Chip Wars

Summary of 'Chips Wars' by Chris Miller, the History of the Semi Conductor Industry and the Potential Geopolitical (and Investing) Implications

Introduction

At Voss we have historically steered our investments more towards value-oriented software stocks within the Tech universe, and have generally been apathetic towards semiconductor names, as we believe it’s uniquely hard to know when a company might gain or lose a socket in a smart phone, or whose technology might catch on and become the industry standard. The industry feels very speculative and momentum based, not our preferred modus operandi. That said, with several of our portfolio companies having hardware and chip exposure (e.g., EXTR), and some getting hit (or helped) by “supply chain disruptions” by COVID, we are trying to get a better grip on the landscape by reading various vantage points and historical contexts.

In Chip Wars, by Chris Miller, we get a well written and accessible history of the semiconductor industry viewed through a geopolitical lens, starting in the late 1940s and ending at the present-day Russia-Ukraine war and China-Taiwan tensions. The book makes a credible case that much of the history of the industry has been heavily influenced by geopolitical strategy, with silicon supply becoming the new oil as a strategic advantage for countries.

It further insists (credibly in our opinion), that one of the larger Black Swans (or perhaps a known unknown) out there is if Taiwan were to be disrupted in some way that would shut down or hinder perhaps the most strategically important company in the world, Taiwan Semiconductor Manufacturing Co Ltd. (TSMC). TSMC is at this moment by far the largest semiconductor fabrication company, producing some 37% of the world’s logic chips (logic chips being the “brains” of a device as opposed to memory chips) and an even higher percentage of the most cutting-edge chips. These chips don’t just power computers, they power washing machines, industrial machines, and hundreds of other products. Perhaps most importantly, the most cutting edge of these chips power advanced military apparatus like guided missiles.

The author posits silicon and technology leadership as the actual drivers of essentially all the major Superpowers and rising Superpower conflicts since World War II, and that the United States fending off these aspiring Superpowers has been largely a product of them maintaining technological leadership while the other country slips up in some way (from Russia to Japan to Russia again to, now, China).

The overall takeaway of the book is that the United States, while still in a quite dominating technological leadership position when considering the full life cycle of chips (design in particular), especially when combined with its allies, is also in a precarious position and has less leverage than it may seem by being so dependent on Taiwan (TSMC and others) and China (for final assembly of products like say, the iPhone).

The conclusion is that all relationships are quite tenuous, and while China would also be (massively) negatively impacted by “rocking the boat” in Taiwan, it may come to a point where they believe they have no choice. From an investment perspective, it makes us consider a couple of things:

• For our existing positions, where are critical products actually being assembled and is there any “Plan B” if that assembly option was no longer available?

• Given the tensions, are there companies that could potentially be strategically valuable to countries that are currently being hurt by globalization and China in particular? For instance, it may be interesting to explore hardware/semi areas where China has hurt the industry and even removed competitors from the Western World market, as geopolitical retaliation could benefit companies like that.

Note: at the bottom of this article see a short update on what has transpired just over the fast few weeks.

Summary

The book is broken into eight parts, each of which has a geopolitical motivation for advancement in technology.

Part 1: Cold Chip Wars (1945-1965)

Geopolitical Angle:  The Russians Launched Sputnik, We Need to Respond

This chronicles major initial innovations in semiconductor technology.  It starts with the basics about semiconductor materials, which one typically thinks of as silicon but can also be germanium and other materials. What’s unique about these materials is that with a little modification they can be used to turn an electrical current “on” and “off”, as opposed to other materials like copper which is always on or glass which is always off.

One can then place what are called transistors onto silicon to direct and turn the current on or off.  The transistor was announced by Bell Labs in 1948 and was compared to neurons (brain cells). It took another ten years to build the first “integrated circuit”:

“Multiple transistors could be built into a single slab of silicon of geranium.  Kilby called his invention an integrated circuit, but it became known colloquially as a ‘chip’, because each integrated circuit was made from a piece of silicon chipped off a circular silicon wafer.”

The inventors of these “chips” needed to find a market and they were able to initially find that market in NASA:

“Across America, the Soviet space program caused a crisis of confidence…John F. Kennedy declared the US would send a man to the moon.  Bob Noyce suddenly had a market for his integrated circuits: rockets.”

Applications quickly turned to the military:

“In fall 1962, the Air Force began looking for a new computer to guide its Minuteman II missile, which was designed to hurl nuclear warheads through space before striking the Soviet Union.”

