U.S. chip makers experiencing blow back of China Chip embargo.

 CHINA DESTROYING PROFIT OF WESTERN ANALOG CHIP MAKERS

SOPHISTICATED CHIPS MAY BE NEXT

U.S. chip makers, Intel, Texas instruments. and others  have recently informed the Biden administration that China has set about to retaliate to the U.S. embargo on silicon chips and equipment. While the embargo has been effective at slowing sales to China, China has been in the process in ramping up its production of Analog Chips, those used in most products, like automobiles, refrigerators and other products. It is in fact the bread and butter of chip makers. 

China now has the ability to produce chips of comparable quality as those produced in the U.S. but at a drastic discount to western producers. It has been reported that a similar chip that had cost $70 to $80 is now being marketed by China for as little as $1. This has deeply impacted the profit margins of these companies and while they have been forced to reduce prices, they will never be able to compete with China's manufacturers. 

It seems this is a new pattern emerging around the world, as sanctions and embargos are used to intimidate or force compliance those affected have been able to substitute in short order at moving to domestic manufacturers, that then replace the existing suppliers. This has been the case with Russia and other countries that soon find alternatives to former suppliers that may never have access to those markets again.

While the U.S. and western countries have relied on High Tech products to keep their share of markets, it is now possible that other countries can soon match the quality and often the quantity of producing these products. 

Sanctions historically have never really been effective, the embargo of U.S. oil to Japan is often blamed on the attack on Pearl Harbor. 40 years of sanctions on Iran may have caused discomfort, but not submission.Today, retaliation is often just replacing and finding other products to use as leverage. China has already slowed the availability of rare earth minerals in retaliation for sanctions. Russia has replaced western products with domestic production or production from other countries. European autos have almost all been replaced either by Chinese or other autos, Mc Donalds still functions but with Russian owners and a new name. 

Years were spent on pushing the benefits of global trade. Many domestic products were replaced by foreign competition, in the hope that it would be offset with hi-tech sales to these countries. To some extent that worked out, many countries were satisfied to engage in that bargain, but when essential items are used as weapons it is soon apparent that no product is now exclusive for long. It can soon be produced by others and that market may disappear forever.

That is were we are today, a policy of power politics and economic intimidation is no longer a one way street and it is likely no one will be a winner.