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China’s chip industry is deeply pained by US export controls

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Two years after the United States imposed harsh sanctions on Huawei, the revenue of the Chinese technology group plummeted, it lost its leadership position in network equipment and smartphones, and its founder told employees that the company’s survival is at stake.

Now, the entire Chinese chip industry is preparing for a similar pain as Washington applies the tools it has been tested on Huawei on a much larger scale.

under New export controls Announced Friday, US-made semiconductors for use in artificial intelligence, high-performance computing and supercomputers can only be sold to China with an export license — something that would be very difficult to obtain.

Moreover, Washington prohibits US citizens or entities from working with Chinese chip producers except with specific approval. The package is also strictly restricted to export to China of chip-making tools and technology that China could use to develop its own equipment.

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To put it mildly, [Chinese companies] Zihu Ng, managing director of China Renaissance, said:

“There will be a lot of losers as the tsunami of change unleashed by the new rules washes away the semiconductor and associated industries,” said Paul Triulo, China and technology expert at consultancy Albright Stonebridge.

He added that the impact would be particularly profound on Chinese companies that use US-origin devices to deploy artificial intelligence algorithms including self-driving vehicles and logistics, as well as medical imaging and research centers that use artificial intelligence for drug discovery and modeling of climate change.

“The full impact will take some time to become clear, but at least it will slow innovation in both China and the United States, ultimately costing American consumers and businesses hundreds of millions or even billions of dollars,” Triollo said.

Many of the new controls are operated by chip manufacturers in other countries as nearly all semiconductors are designed with US software and most chip factories have American machines.

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“You can look at Huawei as a case study,” said Brady Wang, an analyst at technology market research house Counterpoint. He said that while Huawei could still get some supplies, it wasn’t the most advanced but those of an earlier era, which would limit the functionality of its products.

New controls on semiconductor equipment are also a powerful weapon, targeting major manufacturers and leading chip producers. According to analysts at Bank of America, the equipment constraints will affect logic chips designed in the past four to five years, and Dram chips designed after 2017. “It’s their sweet spot now — they’re lagging behind in technology and dependent on technology and adoption,” said Wayne Lamm, an analyst at CCS Insight.

Chinese chip companies are more concerned about Washington’s attempts to prevent US citizens from supporting them.

“This is a bigger bomb than keeping us from buying equipment,” said a human resources executive at a state-backed semiconductor factory.

“We have [US passport holders] In our company, in some of the most important positions,” she said, calling them the “primary weapon” of technology development. “We need to find a way for these people to continue working in our company. This is very difficult. Most people are not willing to give up their US passports.”

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Most of the US citizens in the Chinese chip sector are Chinese and Taiwanese returning from the United States. There are no statistics on the size of this group. But a Taiwanese intelligence official estimated that as many as 200 US passport holders work for Chinese semiconductor companies.

And the restrictions go beyond that group. An executive at a semiconductor materials supplier said his company will have to replace all US sales and technical support staff sent to Chinese customers.

Another threat to the entire technology industry in China is the new licensing requirement to export chips for use in artificial intelligence and high-performance computing.

said Douglas Fuller, an expert on the Chinese semiconductor industry at Copenhagen Business School.

Even some of China’s largest technology companies, such as Alibaba and Baidu, are believed to be at risk. “[Their] Counterpoint’s Wang said the entire R&D progress will slow.

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Experts believe that China’s dynamic breed of AI chip design firms will suffer. “If you lose AI startups, you will lose their innovation dynamism,” said a Taiwanese electronics industry executive.

With the Chinese end-user semiconductor market now accounting for nearly a quarter of global demand, foreign suppliers are also set to take a hit.

US equipment maker Applied Materials got 33 per cent of its sales from China last year and 31 per cent from its peer Lamm Research. Lam Research named Yangtze Memory Technologies, the largest maker of memory chips in China that is specifically targeted by the United States under the new rules, as a significant customer in its annual report, and BofA estimates that 6-7 percent of Lam Research’s sales are to YMTC.