In 1965, we got the now famous Moore’s Law, which Gordon Moore first wrote about in Electronics magazine, essentially predicting that the number of components that could fit on a chip would double every year for at least the next decade.

It was in this context of first getting funded by NASA and then by the military that more significant advancements were made, and the industry was ready to start considering the mass consumer.

Part 2: The Circuitry of the American World (1960s-1970s)

Geopolitical Angle: Russians Lose Edge by “Copying” Strategy

As Silicon Valley was being coined in 1971, there was an ongoing battle for technology supremacy between the Soviet Union and the United States. The Soviets recognized that the United States had a lead so began deploying various strategies to catch up. Khruschev/Russia essentially attempted a “copy” strategy, first attempting to build a Silicon Valley in Moscow dubbed Zelenograd.

Additionally, spies began to attempt to steal trade secrets from American companies. 

However, the book argues that the “copy it” strategy was not effective because the technology was moving so quickly.  Essentially, starting from a position behind the US, rote copying would ultimately get them to a similar point, but by the time they got there the US was again far ahead:

“Soviet leaders never comprehended how the ‘copy it” strategy condemned them to backwardness…the USSR started several years behind the US in transistor technology and never caught up…the pathways of innovation in Soviet semiconductors were set by the United States.  One of the most sensitive and secretive industries in the USSR therefore functioned like a poorly run outpost of Silicon Valley.”

Part 3: Leadership Lost? (1980s)

Geopolitical Angle:  Japan Becomes a Major Threat

Unlike the Soviet Union, which operated in secret and attempted to steal and copy, Japan tried a different, more successful tactic. While both nations used government support aggressively, Japan befriended American innovators and essentially made itself useful, receiving some degree of intellectual property in exchange for building fab plants that could ship products back to US consumers.

However, primarily through the rise of Sony, Japan went from having a “cheap” perception to one of innovation and quality, not unlike their rise in the auto industry.  Japan aggressively subsidized semiconductors with much cheaper loans than American companies were able to get, and their workers were allegedly far more efficient than their US counterparts.  Because the Japanese were more privy to the latest cutting edge technology and worked with Americans, they also became significantly more innovative their Russian peers:

“The US had supported Japan’s postwar transformation into a transistor salesman.  US occupation authorities transferred knowledge about the invention of the transistor to Japanese physicists, while policymakers in Washington ensure Japanese firms like Sony could easily sell into US Markets.  The aim of turning Japan into a country of democratic capitalist had worked.  Now some Americans were asking whether it worked too well.”

Almost immediately, there were concerns that “Silicon Valley would end up like Detroit”, and it didn’t help that the Reagan administration was initially lukewarm to the idea of providing support, famously comparing silicon chip subsidies to potato chips.  However, as the Japanese threat intensified, various congressional actions ultimately did amp up American competitiveness.

Loosening financial regulations and cutting the capital gains tax generated a flood of VC money into Silicon Valley, which did generate additional innovation but still didn’t solve the price issue (Japan could produce the same product at the same quality more cheaply).  Ultimately there are areas that the US lost to Japan that they never quite got back.  For instance, DRAM is an area that Asian countries (primarily Korea now) still dominate to this day.

Part 4:  America Resurgent (Late 1980s/Early 90s)

Geopolitical Angle: “The Empire Strikes Back” with US Dominating Microprocessors, Japan’s Economy Crashes, Russia Falls Further Behind, and the US Displaying Military Superiority in Iraq

This section is a bit of a transition and sequel to Part 3, whereby the US does begin generating some “wins.”  This happens not only in the DRAM market with Micron carving out a real niche, but more significantly with Intel beginning to dominate the microprocessor market and companies like Qualcomm rising in the telecom market.

Part 4 also details the rise of South Korea (now the dominant DRAM player along with Micron) with the beginnings of Samsung, who began following a similar playbook as Japan but had the effect of hurting Japan.  Japan had everything hit them all at once: resurgent US protectionism, an overheated economy, and new Asian competition:

“Thanks to the Sony Walkman and other consumer electronics, Japan had become prosperous…then in 1990 crisis hit.  Japan’s financial markets crashed.  The economy slumped into a deep recession…as the stock market crashed, the country’s vaunted long term thinking no longer looked so visionary.  Japan’s seeming dominance had been built on an unsustainable foundation of government-backed overinvestment.  Cheap capital had underwritten the construction of new semiconductor fabs, but also encouraged chipmakers to think less about profit and more about output.  Japan’s biggest semiconductor firms doubled down on DRAM production even as lower cost producers like Micron and South Korea’s Samsung undercut Japanese rivals.”

