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China pursues tech ‘self-reliance,’ fueling global unease

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BEIJING (AP) — To help make China a self-reliant “technology superpower,” the ruling Communist Party is pushing the world’s biggest e-commerce company to take on the tricky, expensive business of designing its own processor chips — a business unlike anything Alibaba Group has done before.

Its 3-year-old chip unit, T-Head, unveiled its third processor in October, the Yitian 710 for Alibaba’s cloud computing business. Alibaba says for now, it has no plans to sell the chip to outsiders.

Other rookie chip developers including Tencent, a games and social media giant, and smartphone brand Xiaomi are pledging billions of dollars in line with official plans to create computing, clean energy and other technology that can build China’s wealth and global influence.

Processor chips play an increasingly critical role in products from smartphones and cars to medical devices and home appliances. Shortages due to the coronavirus pandemic are disrupting global manufacturing and adding to worries about supplies.

Chips are a top priority in the ruling Communist Party’s marathon campaign to end China’s reliance on technology from the United States, Japan and other suppliers Beijing sees as potential economic and strategic rivals. If it succeeds, business and political leaders warn that might slow down innovation, disrupt global trade and make the world poorer.

“Self-reliance is the foundation for the Chinese nation,” President Xi Jinping said in a speech released in March. He called for China to become a “technology superpower” to safeguard “national economic security.”

“We must strive to become the world’s main center of science and the high ground of innovation,” Xi said.

Beijing might be chasing a costly disappointment. Even with huge official investments, businesspeople and analysts say chipmakers and other companies will struggle to compete if they detach from global suppliers of advanced components and technology — a goal no other country is pursuing.

“It’s hard to imagine any one country rebuilding all of that and having the best technology,” said Peter Hanbury, who follows the industry for Bain & Co.

Beijing’s campaign is adding to tension with Washington and Europe, which see China as a strategic competitor and complain it steals technology. They limit access to tools needed to improve its industries.

If the world were to decouple, or split into markets with incompatible standards and products, U.S.- or European-made parts might not work in Chinese computers or cars. Smartphone makers who have a single dominant global operating system and two network standards might need to make unique versions for different markets. That could slow down development.

Washington and Beijing need to “avoid that the world becomes separated,” U.N. Secretary-General Antonio Guterres told The Associated Press in September.

China’s factories assemble the world’s smartphones and tablet computers but need components from the United States, Europe, Japan, Taiwan and South Korea. Chips are China’s biggest import, ahead of crude oil, at more than $300 billion last year.

Official urgency over that grew after Huawei Technologies Ltd., China’s first global tech brand, lost access to U.S. chips and other technology in 2018 under sanctions imposed by the White House.

That crippled the telecom equipment maker’s ambition to be a leader in next-generation smartphones. American officials say Huawei is a security risk and might aid Chinese spying, an accusation the company denies.

Huawei and some Chinese rivals are close to matching Intel Corp., Qualcomm Inc., South Korea’s Samsung Electronics and Britain’s Arm Ltd. at being able to design “bleeding edge” logic chips for smartphones, according to industry analysts.

But when it comes to making them, foundries such as state-owned SMIC in Shanghai are up to a decade behind industry leaders including TSMC, or Taiwan Semiconductor Manufacturing Corp., which produces chips for Apple Inc. and other global brands.

Even companies such as Alibaba that can design chips likely will need Taiwanese or other foreign foundries to make them. Alibaba’s Yitian 710 requires precision no Chinese foundry can achieve. The company declined to say which foreign producer it will use.

“My country still faces a big gap in chip technology,” said industry analyst Liu Chuntian of Zero Power Intelligence Group.

China accounts for 23% of global chip production capacity but only 7.6% of sales.

Packing millions of transistors onto a fingernail-size sliver of silicon requires some 1,500 steps, microscopic precision and arcane technologies owned by a handful of U.S., European, Japanese and other suppliers.

They include KLA Corp. in California for super-precise measurement and Japan’s TEL for machines to apply coatings a few molecules thick. Many are covered by restrictions on “dual use” technologies that can be used in weapons.

China “lags significantly” in tools, materials and production technology, the Semiconductor Industry Association said in a report this year.

Washington and Europe, citing security worries, block access to the most advanced tools Chinese chipmakers need to match global leaders in precision and efficiency.

Without those, China is falling farther behind, said Bain’s Hanbury.

“The TSMC horse is sprinting away and the Chinese horse is stopped,” he said. “They can’t move forward.”

Washington stepped up pressure on Huawei last year by barring global foundries from using American technology to produce its chips. U.S. vendors can sell chips to the company, but not for next-generation “5G” smartphones.

For its part, the European Union said it will review foreign investments after complaints China was eroding Europe’s technology lead by purchasing important assets such as German robot maker Kuka.

