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China pursues ‘self-reliance’ in making chips, fueling global unease

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BEIJING — To help make China a self-reliant “technology superpower,” the ruling Communist Party is pushing the world’s biggest e-commerce company to take on the tricky, expensive business of designing its own processor chips — a business unlike anything Alibaba Group has done before.

Its three-year-old chip unit, T-Head, unveiled its third processor in October, the Yitian 710 for Alibaba’s cloud computing business. Alibaba
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says for now, it has no plans to sell the chip to outsiders.

Other rookie chip developers including Tencent
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a games and social media giant, and smartphone brand Xiaomi
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are pledging billions of dollars in line with official plans to create computing, clean energy and other technology that can build China’s wealth and global influence.

Processor chips play an increasingly critical role in products from smartphones and cars to medical devices and home appliances. Shortages due to the coronavirus pandemic are disrupting global manufacturing and adding to worries about supplies.

Chips are a top priority in the ruling Communist Party’s marathon campaign to end China’s reliance on technology from the United States, Japan and other suppliers Beijing sees as potential economic and strategic rivals. If it succeeds, business and political leaders warn that might slow down innovation, disrupt global trade and make the world poorer.

“Self-reliance is the foundation for the Chinese nation,” President Xi Jinping said in a speech released in March. He called for China to become a “technology superpower” to safeguard “national economic security.”

“We must strive to become the world’s main center of science and the high ground of innovation,” Xi said.

Beijing might be chasing a costly disappointment. Even with huge official investments, businesspeople and analysts say chipmakers and other companies will struggle to compete if they detach from global suppliers of advanced components and technology — a goal no other country is pursuing.

“It’s hard to imagine any one country rebuilding all of that and having the best technology,” said Peter Hanbury, who follows the industry for Bain & Co.

Beijing’s campaign is adding to tension with Washington and Europe, which see China as a strategic competitor and complain it steals technology. They limit access to tools needed to improve its industries.

If the world were to decouple, or split into markets with incompatible standards and products, U.S.- or European-made parts might not work in Chinese computers or cars. Smartphone makers who have a single dominant global operating system and two network standards might need to make unique versions for different markets. That could slow down development.

Washington and Beijing need to “avoid that the world becomes separated,” U.N. Secretary-General Antonio Guterres told The Associated Press in September.

China’s factories assemble the world’s smartphones and tablet computers but need components from the United States, Europe, Japan, Taiwan and South Korea. Chips are China’s biggest import, ahead of crude oil, at more than $300 billion last year.

Official urgency over that grew after Huawei Technologies Ltd., China’s first global tech brand, lost access to U.S. chips and other technology in 2018 under sanctions imposed by the White House.

That crippled the telecom equipment maker’s ambition to be a leader in next-generation smartphones. American officials say Huawei is a security risk and might aid Chinese spying, an accusation the company denies.

Huawei and some Chinese rivals are close to matching Intel Corp.
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Qualcomm Inc.
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South Korea’s Samsung Electronics
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and Britain’s Arm Ltd. at being able to design “bleeding edge” logic chips for smartphones, according to industry analysts.

But when it comes to making them, foundries such as state-owned SMIc in Shanghai are up to a decade behind industry leaders including TSMC, or Taiwan Semiconductor Manufacturing Corp.
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which produces chips for Apple Inc.
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and other global brands.

Even companies such as Alibaba that can design chips likely will need Taiwanese or other foreign foundries to make them. Alibaba’s Yitian 710 requires precision no Chinese foundry can achieve. The company declined to say which foreign producer it will use.

“My country still faces a big gap in chip technology,” said industry analyst Liu Chuntian of Zero Power Intelligence Group.

China accounts for 23% of global chip production capacity but only 7.6% of sales.

Packing millions of transistors onto a fingernail-size sliver of silicon requires some 1,500 steps, microscopic precision and arcane technologies owned by a handful of U.S., European, Japanese and other suppliers.