As a final American “success” the US was able to flash their military superiority in Iraq as their chip embedded missiles produced “shock and awe.”

Between the dissolving of the Soviet Union, Japan collapsing, and the Iraq War, the US was entering a period of being the only undisputed superpower, and many credit semiconductor/technological superiority to that:

“The new technologies Perry had pushed the Pentagon to develop during the late 1970s performed even beyond his expectations.  The Iraq military- armed with some of the best equipment the Soviet Union’s defense industry produced- was helpless in the face of the American assault…it’s the ‘triumph of silicon over steel’ declared a New York Times headline.  ‘War Hero Status Possible for the Computer Chip,’ read another.”

Part 5: Integrated Circuits, Integrated World? (Early 1990s to early 2000s)

Geopolitical Angle: Globalization Drives the Rise of Taiwan and China, Intel Misses Mobile

Part 5 could be considered the beginning of the modern-day climate for geopolitical technology leadership as it is chronicles the beginnings of Taiwan and China’s ascendance.  Taiwan’s rapid growth to global technological criticality is a marvel to behold, and much of the credit seems to go to Morris Chang and his creation of Taiwan Semiconductor Manufacturing Company (TSMC). 

Chang had already had incredible career success in the United States, spending 25 years at Texas Instruments (starting in 1958) until leaving in the early 1980s “after being passed over for the CEO job and ‘put out to pasture’.”  Chang was recruited by the Taiwanese government to build out their technological capabilities, and Chang’s unique insight, which proved to be extraordinarily powerful, is that you didn’t have to both design and build chips.  Rather a company could save a ton of costs simply designing chips, then leaving the actual production to Taiwan.  Thus the “foundry” and “fabless” models were born:

“In the chip industry, by lowering startup costs, Chang’s foundry model gave birth to dozens of new ‘authors’- fabless chip design firms- that transformed the tech sector by putting computing power in all sorts of devices.”

The underlying brilliance of this strategy was that it had a bit of a network effect, as scale proved to be everything for chip manufacturing.  Thus, the more TSMC came to be relied upon by fabless semiconductor companies, the larger its advantage became because they could act as the low-cost producer:

“The economics of chip manufacturing required relentless consolidation.  Whichever company produced the most chips had a built-in advantage, improving its yield and spreading capital investment costs over more customers.  TSMC’s business boomed during the 1990s and its manufacturing processes improved relentlessly.  Morris Chang wanted to become the Gutenberg of the digital era.”

China also began to develop its capabilities, but throughout the 90s and early 2000s was relegated to more of an assembly role, as they had suppressed their scientist’s ability to innovate and had made some of the same mistakes Russia made by attempting to copy rather than partner.  However, they did begin carving out a significant niche in device assembly…ultimately think of the Foxconn plant that is a major iPhone assembler.

The workflow that is enacted to this day was beginning to take form:  US maintained a strong lead in cutting edge chip design (including software and tools to create semiconductors), Taiwan became a powerhouse in building the actual chips, and assembly was completed in China and sent to the US consumer to enjoy.

The only exception to this, and it’s an important one, is in the lithography process, which is a critical component of extending Moore’s Law.  Put in the simplest terms (for a crazy complex process), lithography involves shooting light at chemicals that ultimately will carve out nano-sized shapes on a piece of silicon.  The technology here is truly state of the art and honestly a bit mind-boggling.  State of the art lithography machines can cost hundreds of millions of dollars and are critical to ongoing chip shrinkage.

The book argues that this is now essentially a monopoly in the hands of a company in the Netherlands of all places, ASML.  Although Japanese companies like Canon and Nikon initially competed, and still do provide lower-level machines, all cutting-edge machines now run through ASML.  The unlikely connection between ASML and TSMC may have been decisive here:

“ASML’s history of being spun out of Philips helped in a surprising way, too, facilitating a deep relationship with Taiwan’s TSMC.  Philips had been the cornerstone investor in TSMC, transferring its manufacturing process technology, and intellectual property to the young foundry.  This gave ASML a built-in market, because TSMC’s fabs were designed around Philip’s manufacturing process.”

