China Made a Chip Breakthrough That Shocked the World

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:16)

Tracy, it's been too long since we've done a semiconductor episode.

Tracy Alloway (0:20)

I know. I actually feel really behind on what's been happening in the industry. I've seen some headlines. I mean, obviously we talked about NVIDIA earlier in the year, and that stock just exploded, and recently they released their earnings. I've seen some news about additional export restrictions and things like that, but I haven't been paying close enough attention, and I feel really bad about that.

Joe Weisenthal (0:42)

Do you ever read, Tracy, or have you ever tried?

Tracy Alloway (0:45)

Do I ever read?

Joe Weisenthal (0:47)

You read? Have you ever tried to read those really technical semiconductor publications that talk about, oh, the new NVIDIA chip is four different cores and a thing here, and have you ever seen those sites?

Tracy Alloway (1:02)

I have.

Joe Weisenthal (1:02)

Sometimes people drop the links in our Discord, and I try to catch up to speed on what the hot new chip is, and I always give up one third of the way through the post.

Tracy Alloway (1:10)

It's really difficult. I mean, even the ones where they talk about wafer thinness and stuff, I can kind of understand it, but there's so much within this specific subject. There's sort of the big picture things, like geopolitical tensions and trade tensions and things like that, and then you can really get into, I don't want to say the nuts and bolts of the specific technology, but I don't know, the wafers and pins of specific technology.

Joe Weisenthal (1:36)

So the one thing is it seems like the lower nanometer number, the better.

But even there, and I know we've done some episodes in the past with Stacey Raskin, et cetera, even there, that only tells you so much about a chip's performance, and there are all different kinds of architectures and yields, we've talked about that too, or in theory, you could have a really powerful chip, but maybe it's not economical because you lose so many chips in the process, et cetera. So wrapping one's head around chips is tough.

Tracy Alloway (2:05)

Yes, agreed.

What will we be doing on this episode? Trying to wrap our heads around chips.

Joe Weisenthal (2:10)

Yeah, so there's been some news, particularly related to China, and I think Huawei came out with a phone fairly recently in the last couple months, and what caught people's attention was it seemed to have performance that people didn't assume it could have given what was known about the state of domestic Chinese semiconductor capacity.

Tracy Alloway (2:32)

Seven nanometers, I shouldn't whisper, on a podcast. I don't know why I did that. It's not a secret. So supposedly it had a chip made by SMIC, a Chinese chip maker that was seven nanometers, and something that people thought China wasn't able to produce just yet, and yet here we are talking about the 7NM in these phones.

Joe Weisenthal (2:54)

And I guess the question is, is this represent a major domestic breakthrough for China's semiconductor industry?

Does it mean that some technology, which wasn't supposed to get into the country, somehow got in? So there's some sort of US national security implications. But it's a good time. We've talked about this for years with people like Dan Wong.

What is the state of Chinese semiconductor? Are they catching up? So I think it's a good time to take stock of the situation.

Tracy Alloway (3:21)

I agree. And also you didn't mention the biggest thing that people are talking about now, which is the idea that have the restrictions basically created the exact opposite result intended and maybe accelerated China's semiconductor technology.

Joe Weisenthal (3:37)

Which is something people have warned about that ultimately, sure, maybe you set the country back a few years in its development, but if you restrict its capacity to get international technology, then it just builds faster its own homegrown. And we have all kinds of questions related to chips right now that we need to catch up on.

Tracy Alloway (3:54)

Yes. And also, can I just say that I blame the semiconductor restrictions on me having to read the three body problem. Did you ever read that? And now these visions, I don't know how many people have read it, but a lot of people used it as an analogy for China's technological development. But now I have nightmares about little shriveled up dead people.

And if you've read the book, if you've read the book, this makes sense.