They include KLA Corp.
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in California for super-precise measurement and Japan’s TEL for machines to apply coatings a few molecules thick. Many are covered by restrictions on “dual use” technologies that can be used in weapons.

China “lags significantly” in tools, materials and production technology, the Semiconductor Industry Association said in a report this year.

Washington and Europe, citing security worries, block access to the most advanced tools Chinese chipmakers need to match global leaders in precision and efficiency.

Without those, China is falling farther behind, said Bain’s Hanbury.

“The TSMC horse is sprinting away and the Chinese horse is stopped,” he said. “They can’t move forward.”

Washington stepped up pressure on Huawei last year by barring global foundries from using American technology to produce its chips. U.S. vendors can sell chips to the company, but not for next-generation “5G” smartphones.

For its part, the European Union said it will review foreign investments after complaints China was eroding Europe’s technology lead by purchasing important assets such as German robot maker Kuka.

Alibaba’s Yitian 710 is based on architecture from Britain’s Arm, highlighting China’s enduring need for foreign know-how. Alibaba said it still will work closely with longtime foreign suppliers Intel, Arm, Nvidia Corp.
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and Advanced Micro Devices Inc.
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.

T-Head’s first chip, the Hanguang 800, was announced in 2019 for artificial intelligence. Its second, the XuanTie 910, is for self-driving cars and other functions.

In November, Tencent Holding, which operates the WeChat messaging service, announced its first three chips for artificial intelligence, cloud computing and video.

Beijing says it will spend $150 billion from 2014 through 2030 to develop its chip industry, but even that is a fraction of what global leaders invest. TSMC plans to spend $100 billion in the next three years on research and manufacturing.

China is trying to buy experience by hiring engineers from TSMC and other Taiwanese producers. Taiwan, which Beijing claims as part of its territory and has threatened to attack, has responded by imposing curbs on job advertising.

Beijing encourages smartphone and other manufacturers to use suppliers within China, even if they cost more, but officials deny China wants to detach from global industries.

“We will never go back in history by seeking to decouple,” Xi said in a speech by video link to a November meeting of Asia-Pacific leaders in Malaysia.

The latest conflict is over photolithography, which uses ultraviolet light to etch circuits into silicon on a scale measured in nanometers, or billionths of a meter.

The leader is ASML
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+1.25%

in the Netherlands, which makes machines that can etch transistors just 5 nanometers apart. That would pack 2 million into a space one centimeter wide.

China’s SMIC is about one-third as precise at 14 nanometers. Taiwan’s TSMC is preparing to increase its precision to 2 nanometers.

SMIC wants to upgrade by purchasing ASML’s latest machine, but the Dutch government has yet to agree.

“We will wait for their decision,” said an ASML spokeswoman, Monica Mols, in an email.

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Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?

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After pandemic drop, Canada’s detention of immigrants rises again By Reuters

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© Reuters. FILE PHOTO: Two closed Canadian border checkpoints are seen after it was announced that the border would close to “non-essential traffic” to combat the spread of novel coronavirus disease (COVID-19) at the U.S.-Canada border crossing at the Thousand Isla

By Anna Mehler Paperny

TORONTO (Reuters) – Canada is locking up more people in immigration detention without charge after the numbers fell during the pandemic, government data obtained by Reuters shows.

Authorities cite an overall rise in foreign travelers amid easing restrictions but lawyers say their detained clients came to Canada years ago.

Canada held 206 people in immigration detention as of March 1, 2022 – a 28% increase compared with March 1 of the previous year. Immigration detainees have not been charged with crimes in Canada and 68% of detainees as of March 1 were locked up because Canada Border Services Agency (CBSA) fears they are “unlikely to appear” at an immigration hearing, according to the data.

The rise puts Canada at odds with Amnesty International and other human rights groups that have urged Ottawa to end its use of indefinite immigration detention, noting CBSA has used factors such as a person’s mental illness as reason to detain them.

A CBSA spokesperson told Reuters that “when the number of entries (to Canada) goes up, an increase in detention is to be expected.” CBSA has said in the past it uses detention as a last resort.