Although the Netherlands is a close ally to the US and the Western World, the unique relationship between Taiwan and ASML adds a fascinating wrinkle to things that still provide geopolitical leverage to this day.  TSMC absolutely needs ASML to continue to stay at the cutting edge of semiconductor fabrication.  Without it, innovation and chip shrinkage would slow down significantly and many of TSMC’s advantages would erode. 

Part 6:  Offshoring Innovation? (2000-2015)

Geopolitical Angle: A Continuation of Part 5, Whereby Asia Continues its Chip Manufacturing Domination

This section hammers home all the trends from Part 5, namely the ongoing domination of Asia in chip manufacturing while the US maintains a tenuous (but still dominating) lead in chip design.  Although Intel continued to maintain domination in certain types of chips (the server market, for example), and a third kind of chip (analog/sensor chips) does have some US manufacturing presence, the memory market remain dominated by Asia while cell phone chips are fabricated primarily at TSMC/Samsung.

The book argues that Nvidia may be the single biggest “fabless” success story, as their specialty chips, graphics processor units (GPUs), are completely ubiquitous. The symbiotic relationship between Nvidia and TSMC is hammered home as TSMC is the primary manufacturer of Nvidia chips:

“Today’s Nvidia’s chips, largely manufactured by TSMC, are found in the most advanced data centers.  It’s a good thing the company didn’t need to build its own fab.  At the startup stage, it would probably have been impossible to raise the necessary sums…betting over a hundred million dollars- the cost of a new fab at the time- would have been a stretch even for Silicon Valley’s most adventurous investors.”

The final chapter in this part gets at just how badly Intel screwed up after potentially owning a leadership position in the next age of silicon innovation. The frustrating part for Intel and their investors is they were on the right track, investing $200M in ASML’s new cutting edge lithography technology, extreme ultraviolet (EUV):

“Now, after billions of dollars in investment- a substantial portion of which had come from Intel- ASML had finally made the technology a reality.  Yet rather than capitalizing on this new ear of shrinking transistors, Intel squandered its lead, missing major shifts in semiconductor architecture needed for artificial intelligence, then bungling its manufacturing processes and failing to keep up with Moore’s Law.”

On Intel, the author concludes:

“It still has a shot at regaining its leadership position over the next half decade, but it could just as easily end up defunct.  What’s at stake isn’t simply one company, but the future of America’s chip fabrication industry.  Without Intel, there won’t be a single US company- or a single facility outside of Taiwan or South Korea- capable of manufacturing cutting-edge processors.”

The book notes that by 2020, half of all EUV lithography tools, “funded and nurtured by Intel”, are installed at TSMC.

From a geopolitical perspective, having TSMC and Samsung being the only two companies in the world that can manufacture high end processors is a tough conundrum for the US to be in, and one wonders if at some point the US government might try and reinvigorate Intel to keep some balance and leverage.

Part 7: China’s Challenge (2016-present)

Geopolitical Angle: China’s Push Towards Relevance and/or Dominance

Part 7 is a deeper dive into how China is trying to recreate itself as a relevant and ultimately dominant player in the ongoing technology wars, as the world looks to future tech like AI and advanced war machines.  China’s problem is described succinctly here:

“Across the entire semiconductor supply chain, aggregating the impact of chip design, intellectual property, tools, fabrication, and other steps, Chinese firms have a 6 percent market share, compared to America’s 39 percent, South Korea’s 16 percent, and Taiwan’s 12 precent.”

While President Xi talked a big game on globalization and partnerships publicly, the book suggests that behind the scenes there was a strong push to become less and less dependent on others’ technology andan attempt to assume technology leadership in as many areas as possible:

“The Made in China 2025 plan didn’t advocate economic integration but the opposite.  It called for slashing China’s dependence on imported chips.”

The book goes through various methods by which China would get to this point, from large subsidies for Chinese companies to what is kindly called “technology transfer” by which US companies might reveal trade secrets for money or access to the Chinese market.  For instance, IBM attempted to woo China in various ways:

“Rather than trying to sell chips and servers to Chinese customers, she (CEO Rometty) announced, IBM would open its chip technology to Chinese partners, enabling them to create a new and vibrant ecosystem of Chinese companies producing homegrown computer systems for the local and international markets.”

