China's comparative disadvantage in chips exposed in M&A numbers.

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As you know, the US has a comparative advantage in semiconductors, predominantly as a result of years of innovation and funding focused primarily in the lower part of the San Francisco Bay Area, i.e., Silicon Valley.

So when a recent Bloomberg View article made the suggestion that China might finally be on track to develop a semi-conductor industry, I stopped to read it.

It looks like China is investing big at home in an attempt to build an industry, but this follows over 10 years of failed attempts at buying American advantage.

The Bloomberg article states: "China has made $34 billion in bids for U.S. semiconductor companies alone since 2005, yet completed only $4.4 billion in deals globally, in that span." 

This would include the recent banning of Broadcom's bid for Qualcomm for "National Security" reasons this March. According to Bloomberg, it's not just the US; with Japan, Korea and China also blocking Chinese approaches.

But this all comes under the shadow of steel and aluminium tariffs that are directed at China and are slowly being exempted for other players (with Australian, BlueScope's reprieve announced today).

So you would have to think that the Chinese Government is getting hot and bothered and ready to have a crack at weening China (the world's biggest semiconductor consumer) off semiconductor imports - which according to Bloomberg is a ~$200 billion annual addiction. 

Mike


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