As many high-end Intel processors roll into Chinese supercomputers, BofA expects the restrictions to be as high as 10 percent of Intel’s sales.

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But some analysts believe these measures will benefit foreign chip makers. Since the main impetus for the United States has been to slow China’s development in more advanced semiconductor technology, leading foreign chip manufacturers such as Taiwan Semiconductor Manufacturing Corporation (TSMC) Intel or Intel would benefit, said Akira Minamikawa, a semiconductor analyst at research firm Omdia.

He said flash memory makers that compete directly with YMTC, such as Japan’s Kioxia, may “get some benefits” from the new US measures, but that the gains are likely to be small.

Kim Young-woo, head of research at SK Securities, said the fact that Washington has not imposed a blanket ban on equipment supplies to foreign chip manufacturers operating in China will come as a relief to Korean semiconductor companies, but the need for export licenses remains. be a hassle.

The bigger question is how China will respond. “We are in a negative cycle where the United States continues to push for restrictions, which is driving the Chinese to strive for technological independence, which in turn is pushing the United States toward tighter restrictions,” said an industry insider in Beijing.

But Beijing’s leverage is limited. This person said, “This will push the Chinese to look for alternatives but recognizing that the alternatives to American technology are decades away.”

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This dire situation may lead to more intellectual property theft. Since some equipment now subject to export controls is already in use in China, Beijing may ignore intellectual property rights and re-engineer machinery to strengthen local equipment makers, CCS’ Lam said. “Maybe we’ll shoot our feet,” he added.

Additional reporting by Catherine Hill in Taipei, Kiener Liu and Eleanor Olcott in Hong Kong, Richard Waters in San Francisco, Dimitri Sevastopoulou in Washington, Kana Inagaki in Tokyo and Song Joong-A in Seoul

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UK mortgage lenders promise more support for vulnerable groups

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UK mortgage lenders have agreed to take a more consistent and supportive approach to homeowners struggling with the cost of living crisis, a measure prompted by a Treasury meeting with Chancellor Jeremy Hunt and attended by consumer champion Martin Lewis.

“We expect each lender to live up to its responsibilities and support any mortgage borrowers who are finding it difficult at this time,” Hunt said after a roundtable with executives from the country’s largest banks on Wednesday.

Meanwhile, the UK’s Financial Conduct Authority, the financial watchdog, Post the draft guidance Identify key ways to support customers, including patience programs similar to those introduced at the start of the COVID-19 pandemic.

Bankers also recommitted to offering borrowers an opportunity to move to fixed-rate mortgages, without affordability tests, once their existing deals expire if their payments are up to date.

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The chancellor is concerned that there are wide differences in how different banks deal with customers in financial difficulty, an issue that has consistently focused the spotlight on Lewis, a journalist and activist.

Hunt warned lenders to do everything they can to help vulnerable clients through the tough months ahead.

Lewis previously warned that a “perfect storm” was brewing for homeowners in the spring, as soaring energy prices, double-digit inflation and interest rates projected to exceed 4 percent next year make repayment unaffordable.

Bank of England data suggests that a third of borrowers in fixed-rate deals will have to refinance in the next two years – the equivalent of hundreds of thousands of households a month – at much higher rates. Earlier this year, it was the average price for a fixed-five-year deal more than doubled to more than 6 percent.

In addition, the Office for Budget Responsibility’s Office of Financial Oversight said last week that home prices are expected to fall 9 percent over the next two years and could remain below their current level for five years.

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In a separate statement, the FCA outlined the different ways banks can provide relief to customers. These include extending the term of the mortgage, switching to interest-only payments for a temporary period, moving customers to a different interest rate or allowing them to make reduced monthly payments.

The FCA would also allow banks to use automation to “provide forbearance at scale” and proactively identify similar groups of borrowers who might benefit from the same method of forgiveness.