Similar partnerships and deals from the likes of Qualcomm and AMD are also discussed.  China seems to go after companies that were struggling or were not in a leadership position, thinking they might be more amenable to providing trade secrets for market access.

Additionally, China attempted to build investments in large Taiwanese companies like MediaTek and, of course, TSMC. A Chinese company that was closely linked to the Chinese government, Tsinghua Unigroup, began making overtures to buy a significant stake in TSMC, which as the book points out, “put TSMC and MediaTek in a bind.  Both companies were crucially reliant on the Chinese market.  Most of the chips TSMC produced were assembled into electronics goods in workshops across China.”

After ultimately getting rebuffed on those overtures, there were some additional shady dealings with US companies, including Lattice Semiconductors, where Tsinghua Unigroup initially bought 6% of the company, then seemingly sold their shares before Lattice received a buyout offer from a US company called Canyon Bridge.  It turned out Canyon Bridge was a Chinese-backed company with close ties to the government and the deal was nixed.

Finally, the book details the rise of Huawei, which was China’s attempt to replicate some of the success that companies like Samsung had experienced.

Between subsidizing innovation abroad, buying technology from US firms, attempting to acquire US firms, and launching global companies from within, China was pretty clearly focused on increasing their 6% share in any way possible.  However, at this point it doesn’t seem that a clear leadership transition has occurred, or is close to occurring, which continues to make a battleground like Taiwan extremely relevant. 

Part 8:  Chip Choke (2020-present)

Geopolitical Angle: Trump Administration’s More Hostile Approach to China, War Games Hypotheticals

The author argues that since Trump took over the White House in 2016, there has been a notable counterattack played out by the US.  Before that, with Obama, things were moving and reacting quite slowly:

“Most people in Washington barely knew what a semiconductor was.  The Obama administration moved slowly on semiconductors, one person involved in the effort recalled, because many senior officials simply didn’t see chips as an important issue.”

Generally critical of the Obama administration, the author notes that its perception that globalization had occurred and was unstoppable was a bit of a misnomer:

“However, globalization of chip fabrication hadn’t occurred; ‘Taiwanization’ had.  Technology hadn’t diffused.  It was monopolized by a handful of irreplaceable companies.  American tech policy was held hostage to banalities about globalization that were easily seen to be false.”

Indeed, the Obama administration is characterized as kind of throwing up their hands and saying, “semiconductor mastery is really important but there’s not much you can do.”

The Trump administration clearly took a different view and approach and the actions taken ultimately reflect that.  The author  highlights three examples of aggressive actions the administration took that curbed Chinese companies:

1. ZTE, a smaller Huawei, was severely restricted on what goods it could buy from US companies, on the basis that it sold telecom equipment to Iran and North Korea, in addition to being fined nearly a billion dollars.

2. Fujian Jinhua, a DRAM producer, was throttled after it was determined they stole trade secrets from Micron.  They essentially made it impossible for Jinhua to buy the equipment they needed from US and Japanese suppliers.

3. Huawei, the biggest example, was also choked in what they could buy and sell:

“In May 2020, the administration tightened restrictions on Huawei further…the new Commerce Departments rules didn’t simply stop the sale of US-produced goods to Huawei.  They restricted any goods made with US produced technology from being sold to Huawei, too.  In a chip industry full of choke points, this meant almost any chip.  TSMC can’t fabricate advanced chips for Huawei without using US manufacturing equipment.  Huawei can’t design chips without US produced software…Huawei was simply cut off from the world’s entire chipmaking infrastructure.”

Ultimately, it seems these tactics were successful in slowing down China, and perhaps made China realize there was no realistic way they could do things all on their own:

“This is why, despite the rhetoric, China’s not actually pursuing an all-domestic supply chain.  Beijing recognizes this is simply impossible.  China would like a non-US supply chain, but because of America’s heft in the chip industry, and the extraterritorial power of its export regulations, a non-American supply chain is also unrealistic, except perhaps in the distant future…what is plausible is for China to reduce its reliance on the United States in certain spheres…”

The prime example they use is ASML and EUV technology.  They note that “replicating just the laser in an EUV system requires perfectly identifying and assembling 457,329 parts.  A single defect could cause debilitating delays or reliability problems.”  Additionally, even if China spent tens of billions of dollars and a decade or more replicating the technology, by that time ASML will have rolled out its own new technology, “high-aperture EUV,” which is supposed to be ready in the mid-2020s.

