Hard currency | Ukraine crisis, why France and Germany are willing to be Chamberlain [Issue 1]

Bad things always start with the chip.

Last year, the U.S. Department of Commerce ordered several chip companies to hand over trade secrets in the name of responding to the global chip crisis. Soon, TSMC, UMC, Tower Semiconductor, ASE, Universal Crystal, Samsung and SK Hynix all "handed in".

In the past, the state calculated the "big account" and looked at the dynamic interests of foreign trade; the enterprise calculated the "small account" and wanted the static interests of real money. Now, "big accounts" and "small accounts" are mixed together. This is of course a phenomenon in which the era of anti-globalization has broken people's "historical experience" of globalization, and anti-globalization is only the result, not the cause.

The basis of trade is the division of labor. A problem with trade means a problem with the division of labor, that is, a problem with the global value chain system.

Since 2021, both integrated circuits and crude oil and natural gas have experienced shortage crises, which will have a particularly severe impact on China. They are not only the main commodity categories imported by China, but also the "key core technologies" that the Chinese Academy of Sciences and the Academy of Engineering need to "go all out" under the policy.

Forty years of "export-oriented" policy, China has created an "economic miracle". The current "import crisis" not only makes people reflect on the corporate strategy of "import for export", but also makes people wonder why the global value "chain" suddenly becomes like a long rope.

"Gizmos" measured in nanometers

In order to deal with the crisis of "lack of cores", China's "new car-making forces" have to try all kinds of methods. For example, the car is delivered first, and the radar is supplemented later.

This is the "Ideal ONE Delivery Plan Communication" released by Li Auto: vehicles originally scheduled to be delivered in October and November 2021, only 1 forward millimeter wave radar and 2 rear corner millimeter wave radars are installed, and will arrive in December The remaining two millimeter-wave radars will be installed before the Spring Festival next year. Users who pick up their car in December are not affected.

Li Auto said that the automatic merging and front crossing vehicle warning functions are temporarily disabled for models with only 3 millimeter-wave radars installed, and other ADAS (advanced driver assistance system) functions can be used normally. The late OTA (over-the-air technology) of NOA (assisted driving system) needs to be upgraded after 5 radars are installed.

Due to the resurgence of the new coronavirus disease in Malaysia in the summer, the local production of millimeter-wave radar chips cannot be supplied to China. Li Auto's September sales were 7,094 units, down 24.8% month-on-month.

Weilai Automobile was also affected by the shortage of chips, and its sales in August fell by 25.86% month-on-month. NIO explained that the outbreak in Malaysia affected the production of STMicroelectronics, and STMicroelectronics is a supplier of Bosch ESP (body electronic stability control system), so the ESP from Bosch to NIO could not be delivered on time.

The "pursuit" of new energy vehicles for chips started with Tesla, which was rushing forward. Just at Artificial Intelligence Day in August, Tesla showed off a new microchip for training artificial intelligence networks, developed for autonomous driving. Previously, Tesla purchased a lot of "cutting-edge" chips from Nvidia. Since 2016, Musk has been poaching experts and designing custom chips, and has partnered with Samsung.

Of course, Tesla is characterized by both forward-looking thinking and eye-catching hype. Although it is still a little far from the day of autonomous driving, its idea of "mastering the chip" still sounded a wake-up call to the entire automotive industry.

Volkswagen has already said it wants to develop custom chips for self-driving cars. Mercedes-Benz started working with Nvidia last year, following the same path. Intel Chief Executive Pat Kissinger, citing a forecast from Roland Berger, a well-known consulting firm, said that chips will account for 20% of the material cost of premium cars by 2030, up from 4% in 2019. They hope to "serve this growth market" with their chips.

In August, Qualcomm made an initial offer of $4.6 billion to acquire Veoneer, a Swedish company that sells sensors and software for assisted driving. The plan is similar to Intel's acquisition of Mobileye during the last wave of autonomous driving in 2017.

Originally, the gap between chips, to exaggerate, is similar to the gap between livestock and automated agricultural machinery. Cutting-edge components such as mobile phone chips and FPGAs (Field Programmable Logic Gate Arrays) are made in state-of-the-art wafer fabs using state-of-the-art processes, and it costs billions of dollars to build just one fab. The shortage of high-end chips will spread to China's high-end industries and some industries such as measurement, control, testing, testing and other high-end links.

However, the vast majority of chips that people use every day are not "high-end", especially automotive chips - they are all made in the previous generation or generations of fabs using old processes. For example, the EPB (Electronic Parking) chip, the normal price is about 6 yuan per piece, which is no more expensive than a bowl of plain noodles at 8 yuan on the street. There are rumors that Li Auto's purchase price for EPB has recently reached about 5,000 yuan/piece, which is 800 times higher than the normal price. Li Auto denied it.

Although the future of automotive chips tends to be "high-end", the shortage of "low-end goods" over the past year has cut off auto supply links across the planet one after another - automakers in South Korea, Germany and Brazil have shut down production lines all the way. The total number of vehicles delivered by Volkswagen in the third quarter fell 24.5% year-on-year. Global sales of Mercedes-Benz fell 30.5% year-on-year over the same period, while global sales of BMW's BMW, MINI and Rolls-Royce units fell 12% year-on-year.

