, reported operating profit nearly doubled from a year ago to 14.8 billion Japanese yen, or $99.6 million.Hideharu Matsutani, the company's president, said at a Wednesday press conference that operating profit from its China operations "rose significantly," per <a target="_blank" class="" href="https://asia.nikkei.com/Business/Food-Beverage/Thrifty-Chinese-diners-bring-record-profit-for-Japan-s-Saizeriya">Nikkei.</a>Matsutani said Saizeriya is now using its strategy for Japan in the neighboring market because "conditions in China in some respects look like Japan after its economic bubble burst."There are <a target="_blank" class="" href="https://www.businessinsider.com/china-economy-heading-for-lost-decade-needs-reform-growth-japanification-2024-2">similarities</a> between <a target="_blank" rel="" href="https://www.businessinsider.com/japan-millennial-salaryman-job-wages-rent-home-ownership-birthrate-2023-5#the-typical-japanese-millennial-is-financially-conservative-having-grown-up-watching-their-countrys-lost-decade-suffer-from-a-devastating-economic-crisis-2">Japan's "Lost Decade"</a> of economic stagnation in the 1990s, after the country's asset and credit bubbles burst, and <a target="_blank" class="" href="https://www.businessinsider.com/china-economy-property-crisis-vanke-get-uglier-analyst-charlene-chu-2024-3">China's economic downturn</a> now.After Japan's asset bubble implosion, consumption in Japan witnessed a fundamental shift, as people who previously would pay for quality and convenience increasingly moved to buying discount goods, consultancy <a target="_blank" class="" href="https://www.mckinsey.com/~/media/McKinsey/Industries/Consumer%20Packaged%20Goods/Our%20Insights/The%20new%20Japanese%20consumer/The%20new%20Japanese%20consumer.pdf">McKinsey</a> wrote in a 2010 report.Chinese consumers now appear to be moving in the same direction as their Japanese peers, trading down for cheaper products — even if the trend also presents challenges for budget-friendly retailers.Still, investors appear to agree with the strategy of offering more value for money. Shares of Saizeriya listed on the Tokyo Stock Exchange are up 7.7% this year-to-date.<h2 id="fa258e48-944f-4589-9a00-fdd7e405730d">Living well but at the 'best value for money'</h2>In China, too, times have changed, and people are looking for cheaper products, including <a target="_blank" class="" href="https://www.businessinsider.com/chinese-economy-young-shoppers-looking-dupes-substitutes-pingti-fashion-travel-2024-9">dupes and substitutes.</a>"Consumers are increasingly rational and strategic, focusing on obtaining the best value for their money," said MingYii Lai, a strategy consultant at Beijing-based market research firm Daxue Consulting, told Business Insider.Shoppers are seeking high-quality experiences and products at lower costs while aiming to live well, she said.People are increasingly choosing to spend on experiences, like travel and food, rather than buying products."Economic pressures and changing priorities are driving a move towards more economical spending," said Lai.The ethos has benefited companies with budget offerings, including Yum China, which operates KFC and Pizza Hut in the country.<a target="_blank" class="" href="https://ir.yumchina.com/quarterly-results">Yum China'</a>s second-quarter operating profit grew 4%, to $266 million, from a year ago thanks to aggressive budget-friendly deals.<a target="_blank" class="" href="https://www.fastretailing.com/eng/ir/financial/summary.html">Fast Retailing</a> — the parent company of Uniqlo, known for affordable clothes — reported net profit growth of 25.6% for its full year ending August 2024 thanks to robust sales in both the domestic and international markets. Sales in Greater China grew by 9.2%, to 677 billion yen.Yum China shares are up 11% this year to date, while Fast Retailing shares are up 56% over the same period.<h2 id="af7e4a77-fdf8-44fe-9f62-eb06a273ab9e">Intense competition</h2>However, China's market is a fast and furious one — even for winners — and the country's economic downturn has created cut-throat competition with aggressive price wars.Uniqlo said on Thursday that while sales in mainland China were "strong" in the first half of its fiscal year, they were "lackluster" in the second half.Some consumers are <a target="_blank" class="" href="https://www.businessinsider.com/chinese-economy-young-shoppers-looking-dupes-substitutes-pingti-fashion-travel-2024-9">going straight to the source</a> to buy original equipment manufacturer goods or white label products to replace items in a wide range of categories — even if they're just ordinary products.The race for Chinese consumers' yuan is exemplified in the boba tea business, where an all-out price war is changing market dynamics for what is considered a still affordable indulgence in a penny-pinching era.As China's economic malaise deepened, <a target="_blank" class="" href="https://x.com/AFP/status/1835337779993256178">boba tea went from</a> premium pricing around $3.50 to $5.50 on average to as little as $1 or less over the last few years."All the players are trying to introduce low-price offers. So, either you can use a low price range, or try to be very creative in terms of pricing promotion so as to stay ahead of the market," Jason Yu, the Greater China managing director at Kantar Worldpanel, a consumer research group, told BI.In KFC's case, its marketing and pricing strategies cater to both ends of the market, with wagyu beef products at the higher end and promotions like 15 wings for under $3, <a target="_blank" class="" href="https://www.businessinsider.com/western-brands-china-kfc-mcdonalds-american-fast-food-all-in-2024-9">BI's Matthew Low</a> reported last month.As Allison Malmsten, another analyst from Daxue Consulting, told BI: "the rich are comfortable to spend, while the middle class chooses cheaper options."

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