The book reinforces that there is currently a tense and delicate standoff between the US, Taiwan, and China, as Taiwan is an obvious swing factor across the entire industry and is in fact very close (geographically) to China (in addition to dispute over whether Taiwan is a part of China).  Getting into game theory in the last couple chapters, the author argues, as a base case, that the current relationship should continue on a status quo basis.

If tensions were to continue and perhaps ratchet up, the idea is that China could “seize TSMC.” While it seems like this would not be in China’s (or the US’s) best interest as a conflict like this could potentially result in TSMC and its infrastructure being destroyed (which would likely plunge the globe in a deep recession), there are paths of escalation that might lead to that outcome. For instance, there is a small island between Taiwan and mainland China that is garrisoned by Taiwan. If China took that island as an initial escalation point, “Taiwan and the US would face the difficult choice of starting a war over an irrelevant atoll or establishing precedent that China can slice off chunks of Taiwanese territory.”

The point is that while game theory dictates it is in neither country’s interest to push the envelope, either country might decide that a confrontation is inevitable, lob the first offensive, and off we would go to a major World War. While that shouldn’t happen in theory, wars are sometimes started by seemingly poor, non-logical choices. 

The book does offer some final food for thought, which has so far been disproven but might eventually come to pass: What if Moore’s Law finally dies? It notes:

“At some point, the laws of physics will make it impossible to shrink transistors further. Even before then, it could become too costly to manufacture them. The rate of costs declines has already significantly slowed.”

This would add a new wrinkle as it might make laggards like China to believe they could ultimately catch up on their own, if innovation itself was slowing.

Conclusion:  Investment Implications

While making geopolitical predictions and how they might or might not benefit companies seems challenging and perhaps foolhardy, a couple things do come to mind as an investor.

1. Intel is likely to be viewed as a strategic asset and might in the future get government assistance to regain former glory, unless a viable replacement emerges.

2. ASML is a complete monopoly and, so long as Moore’s Law continues, is likely remain extremely successful and one of the most strategically important companies in the world.

3. There are likely to be additional mini-escalations in the same vein as what happened to Huawei. One area we are exploring is cellular modules. This industry in North America was gutted when cheap Chinese competitors (most notably Quectel) entered and undercut pricing. There is a growing drumbeat that China should probably not be providing these sensitive items as there are ways data could be captured and sent to China. For instance, from a recent Spectator article:

“In January the security services took apart a UK government car because data was being transferred via a ‘Chinese e-sim (they meant a cellular module) inside.  The government has been tight-lipped about who used the car- or if it ever transported the Prime Minister.  But we know from a separate Tesla scandal that it would be perfectly possible for a Chinese engineer to record a private conversation in a car like this with a cellular module.”

In late November 2022, it appears the FCC queued up a policy to quickly ban Chinese equipment it deems posing a threat to national security. Although Quectel has not been put on this list, the infrastructure is in place for a quick strike. If that happens, a large beneficiary would be SMTC, which purchased Sierra Wireless at the end of the year. Sierra Wireless is essentially the last module player standing in North America, and a ban of Quectel would immediately provide it access to the $500M a year in revenues Quectel generates in the United States, while also likely significantly improving margins on said modules.

It will be interesting to see how the “Chip Wars” all play out over the coming years and decades.

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Update As of September 9^th:

Since we began writing this summary, events have been unfolding at a fast and furious pace.  Consider the following:

1)     Apple banned in China for government employees

If this is just a one-time thing and only applies to China’s government workers, perhaps it’s not a huge deal.  However, if it’s the beginning of China phasing out Apple entirely, it’s a huge deal as Apple manufactures nearly all of its iPhones in China at their enormous Foxconn facility.  Would China do this unless they thought they were closer to semiconductor independence than the US anticipates?  Well, see below:

2)     Huawei introduces phone with significantly higher technological capabilities than anticipated

We are still trying to understand just how close this new Kirin 9000s stacks up against the most cutting edge chips, but our preliminary understanding is it places Huawei just a little bit behind Western technologies, at least in terms of nanometers. 

It appears Qualcomm may be the initial loser here, but geopolitically it implies Western countries have less leverage over China than perhaps thought.

3)     US escalates messaging on a ban of Quectel and others

As discussed above, we noted that the US had fast-tracked a potential ban on Chinese module producers like Quectel.  Now, the language is again escalating towards an all out ban.