Chen Bin, executive vice president of China Machinery Industry Federation, said at the "2021 China Automobile Supply Chain Conference" that chips that have not received enough attention in the automobile supply chain in the past have had a huge impact on China's automobile production and sales. In September, China's auto production and sales fell for five consecutive months compared with the same period last year. According to this inference, it is possible to reduce production by nearly 2 million throughout the year.

Judging from the import and export status of the entire manufacturing industry, most of the key equipment required in the production line of enterprises relies on imports, and the automotive field is more prominent; the electronic information industry focuses on the application side of consumer electronics and the information industry, resulting in high-end chips and sensors. Other industrial basic components and development software are also imported.

In the "2020 China Customs Statistical Summary" published by the General Administration of Customs of China, the top three import value (USD) of China's main commodities in 2019 are mechanical and electrical products, high-tech products, integrated circuits, and the sum of the value exceeds 1.8 trillion. Dollar.

"big guy" in tons

Mr. Huang, a supplier of ceramic raw materials, was at leisure. His current schedule is to swim three times a week, play badminton twice, and think about going to learn billiards again. Because his client ceramics factory has been shut down - "the gas has gone up too much".

Guangdong is China's largest exporter of ceramic tiles. Among the ceramic export provinces in 2020, Guangdong accounted for as high as 41%. The outbreak of the epidemic last year brought the export of ceramic tiles to a near standstill. This year has improved slightly, but since the second half of the year, the cost of electricity, raw materials and fuel has risen sharply, and the life of ceramic upstream and downstream enterprises is still difficult.

At present, the calorific value of conventional natural gas used in China's ceramic industry is about 8,500 kcal/m³, and the calorific value of coal is about 6,000 kcal/kg. Considering the calorific value loss and gas production cost in the process of coal-to-gas production, the calorific value of 1 kg of coal is roughly equivalent to 0.5 m³ of natural gas.

The ceramic industry has high energy consumption and high pollution. The "coal-to-gas" measure was implemented more than ten years ago. Now that the goal of carbon neutrality is announced, the "change in gas" is an irreversible "general trend".

First of all, the conversion of "coal to gas" has raised the production threshold of ceramic enterprises. The combustion system and operating technology must be readjusted, and tuition fees are unavoidable. Moreover, only large-scale ceramic brand enterprises can obtain more favorable "long-term" prices through gas consumption, but enterprises, regardless of size, have to study how to improve combustion efficiency to reduce unit energy consumption.

For example, a good quality 11mm thick, 800×800mm polished glazed tile weighs about 17 kilograms, consumes about 550 kcal of energy per kilogram of tile, and requires about 1.7m³ of natural gas/㎡, which is the theoretical minimum energy consumption value. For some Guangdong ceramic enterprises that started early, the tiles of the same specification can achieve 1.8m³ natural gas/㎡, which is close to the "ideal" extreme.

Secondly, the fluctuation of gas price also greatly increases the cost of "changing gas" for ceramic enterprises. In the past ten years, the gas price in the ceramic production areas of Fujian Province once exceeded 4 yuan/m³, and the gas consumption and coal consumption were repeated many times. After 2016, the gas consumption was gradually unified and stable.

The price of natural gas on November 11 was close to 5 yuan/m³, and the price before the price increase was 2.2 yuan/m³. A ceramic factory with 3 production lines and a daily output of about 70,000 square meters of ceramic tiles costs about 1 million yuan per month based on the original unit price of more than two pieces. After the price increase, the single natural gas cost is 2 million yuan. Equivalent to a tile of 800mm × 800mm, the cost will increase by 1~2 yuan.

With coal, the price of coal has also risen. At the beginning of this year, the coal price was more than 900 yuan / ton, and after October, it was 2,000 yuan / ton. The cost structure of the ceramic industry is divided into two parts: raw materials and fuel. Now the fuel has more than doubled, and the price cannot be greatly increased to the dealers - after all, the domestic real estate industry is sluggish, and the overseas logistics cost is high. Therefore, only by stopping production can losses be reduced. "If we reproduce this year, it will basically be in vain."

China is a major energy importer. In the "2020 China Customs Statistical Summary", the import value of crude oil in 2019 ranked fourth, at US$241.8 billion, natural gas was US$41.7 billion, coal and lignite was US$23.4 billion, and the total of the three items was US$306.9 billion, higher than the third The $305.5 billion for the famous integrated circuit is a little more than $305.5 billion.

In the first half of 2021, China's natural gas demand grew rapidly under the background of "carbon neutrality" and "coal-to-gas", with the total apparent consumption reaching 185.1 billion cubic meters, a year-on-year increase of 16%. Among them, LNG (liquefied natural gas) imports increased by 26%. The overall demand is growing rapidly, and the domestic gas volume and the pipeline imported gas volume have a certain supply rigidity. Therefore, the elastic part can only be supplemented by LNG imports.