A lawyer told Reuters her detained clients have been in Canada for years.

In the United Kingdom, too, immigration detention levels rose last year after dropping earlier in the pandemic, according to government statistics. Unlike Canada, the United States and Australia, European Union member states have limits on immigration detention and those limits cannot exceed six months.

The rise in detentions puts people at risk of contracting COVID-19 in harsh congregate settings, refugee lawyers say.

Julia Sande, Human Rights Law and Policy Campaigner with Amnesty, called the increase in detentions “disappointing but not surprising,” although she was reluctant to draw conclusions from limited data.

The number of immigration detainees in Canada dropped early in the pandemic, from a daily average of 301 in the fourth quarter (January through March) of 2019-20 to 126 in the first quarter (April through June) of 2020-21.

FEW NO-SHOWS AS DETENTIONS DROPPED

Detaining fewer people did not result in a significant increase in no-shows at immigration hearings – the most common reason for detention, according to Immigration and Refugee Board data.

The average number of no-shows as a percentage of admissibility hearings was about 5.5% in 2021, according to that data, compared to about 5.9% in 2019.

No-shows rose as high as 16% in October 2020, but a spokesperson for the Immigration and Refugee Board said this was due to people not receiving notifications when their hearings resumed after a pause in the pandemic.

Refugee lawyer Andrew Brouwer said the decline in detention earlier in the pandemic shows Canada does not need to lock up as many non-citizens.

“We didn’t see a bunch of no-shows. We didn’t see the sky fall … It for sure shows that the system can operate without throwing people in jail,” Brouwer said.

He added that detainees face harsh pandemic conditions in provincial jails – including extended lockdowns, sometimes with three people in a cell for 23 hours a day.

Refugee lawyer Swathi Sekhar said CBSA officials and the Immigration and Refugee Board members reviewing detentions took the risk of COVID-19 into account when deciding whether someone should be detained earlier in the pandemic but are doing so less now.

“Their position is that COVID is not a factor that should weigh in favor of release,” she said.

“We also see very, very perverse findings … [decision-makers] outright saying that individuals are going to be safer in jail.”

The Immigration and Refugee Board did not immediately respond to a Reuters request for comment.

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Nasdaq futures rise as market attempts comeback from April sell-off, Meta shares soar

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Stock futures rose in overnight trading as the market shook off the April sell-off and investors reacted positively to earnings from Meta Platforms.

Futures on the Dow Jones Industrial Average added 70 points or 0.2%. S&P 500 futures gained 0.7% and Nasdaq 100 futures jumped 1.2%.

The moves came as shares of Meta surged more than 18% after hours following a beat on earnings but a miss on revenue, a sign that investors may see signs of relief in the beaten-up tech sector. Shares were down 48% on the year heading into the results.

Meanwhile, shares of Qualcomm gained 5.6% in extended trading on the back of strong earnings while PayPal rose 5% despite issuing weak guidance for the second quarter.

“I think a lot of people want to believe that earnings are going to pull us out of this, but earnings are not what got us into this,” SoFi’s Liz Young told CNBC’s “Closing Bell: Overtime” on Wednesday. “… But the reality is there are so many macro headwinds still in front of us in the next 60 days that the market is just hard to impress.”

The after-hour activity followed a volatile regular trading session that saw the Nasdaq Composite stoop to its lowest level in 2022, as stocks looked to bounce back from a tech-led April sell-off. The index is down more than 12% since the start of April.

In Wednesday’s regular trading, the tech-heavy Nasdaq ended at 12,488.93, after rising to 1.7% at session highs. The Dow Jones Industrial Average rose 61.75 points, or 0.2%, to 33,301.93 propped up by gains from Visa and Microsoft, while the S&P 500 added 0.2% to 4,183.96.

Investors await big tech earnings on Thursday from Apple, Amazon and Twitter, along with results from Robinhood. Jobless claims are also due out Thursday.

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