China’s new chip is revenge for centuries of Western IP theft

This is Bloomberg Opinion Today, an autumnal bouquet of Bloomberg Opinion’s opinions. Sign up here. Innovations knows no monopoly. Can Big A [Bloomberg]( This is Bloomberg Opinion Today, an autumnal bouquet of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Must-Reads - [Innovations knows no monopoly](. - [Can Big Auto and the UAW get along](? - [Not the REIT time to exhale](. China Knows All About IP Theft Marco Polo, industrial spy. Source: MPI via Getty Images Through much of history, the Western world took — by stealth or strength — Chinese knowhow. The secrets of making paper, silk, porcelain and other staples of modern life leaked out of the Middle Kingdom, despite rigorous attempts by emperors and mandarins to preserve the intellectual property rights. Why then, asks Howard Chua-Eoan, should we now be surprised [if the process is reversed](? In a sign that Beijing is making progress in circumventing US efforts to contain semiconductor technology, Huawei Technologies Co. and China’s top chipmaker have built an advanced 7-nanometer processor for the Mate 60 Pro smartphone. The Kirin 9000s chip was fabricated in China by Semiconductor Manufacturing International Corp., according to a [teardownÂ](of the handset that TechInsights conducted for Bloomberg News. And this may only be the thin end of the wedge: With the Chinese government raising $40 billion to support homegrown manufacturing, better (and thinner) chips are inevitable. This will raise eyebrows at Apple, which would like to maintain its substantial technological edge over Huawei. But it also poses a challenge to the Joe Biden administration, which has made a priority of keeping cutting-edge technology from getting into Chinese hands, driven in large part by fears it could be used to boost Beijing’s military capabilities. History suggests this is a fool’s errand. The US “can always tighten its sanctions regimes and strengthen the safeguards to slow the proliferation,” says Chua-Eoan. “But commerce will almost always force out technological secrets.” (Free read!) Think of that when you drink your next cup (porcelain, natch) of tea. Bonus chip reading: Arm Ltd.’s floatation is [sink or swim]( for Softbank . — Marcus Ashworth Climate Policy Hovers Over Auto Tensions The impending showdown between America’s Big Three carmakers and the United Auto Workers is about profit margins, salaries and benefits. It is also, Liam Denning [points out](, about Biden’s signature legislative achievement, the Inflation Reduction Act. The IRA is designed to push the auto industry to remake itself entirely, switching from gasoline-powered cars and trucks to electric vehicles in roughly a decade. To this end, the administration aims to reshore the supply chain, loosening China’s grip on clean technologies. (The West still craves some Chinese knowhow.) The White House will subsidize companies for domestic content and manufacturing, and reward them for paying workers federally defined prevailing wages. As Denning puts it: “While the IRA is often dubbed climate policy, it is more accurately described as green industrial policy with a notable labor component.” But it creates some anxieties for carmakers and the UAW alike. For the union, electrification promises some new jobs — in reshored battery factories, for example. But many of the battery and EV plants that have been announced since the IRA was passed are in states where unions are hamstrung by right-to-work laws. Electrification will also make obsolete gasoline and diesel engines and transmissions, which account for roughly half of current vehicle manufacturing capacity. Carmakers, for their part, face the prospect of investing billions to build EVs which are, at least for now, loss-making. At the same time, the unions and manufacturers need each other in order to overcome the so-called “messy middle” of the energy transition, during which the industry must wind down the manufacturing of profitable legacy products while simultaneously investing heavily in new ones that won’t make money for a while yet. Can the two sides get along? Crash Course “We are witnesses to violent extremities that are often unpredictable and difficult to manage. We are the authors of the disasters and victims of the consequences.” On the [latest episode]( of Crash Course, Timothy L. O'Brien spoke with Mark Gongloff, a Bloomberg Opinion columnist who specializes in covering the environment and climate change. Telltale Charts To judge by the performance of real estate investment trusts, the office market hysteria is easing. But, warns Jonathan Levin, it “isn’t out of the woods yet, and risks could loom over the market for years to come [if interest rates stay anywhere near current levels](.” From dizzying highs after the banking crisis, dividend yield spreads on office property REITs have dropped closer to historical norms. The spread was 1.74 percentage points at the end of last month. But that doesn’t mean we should forget the risks posed by the office market. Borrowing costs remain high, and the mortgage rate is around 7.2%. If interest rate expectations “become anchored at current levels, maybe out of long-term inflation fears or concerns about sustainably high government deficits. If that happens and regional banks remain shy about extending new credit, the wave of refinancings over the next year could easily get ugly in a hurry.”  Further Reading US women would [need to quit housework today]( in order to let men catch up in chores. (Free read!) — Sarah Green Carmichael Skipping the Asean summit in Jakarta is [a bad look for Biden](. — Karishma Vaswani The meme stock phenomenon [gets the Hollywood treatment](. — John Authers Medicare negotiations [won’t shrink Big Pharma’s bottom lines]( by very much. — Richard G. Frank and Caitlin Rowley The widening [gap between GDI and GDP]( is worrying. — Aaron Brown China’s biggest real-estate developer [can get out of its debt crisis](. — Shuli Ren ICYMI The G20 summit in New Delhi [is going to be hot]( — [and heavy](. Saudi Arabia and Russia [prolonged their unilateral oil supply curbs]( until the end of the year. China’s largest export market is [no longer the US or Europe](. Nearly 8% of Ukraine’s prewar population [may never return home after fleeing Russia’s invasion](. A little-known royal is becoming [the face of the UAE's global aspirations](. Britain’s second-largest city has effectively [declared bankruptcy after an equal pay claim](. Kickers Like swords to ploughshares, a [British war office turns into a plush hotel](. The city with the world’s worst traffic [finally gets a metro](. Movies face [a high season low on star power](. Notes: Please send fall camelias and toad lilies to Bobby Ghosh at aghosh73@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Opinion Today newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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