The regulator said it recognized the need for “flexibility and scope to adapt its approach to meet the operational challenge of many clients who need assistance at the same time”.

“If you’re struggling to pay off your mortgage, or worried you might, you don’t have to struggle on your own. Your lender has a range of tools available to help, so Sheldon Mills, FCA’s executive director of consumer and competition, said. You should contact them as soon as possible.

Banks must respond to the proposals by December 21.

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Exclusive: Canada’s largest pension plan, CPPI, is ending the pursuit of cryptocurrency investing

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© Reuters. FILE PHOTO: A representation of bitcoin is seen in front of a stock chart in this illustration taken on May 19, 2021. REUTERS/Dado Ruvik/File Photo

Written by Divya Rajagopal

TORONTO (Reuters) – Canada’s largest pension fund, CBB Investments, has ended its efforts to study investment opportunities in the volatile cryptocurrency market, two people familiar with the matter told Reuters.

The reasons behind CPPI’s abandonment of cryptocurrency research were not immediately clear. CPPI declined to comment but said it has not made direct investments in cryptocurrency. He pointed to previous comments on cryptocurrency by its CEO, John Graham, in which he sounded cautionary.

The people added that CPPI’s Alpha Generation Lab, which studies emerging investment trends, put together a three-member team in early 2021 to research cryptocurrency and blockchain-related businesses, with a view to potential exposure.

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But sources said CPPI gave up the chase this year and redeployed the team to other regions.

CPPI’s move also comes as two of Canada’s largest pension funds have divested their investments following the collapse of cryptocurrency exchange FTX and cryptocurrency lender Celsius, which collapsed this year.

Earlier this year, CPPI CEO Graham said the pension plan, which manages C$529 billion ($388 billion) for nearly 20 million Canadians, did not want to invest in digital currencies simply for fear of missing out.

“You really want to think about the intrinsic value of some of these assets and build your portfolio accordingly,” Graham said in a June speech. “So I’d say crypto is something that we keep looking at and trying to understand, but we haven’t really invested in.”

It was not clear when CPPI dropped its plan. One source said the team was actively evaluating investment opportunities in late July this year, but the second source said the team finished its work earlier than that.

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Details of CPPI’s quest to invest in cryptocurrency and its decision to end it were not previously reported.

The sources declined to be identified because the information was not made public.

Canadian pension funds’ exposure to the cryptocurrency sector has come under scrutiny in the aftermath of the FTX debacle. While Canadian pension funds are not prohibited from buying cryptocurrencies, they are known for risk-averse investment strategies to generate steady returns for retirees.

While CPPI has avoided investments in cryptocurrencies, some of its peers have been caught up in the chaos of the sector this year. The Ontario Teachers’ Pension Fund (OTPP), which oversees approximately C$242 billion in assets, has written off its C$95 million investment in FTX. OTPP said it was “disappointed” with its investment in FTX.

Earlier this year, Canada’s second largest pension fund, Caisse de dépôt et placement du Québec (CDPQ), said it had canceled its C$150 million investment in bankrupt crypto lending firm Celsius. CDPQ has initiated legal action against Celsius in Bankruptcy Court.

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The Ontario Municipal Employees Retirement System (OMERS), which manages C$121 billion, made three allocations to crypto-related companies through the business of OMERS Ventures between 2012 and 2018, but exited all investments in 2020.

Another Canadian pension fund, OP Trust, told Reuters it has investments in the offshore digital asset fund space. She said the investment in core encryption technology.

($1 = 1.3650 Canadian dollars)

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Argentina urges the European Union to renegotiate a South American trade agreement

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Argentina’s President Alberto Fernandez has called on the European Union to renegotiate a landmark trade deal with South America, saying the agreement is unbalanced and a threat to the auto industries of Brazil and Argentina.

Fernandez told Financial Times’s Global Boardroom Conference.

