China has spent 7 yrs making "bad economic choices" to prepare itself for decoupling it has anticipated since 2018.
It has diversified trade partners.
Deflated stock & real estate bubble
Punished big tech & encouraged new startups
Drove industrial policy in new emerging sectors. Due to 2022 tech war, it accelerated de-risking from US supply chain, especially choke pts.
Breakdown of China's import from US
High end tech was 23% (7% IC & 4.6% engines)
Next highest are farming 16% & energy 14%
Chemical 13%, cars/planes 9%
Most of this is easily replaceable.

We are in 3rd economic period since China opened up.
1st period 1980-2005
Advanced economies invested in China, taught China how to make stuff to lower cost
2nd 2006-2020
China became world's factory, US moved from mfg to design.
3rd 2021-
China competes on top end in design.
See graph for foreign export vs private/others Use shipbuilding as an example:
Until 2006, China was still learning how to build ships.
It was competing mostly on low cost for simpler ships like container ships.
It used mostly foreign supply chain like engines, propellers & more.
Other heavy industries also like this.

Back 15 yrs ago, Chinese development faced 2 distinct problems:
1) Energy dependence on Indian Ocean sea lane w/o Navy to defend it
2) Over dependence on Mkt access & Tech from Western countries.
Focusing on 1) today, let's discuss what China is doing for energy independence. WCF saw that China was facing this energy issue when building BYD. He saw China had huge solar potential w/ vast amount of Arid, lowly inhabited land.
Solar required battery to deal w/ intermittency issues.
By electrifying cars, buses & trucks, China reduces its oil dependence.

USN Readiness based on USNI Fleet & Marine Tracker from 2017 - now
1st available from 20170710 in aftermath of GWOT show reduced fleet of 276 w/ 81 ships underway (at sea) & 104 deployed.
3 deployed CSG & many ARG/ESG
None in East Asia
This is b4 start of great power competition Next 2 from 20180904 & 20191216 show a growth in fleet size during Trump-1 term to 293 over 2.5 yrs.
Under way ships remain in the 80s, but fewer deployed ships.
Larger fleet doesn't mean more deployable ships.
By 201912, 3 deployed CSG + 2 more available CVN
1 CSG in East Asia

Huge shift in WestPac wrt underwater fleet, long considered America's biggest military advantage over PLA.
1st batch of 8 Type 093B have been launched & build rate continues to be 3-4/yr.
Each carrying what looks to be 21 VLS tubes able to fire YJ-18B LACM.
Thread on 093 & more
While USN has huge advantage in SSNs, they are aging rapidly & suffering thru high unavailability.
There was 8 yr gap from last LA class to 1st VA class where only 2 Seawolf commissioned.
Build rate much higher in 80s vs now
-> expect decline in sub force size as LA subs retire

A thread on how DeepSeek pushed fwd AI adoption in China & globally by looking @ 5 areas:
Chinese OEM adoption
Global adoption
Chinese Cloud adoption
Chinse AI h/w stack adoption
ByteDance taking lead in DS/AI adoption
DS has ignited a techmovement in China w/ deep consequences DeepSeek adoption in China across all OEMs is swift.
All major phone makers added deep DS integration (Xiaomi last to do so)
All EV maker except for Li/XPeng/Nio/HW have joined
AIPCs by Honor & Lenovo
AI TV by Changhong & Hisense
AI projectors
Alipay, QQ music, govt, education + more

IC/Semi has become China's 2nd largest export item by value w/ $159.5B (up 17% YoY, 7.5% of all mechanical/electrical export).
IC remains top import item w/ $385.6B in total value (up 10% YoY)
China's Semi Capex continue to grow to $24.72B in 2024H1, far away highest globally.
2024 saw huge growth in Chinese WFE imports.
Mostly SME import grew by > 20% vs 2023 as fabs stocked up significantly ahead of new export restrictions.
Lithography import led the way, but Deposition & Etching also increased.
-> Huge growth in Domestic Etch/Deposition WFE sales.

Is China becoming dominant in Biotech?
Article on China Inc moving up value chain & now making new Drug discoveries
28% of trial starts are from Chinese companies now, surpass Europe & just behind America
Similar trend in Drug discoveries
Also in share of global deals
+ total Amt paid upfront to Chinese Biotech R&Datelfo.github.io/2024/12/20/wil…


Partly, this Is CFDA shifting to an "implied license" approval system in 2018 where approval time dropped from 501 to just 87 days.
But it also mirrors China's growth in other industries where China moving from low cost mfg to innovation as seen in growth in out-licensing deals

DeepSeek has commoditized AI outside of very top-end. Lightbulb moment for me in 1st photo. R1 is so much cheaper than US labor cost that many jobs will get automated away over next 5 yrs.
See @teortaxesTex post on how cheaply you can automate previously tedious & boring tasks.
Deepseek has taken over @huggingface models page.
AI community is embracing the freedom that DS R1 is providing.
Distilled models are awesome. I can run 7B, 8B distilled models on my MacBook Pro later.
What nerd doesn't want a powerful model that can be run on home computer?

After new chip related restrictions on China, China Internet Society, CAAM & CSIA jointly released warning domestic companies to caution usage of American chips due to supply chain risks.
Since their members are some of the largest global chip consumers, this is a huge deal.

China has had enough of these national security related export restrictions & their weaponization.

For most mature node chips, there are many non-American options. Infineon, STMicro, NXP & Renasas will all benefit from China's delete-A movement.

src news.ifeng.com/c/8f15ngVFRfW

Samsung doing mass layoffs is result of its divisions losing shares to China & Taiwan across the board.
From below, 38% revenue from Mobile, 32.5% from memory & logic fab, 18% from consumer electronics & 11% from displays.
I will explore each segment & show how it is losing.

https://twitter.com/ReutersBiz/status/1833973798875398253

In all important smart phone mkt, Samsung still 1st globally, but down to just 18% mkt share in Q2.
2023Q4 was also very low.
Xiaomi & Vivo have gained against Samsung across Global South Countries.
HW has ate into Samsung's share in foldable phones.
Unlikely to turn around.