Alibaba’s Yitian 710 is based on architecture from Britain’s Arm, highlighting China’s enduring need for foreign know-how. Alibaba said it still will work closely with longtime foreign suppliers Intel, Arm, Nvidia Corp. and Advanced Micro Devices, Inc.

T-Head’s first chip, the Hanguang 800, was announced in 2019 for artificial intelligence. Its second, the XuanTie 910, is for self-driving cars and other functions.

In November, Tencent Holding, which operates the WeChat messaging service, announced its first three chips for artificial intelligence, cloud computing and video.

Beijing says it will spend $150 billion from 2014 through 2030 to develop its chip industry, but even that is a fraction of what global leaders invest. TSMC plans to spend $100 billion in the next three years on research and manufacturing.

China is trying to buy experience by hiring engineers from TSMC and other Taiwanese producers. Taiwan, which Beijing claims as part of its territory and has threatened to attack, has responded by imposing curbs on job advertising.

Beijing encourages smartphone and other manufacturers to use suppliers within China, even if they cost more, but officials deny China wants to detach from global industries.

“We will never go back in history by seeking to decouple,” Xi said in a speech by video link to a November meeting of Asia-Pacific leaders in Malaysia.

The latest conflict is over photolithography, which uses ultraviolet light to etch circuits into silicon on a scale measured in nanometers, or billionths of a meter.

The leader is ASML in the Netherlands, which makes machines that can etch transistors just 5 nanometers apart. That would pack 2 million into a space one centimeter wide.

China’s SMIC is about one-third as precise at 14 nanometers. Taiwan’s TSMC is preparing to increase its precision to 2 nanometers.

SMIC wants to upgrade by purchasing ASML’s latest machine, but the Dutch government has yet to agree.

“We will wait for their decision,” said an ASML spokeswoman, Monica Mols, in an email.

___

AP researcher Yu Bing in Beijing and AP Writer Edith M. Lederer at the United Nations contributed.

Joe Mcdonald, The Associated Press

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Canada handles Honduras with ease, advances to CONCACAF Nations League final four

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Honduras defender Denil Maldonado (15) and Canada forward Cyle Larin (17) battle for the ball during first half CONCACAF Nations League soccer action in Toronto on Tuesday, March 28, 2023. THE CANADIAN PRESS/Nathan Denette

By Neil Davidson in Toronto

Canada is headed to Las Vegas, in search of the CONCACAF Nations League trophy after a dominant 4-1 win over Honduras on Tuesday.

Cyle Larin scored twice early and Jonathan David and Jonathan Osorio added second-half goals for the 53rd-ranked Canadians, who controlled the game from the get-go. Ismael Kone had a breakout game in the Canadian midfield.

Jorge Benguche scored a consolation goal for No. 81 Honduras.

“Prior to the game we talked about if you want to be part of CONCACAF’s elite, you have to be in these final moments,” said Canada coach John Herdman. “You’ve got to get into these big events. It’s the first (time) in our history to get to a Nations League final and I think this group believes they can win it. And why not?

“The step they’ve taken tonight, I think they’ve shown a level of performance that should give us hope and a lot of belief that we can win that Nations League final.”

The CONCACAF Nations League features 41 teams from North and Central America and the Caribbean split into three tiers: League A (12 teams), B (16) and C (13). The four group winners in League A advance to the final four, scheduled for June 15-18 at Allegiant Stadium in Las Vegas.

No. 13 Mexico (2-0-2) finished first in Group A, while the 15th-ranked U.S. (3-0-1) topped Group D. No. 61 Panama (3-0-1) won Group B after edging No. 32 Costa Rica (2-2-0) 1-0 in a later start Tuesday.

Points earned by the group winners factor into the semifinal matchups. The U.S., as the highest-ranked team by virtue of goal difference over Panama, will face Mexico, the lowest-ranked, while No. 2 Panama takes on No. 3 Canada in the semifinals at Allegiant Stadium.

The Canadian men are 4-2-6 all-time against Panama, which won 1-0 the last time the two teams met in March 2022  in Panama City in Canada’s final World Cup qualifying game. Canada had already booked its ticket to Qatar by then.

The U.S. and Mexico met in the final of the tournament’s inaugural edition in June 2021 with the Americans winning 3-2 after extra time in Denver, thanks to a Christian Pulisic penalty in the 114th minute.

Honduras was third and Costa Rica fourth.

Canada missed out on the final four in the inaugural tournament, finishing runner-up to the U.S. in its group on goal difference.

Canada (3-1-0) came into Tuesday’s contest knowing a draw would be enough to win Group C and book its ticket to Sin City Honduras (2-2-0) needed a win.

The drama did not last long, with Canada leading 2-0 after just 12 minutes. Larin could have had a hat trick in the first half had he not sent a 42nd-minute penalty wide.