Asked how long this process might take, he said, “As long as the parties want to. It’s like tango. The tango is danced by a couple, you need both of them to want to tango, otherwise it’s very difficult.”

The trade deal between the EU and the Mercosur bloc – Argentina, Brazil, Paraguay and Uruguay – was agreed in principle in 2019 after nearly two decades of haggling. But its conclusion has been shelved amid European objections to Brazil’s poor record of preserving the Amazon rainforest under far-right President Jair Bolsonaro.

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The election in October of Luiz Inacio Lula da Silva, who has pledged to preserve the Amazon, to succeed Bolsonaro, raising hopes that a long-awaited deal between the EU and Mercosur might gain final approval. Spain’s trade minister, Xiana Mendez, told the Financial Times last month that she believed he would support the agreement. “It’s very balanced,” she said. We do not support reopening negotiations.

But Fernandez told the Financial Times conference that the environment “isn’t why we don’t get the agreement, it’s an excuse”.

The real reason is that for Brazil and Argentina [as] Car producers, the only car producers in South America, this agreement is problematic because it makes things difficult for us if European competition reaches South America,” he said.

At the same time, he added, South American countries faced a “burden of hurdles” in selling their agricultural exports to Europe, with countries such as France, Ireland and Poland opposing ending agricultural subsidies and allowing competition from Argentina.

“Neither I nor Lula are against the agreement with the European Union,” Fernandez said. You have to keep in mind what this agreement is, because this agreement has problems. . . related to market imbalances.

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While the debate over the long-stalled trade agreement with Europe continues, Argentina is striking deals with China, its second largest trading partner after Brazil. Beijing last month agreed to expand a swap facility with Argentina’s central bank to $25 billion, which helps boost the South American country’s meager foreign reserves.

China has also built a space monitoring station in the Patagonian province of Neuquen, which the Center for Strategic and International Studies in Washington says is Works with little Argentinian supervision It can be used to gather military intelligence.

Fernandez rejected the argument Argentina Need to choose between the United States and China, saying that he does not wish to recreate the Cold War era. “Argentina has to do what works best for Argentina,” he said. “The US is very concerned about what China might do in Latin America but China could do . . . just like the US could do in Latin America, they could come and invest.”

Argentina is building a naval base at Ushuaia in southern Patagonia to support ships patrolling the South Atlantic and Antarctica, but Fernandez called “fictional” news reports that China was involved. He said, “There is no such thing.” “In Argentina you cannot have Chinese, American or French military bases . . . because we are a sovereign country.”

The South American country faces dire economic challenges, with inflation approaching 100 percent annually, access to international financial markets largely cut off after a default in 2020, and exchange controls that have pushed dollars on the black market to nearly double the level. the official.

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Fernandez said the Argentine economy was “strange” because, despite high inflation and “unpayable” levels of debt, the country also had record levels of foreign investment and exports in the first half of the year, unemployment was low and consumption was increasing.

“If you cling to the image of an inflated Argentina . . . of an indebted Argentina, you will say Argentina is a mess,” Fernandez said. “But there is also all this data that points to sustainable growth and huge potential.”

He said the solution to the longstanding economic problems of this South American country is to add value to its goods. “Argentina must stop being an exporter of raw materials and become an industrialized country.”

Argentina holds presidential and congressional elections next October, and opinion polls show Fernandez’s Peronist party trailing the conservative opposition. The president has said in the past that he would like to run again but that his approval ratings are low, and he told the Financial Times conference that he was “totally immersed” in governance.

His powerful vice president, Cristina Fernandez de Kirchner, said on Tuesday she would not run again Convicted of corruptiona ruling against which she plans to appeal.

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“I’m not thinking of re-election, believe me,” said President Fernandez. I think how to solve all these problems[of the country]. . . I want to finish my tenure having seeded Argentina with opportunities for the person who will succeed me.”

Additional reporting by Andy Pounds in Brussels

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