The landscape of natural gas exporters is also changing. Russia is the world's largest natural gas exporter. Russia supplies one-third of Europe's natural gas, and more than half of it needs to transit through Ukraine. However, due to political disputes between the two countries, the supply is limited. The United States has recently imposed economic restrictions on multiple entities involved in the Nord Stream 2 and its ships. Australia overtook Qatar to become the world's No. 1 LNG exporter in 2020, with nearly 40% of it purchased by China.

Since 2013, Qatar's natural gas production has remained unchanged, and more than 95% of its exports are long-term contracts. As competitive pressure from the United States and Australia intensifies, Qatar has begun to expand production capacity while lowering prices. The 2 million tons/year long-term agreement signed with Sinopec will supply in 2022.

As a major producer of shale gas, the United States is the third largest exporter of LNG in the world. But Biden's "Green New Deal" restricts natural gas exploration and extraction in terms of taxes and drilling permits. In addition, oil and gas prices have fluctuated wildly, and most shale gas producers have limited capacity to expand production as they have to repay their debts and maintain output.

"The world made by trade"

Chips, natural gas, and every passing day swept across the sky and ocean.

One of the top chips in the world, Apple's self-designed A15 Bionic for the iPhone 13 Pro Max, is manufactured using the most advanced 5-nanometer technology for smartphone chips, and is about the size of a sugar cube. They are light and small, and like the finished cell phone wrapped around them, they "ride" on a wide-body Boeing 747 between continents.

Natural gas must be transported below minus 163°C because it can be compressed into a liquid state at minus 162°C. The "Margery" manufactured by Daewoo Company is an icebreaker with a volume of more than 170,000 cubic meters and a load of more than 80,000 tons. The natural gas transported is enough for Sweden to use for a month. The "gas storage tank" is large and heavy, and it takes a special LNG vessel to ride the wind and waves at sea for several months.

Like gold, silver, spices, and wood in the past, chips and natural gas with huge differences in size are also flowing rapidly on the earth along with the migration of population. Slaves sold on the island of Delos, miners digging in American mines, and women working in Roman brothels, with caliphs and bazaars, Venetian merchants, bishops of the Holy See against the Reformation, compradors of the East India Company, and the Atlantic coast of America The leaders of emerging industries in the world are all seeking dreams, illusions and wealth under the "blessing" of technology and energy, changing the development of history.

Trade breaks people's "imagination" and doesn't "always" happen according to a pattern.

China's "export miracle", in the past academic circles had the judgment of "import for export": importing advanced manufacturing equipment to meet the needs of major international buyers of consumer goods. A phenomenon worth thinking about is that in the "2020 China Customs Statistical Summary", the top two import and export values of major commodities in 2019 are the same, namely "mechanical products" and "high-tech products". The two types of goods overlap in exports and imports.

This means that mechanical and electrical products and high-tech products are imported, the "intermediate products" link is completed in China, and then exported to high-income countries or regions. These intermediate links are often labor-intensive links in high-tech products. Fortunately, not all export categories are "intermediate links". In 2019's data, the export value is 600 billion US dollars more than the import value, which is at least twice the value of integrated circuit imports. China's independent innovation is strengthening, and local Big buyers are also expanding.

Moreover, imports and exports often do not follow the "equivalent exchange" principle. This is also the difference between calculating a large account and calculating a small account, and unequal exchange is not necessarily completely unfavorable to the trade party. Because the range of mutual benefit is a magnitude, and the equivalent exchange is a point.

Therefore, the essence of trade relations is that both sides of the trade must deal with the division of the interests of specialized division of labor.

The so-called global value chain is a set of processes in which production is divided, where commodities are exchanged, and interests are divided. Chip and gas shortages in 2021 have exposed the fragility of global value chains. Of course, it is to blame for the repeated epidemics of the new coronavirus disease. Most companies pursue "lean production" to reduce inventory but have no surplus food, poor logistics, and people generally lack consumption power. However, the root cause is that the international division of labor has been basically finalized and further deepened. Marginal difficulty increases.

The development of communication technology is nearing its end; the dividends of the border opening system have been released. Whether it is technological change or institutional change, in the process of the last round of globalization, everything that can be done has been done.

The new technology has not yet revealed any clues, and the giants of Silicon Valley can only fry the "metaverse" to "create" demand. The borders and borders are opening up, and the country is gradually opening up to the “internal opening”. TPP, CPTPP, and RCEP are testing the waters.

Sometimes the real world of trade can be abstracted into a simulated game. Just like the board game "Isle of Catan" that I played a while ago. Players collect natural resources by rolling dice, and then use the resources to build roads and settlements on an empty island. Everyone has limited access to natural resources, and players have to trade resources with each other. As the game progresses, one's own "sphere of influence" becomes more and more, and there is a chance to win by developing one's own power or robbing others' resources, but any conflict is limited to the economic level.

In "Catan", the player's role is as much a country as a business - everything you own is accidental, everything you want has to be traded, and no one has "everything". When you tend to trade frequently with your brother, your classmates are likely to join the other camp; and industrialization and urbanization are the only way to "bigger".

"The whole story is a knot that cannot be undone," Rossini said in the sextet of the opera Cinderella.