Honduras had no answer for Canada’s multi-pronged attack before a modest crowd of 13,626 on a mild evening at BMO Field.

Canada went ahead in the ninth minute, cutting through the Honduras defence like a hot knife through butter, on a beautiful give-and-go between Osorio and Larin with Larin slotting the ball home through a defender’s legs. Alphonso Davies triggered the attack down the left flank.

Larin made it 2-0 in the 12th minute, heading home a perfect Stephen Eustaquio corner after his marker, defender Denil Maldonado, lost his footing. Larin, who has scored five goals in his first eight games for Spain’s Real Valladolid, increased his Canada total to 28 goals in 60 appearances.

Another Davies attack set up the penalty late in the first half with the Bayern Munich star beating four defenders. The ball found its way to Kone, who controlled it with his thigh and then hammered a shot from just inside the penalty box that hit Maldonado’s arm.

El Salvador referee Ivan Barton immediately pointed to the penalty spot. Larin’s ensuing penalty glanced off the outside of the post.

It was Canada’s first penalty since Davies’ spot kick was saved by Belgium’s Thibault Courtois at the World Cup in Qatar.

David is Canada’s designated penalty-taker but gave up the ball to Larin so he could try for the hat trick.

David made it 3-0 in the 49th, in the right place at the right time after Tajon Buchanan sliced into the Honduras penalty box at speed. His cross hit a couple of defenders, evading Larin but falling at the feet of David for the Lille striker’s 24th goal for Canada in 40 appearances.

Herdman went to his bench in the 61st minute, sending on Hutchinson, Sam Adekugbe, Richie Laryea and Kyle Hiebert. Davies moved up in attack.

It was cap No. 103 for the 40-year-old Hutchinson, adding to his Canadian men’s record, and No. 1 for Hiebert, a late call-up from St. Louis City FC after Kamal Miller was ruled out by injury.

Benguchi put Honduras on the board in the 73rd minute, flicking a header backwards off a corner.

Osorio restored the three-goal lead in the 86th minute, taking a perfect pass from Toronto FC teammate Ayo Akinola before bursting through two defenders to beat goalkeeper Luis Lopez.

Hutchinson was granted the honour of leading the Viking Clap with a drum in front of the fans in the south stand. He acknowledged it was a “cool moment” — one that comes near the end of his distinguished career.

“A couple more games,” said Hutchinson, an icon both for Canada and his Turkish club side Besiktas.

Herdman and defender/wingback Alistair Johnston were back after sitting out the 2-0 away win Saturday over No. 86 Curaçao through suspension in the wake of being sent off last June in a hot-blooded 2-1 loss in Honduras.

Johnston replaced the suspended Steven Vitoria in the back three while Buchanan, who saw action off the bench against Curaçao after dealing with a minor hamstring issue, moved into the starting 11.

The Canadians improved to 9-12-7 all-time against Honduras, including 6-2-3 on home soil.

Tuesday’s game was the first for the Canadian men at BMO Field since the historic 4-0 victory over Jamaica that sealed World Cup qualification on March 27 last year.

The Canadian men are now unbeaten in 16 matches at home (15-0-1) and have won their last eight straight. Their last loss on Canadian soil was 3-0 to Mexico in March 2018 in World Cup qualifying.

Canada has not lost at BMO Field since September 2010 when it was beaten 2-0 by Peru. It has gone 15-0-6 at the lakefront stadium since then, outscoring the opposition 54-6.

Canada blanked Curaçao 4-0 before losing in Honduras to open Nations League play last June. Those matches came amid turmoil in the Canada camp, with players refusing to take part in a planned friendly against Panama over ongoing labour talks.

Curaçao (1-3-0) has been relegated to League B after finishing third in Canada’s group.

Follow @NeilMDavidson on Twitter

This report by The Canadian Press was first published March 28, 2023.

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Budget 2023 gives boost to dental care, green economy while searching for savings

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Deputy Prime Minister and Minister of Finance Chrystia Freeland delivers the federal budget in the House of Commons on Parliament Hill in Ottawa, Tuesday, March 28, 2023. THE CANADIAN PRESS/Sean Kilpatrick

By Mia Rabson in Ottawa

Finance Minister Chrystia Freeland’s 2023 federal budget promises “transformative investments” in Canada’s green economy as the country tries to maintain its place in the global clean tech revolution and realign its supply chains toward allies who won’t use energy as a political weapon.

“Together these two great shifts represent the most significant opportunity for Canadian workers in the lifetime of anyone here today,” Freeland said Tuesday in the House of Commons.

She is also using the budget to provide another top-up of the GST rebate, styled this time as a grocery rebate, to low-income Canadians who are feeling the pinch of inflation and keep making good on pledges in the confidence-and-supply agreement with the New Democrats.

