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Technology Stocks : Semi Equipment Analysis

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To: Sam who wrote (85534)	8/24/2020 11:51:33 PM
From: Sun Tzu	Read Replies (1) of 95478

Yes, as you pointed out the relocating manufacturing out of China due to increasing costs has been going on for a while. That is normal when a country transforms itself from the low cost producer to a value added producer. That's par for the course. What is different now is that companies are forced to move out of China due to political pressure. As a result the moves are premature and with consequences. It is this latter category that I am discussing and assign high failure rate to. More importantly, Trump is not just pressuring manufacturing to move out of China. That is not terribly significant. Rather as your earlier articles pointed out Trump is cutting off the supply of technology to China. Now take a few minutes and put yourself in China's shoes. You have billions of dollars invested in cell phone manufacturing and 5G comm equipment. Suddenly Trump says that I don't like that China is moving forward and I am not going to allow US technology to be used in their products. What are you going to do? Are you going to roll over and die and let all those billions of investment go to waste? Are you going to give up on your national ambitions? The core Mao's drive for China was self sufficiency. They are not going to roll over and die just b/c Trump issues an order. They are going to find ways to become self sufficient in areas that previously they were satisfied to be a customer of the US. Just the other day there was news that China poached 100 engineers from TSM. China's countermoves to Trump's edicts will reverberate for decades. Interdependence is a good thing. It ensures global peace and prosperity. Removing it is a double edged sword and should not be taken lightly. When Trump imposed sanctions on ZTE and Huawei last year, the effect in China was earth shattering. Just as Trump suddenly woke up and realized that the US is dependent on China for everything from medication to electronics, China suddenly realized that their prized jewels can be taken away at a stroke of a pen - no guns needed. In this fight, the US stands to lose more than China. One good thing that may come out of a Biden presidency will be a repair of US-China relationship. But the damage cannot be fully undone.

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