There are also some measures reacting to political fires that have been burning around the Liberals in recent weeks and months, including some money to combat foreign interference, and to make airport security screening better.

In all the 2023-24 spending plan will cost $490.5 billion, including public debt charges, with $8.3 billion in new program spending. The projected deficit is $40.1 billion, which is greater than the $30.6 billion deficit for this coming fiscal year forecast in November’s fiscal update.

Over the next five years the government expects to spend $59.5 billion more than before. Nearly half of that will go to increase health transfers to the provinces and territories and further expand the national dental-care program the Liberals are creating as part of their deal with the NDP.

Dental care is expected to cost more than $13 billion over the next five years, about a $7-billion increase from what the government said it would cost when it was introduced in last year’s budget. It is now expected to cost $4.4 billion per year to keep it going beyond that.

Dental care was one of the NDP’s top demands from the Liberals when the opposition party entered into a confidence-and-supply agreement in March 2022 to back the minority government on key confidence votes, such as budgets, through to 2025.

“I’m really proud that we were able to force this government to expand dental care,” NDP Leader Jagmeet Singh said after the budget was tabled.

Singh said that while he is disappointed the budget lacks new measures to help make housing more affordable, his party will still vote for it. That will give the Liberals enough votes to pass the budget and continue governing.

The budget addresses a number of other NDP asks outlined in the deal, including anti-scab legislation and a new forum to better address the issue of missing and murdered Indigenous women and girls.

Conservative Leader Pierre Poilievre dismissed the budget as a high-spending plan that will drive up the deficit, make inflation worse, and subsidize major multinational companies. His party will not be voting for it, he said.

“Today’s budget by the costly coalition of the NDP and Liberals is a full-frontal attack on the paycheques of hard working Canadians,” he said.

More than one-third of new spending is wrapped up in Canada’s targeted response to keep pace with the United States Inflation Reduction Act, which last year promised to direct US$370 billion at clean technology and electric vehicles over a decade.

Over the next 12 years, Canada expects to spend more than $80 billion on investment tax credits to spur development of clean electricity, hydrogen, carbon capture and storage systems, critical minerals, and the electric-vehicle supply chain.

The budget warns of the ramifications of not investing in the low-carbon economy, with significant hits to the GDP and jobs in the next 30 years, even as it acknowledges the enormous amount of money it’s going to take.

“The scale of the required investment is massive,” the budget said.

Almost one-third of the investment tax credits will be for clean power, including finally aiming to connect Canada from coast to coast with power lines.

Hidden somewhere in the budget figures is the money Canada has promised that helped lure major auto companies to build battery plants in Ontario, including Volkswagen and Stellantis. The details of those are expected to be made public in the next few weeks.

All of the plans are looking to develop the new industries with supply chains connected to allies like the U.S. and Europe. Freeland said in her speech that this would help to end what Ursula Von Der Leyen, president of the European Commission has called Europe’s “dangerous dependencies” on authoritarian economies.

That includes Russia, which has used its oil and gas exports as a political lever in Europe, and China, which is dominating the electric vehicle and battery supply chain sectors.

Not quite one-tenth of the new spending is directed at making life a bit more affordable for some Canadians, including the second GST rebate top-to low-income Canadians up in a year, and increases to grants for post-secondary students.

While inflation is coming down, the budget predicts it will remain above the Bank of Canada’s two per cent target until at least the second quarter of 2024. Food prices are a key part of what is keeping it elevated.

“We all know that our most vulnerable friends and neighbours are still feeling the bite of higher prices,” Freeland said in her speech.

All the new spending, and a $17-billion increase in the cost of interest on government debt over five years, has eliminated Freeland’s hope for a balanced budget on the horizon.

In November, she forecast a $4.5 billion surplus by 2027-28. Tuesday’s budget says that year will now log a $14 billion deficit.

She is promising to find $15 billion in savings over five years by scaling back government travel, its use of outside consultants and asking most federal departments to cut their spending three per cent.

Freeland uses positive language to describe Canada’s current economic situation, but the budget makes clear the upheaval created by the pandemic means the country is still at risk of seeing its finances take a turn for the worse by the end of this year.

Mostafa Askari, the chief economist at the Institute of Fiscal Studies and Democracy at the University of Ottawa, said his first takeaway from the budget was simple.

“There is a lot of spending,” he said.

He is wary of the government being able to find $15 billion in savings, particularly given that the promises are vague, with no specific understanding of what money will not be spent.

“Every government, every budget has had some efficiency game,” said Askari. “It’s very unlikely they’re going to get these savings.”

Askari also said there are significant risks of a deeper economic downturn later this year than predicted in the budget, which could upend all of Freeland’s economic assumptions, lowering government revenues and making the deficit even bigger.

This report by The Canadian Press was first published March 28, 2023.

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