After a failed two-year campaign to stop China’s Huawei Technologies from leading the world’s rollout of 5G mobile broadband, the Trump Administration announced the so-called nuclear option, asserting control over sales of computer chips made anywhere in the world with US equipment.
Silicon Valley firms like LAM and Applied Materials provide high-end fabrication equipment to the chip-fabrication giants who manufacture the chips that Huawei designs, and the US rule announced Friday could shut off Huawei’s access to the top-of-the-line chips it buys from Taiwan Semiconductor Manufacturing Corp (TSMC).
The ban may apply not only to the high-end chips that Huawei buys from Taiwanese fabricators for its high-end smartphones and servers, but also to radio frequency devices that power its 5G base stations.
That might hold back China’s US$170 billion internal rollout of 5G and hamper Huawei’s network building elsewhere, according to industry experts.
Earlier this year, the Trump Administration floated a number of plans for competing with Huawei, including a “virtual 5G” approach that substitutes software for hardware, or the purchase of Sweden’s Ericsson, the second-largest builder of 5G networks.
Ericsson is presently worth about $28 billion; add an acquisition premium and a $15 billion shot to its R&D budget, and for $50 billion the US would have had a national champion to take on Huawei. The tech war might cost the US many times that amount.
If China retaliates by shutting US tech companies out of the Chinese market, the outcome will be a collapse of trans-Pacific technology trade, aggravating what already is the worst economic downturn since the Second World War.
Both sides will suffer, perhaps gravely. The dispute has the potential to escalate into an all-out trade war that would push the world into depression.
In the medium term, China will build substitutes for US equipment. China buys nearly 60% of the world’s semiconductors, and the loss of the Chinese market would cripple the American semiconductor industry.
When the US stopped American chipmakers from selling chips to China’s number two telecommunications equipment firm ZTE in April 2018, the company shut down. By December 2018, though, Huawei had designed its own chipset for smartphones with capability that matched Qualcomm’s.
TSMC fabricates the chips, and that is what the new US ruling threatens to block.
The new US rules pushes the world into uncharted territory. Semiconductors drove the digital transformation of the world economy, and their design and manufacture combines technology from thousands of firms in dozens of countries.
The next shoe to drop will come from Beijing, which is mulling retaliatory sanctions against US companies like Apple, Qualcomm, Boeing and Cisco. Chinese leader Xi Jinping did not handle the initial phase of the epidemic well and suffered a significant loss of prestige. He cannot afford to be humiliated by the United States, and will respond in kind.
Washington’s after-the-fact assertion over extraterritorial rights over sales of products made by American equipment has no precedent. During the Cold War, foreign companies that bought American technology had to give assurances in advance that the products would not be sold on to the Soviet Union and its allies.
In this case, Taiwan Semiconductor and other fabricators bought American equipment to make products for Huawei and other Chinese companies. Huawei is now TSMC’s largest customer, overtaking Apple. The semiconductor industry around the world will scramble to remove as many American components as possible from the supply chain.
It’s also unprecedented for the United States to try to stop the rollout of a key technology – in this case 5G broadband – rather than lead the rollout itself. If Huawei can’t source radio frequency devices from Taiwan, it will not fulfill its contracts to build 500,000 base stations.
It’s possible that Huawei’s 5G rollout in Europe will be set back by a year or more, giving Washington more time to think up an alternative. But it’s also possible that the US semiconductor industry will be the odd man out, as the rest of the world finds alternatives to US technology.
Washington is betting the farm on the hope that China and its partners won’t find a workaround in time. If they do, the new restrictions will be America’s last hurrah as a tech power. Ten years ago China would have been helpless. But during the past decade Chinese universities have muscled their way up to world class, thanks in large part to the return of tens of thousands of Chinese with doctorates from American universities.
China’s tech industry has the depth and breadth to attack the whole range of semiconductor production issues. Throughout the escalating Sino-American tech war, the Chinese have come up to speed faster than either Washington or the industry consensus expected.
The risk is that the US might lose the crown jewels – its leadership in semiconductor technology. That’s why the Trump Administration hesitated to impose a third-party export ban earlier.
At the urging of the US Defense Department, the White House rejected the nuclear option late in 2019, after America’s top tech designers warned that Chinese retaliation would shut them out of the Asian market. National Economic Council Chairman Larry Kudlow told the Wall Street Journal February 4: “We don’t want to put our great companies out of business.”
The president tweeted February 18: “The United States cannot, & will not, become such a difficult place to deal with in terms of foreign countries buying our product, including for the always used National Security excuse, that our companies will be forced to leave in order to remain competitive.”
Trump changed his mind after blaming China for the coronavirus epidemic. His trade adviser Peter Navarro declared last week, “We are at war with China,” and accused China of deliberately sending infected passengers on international flights from Wuhan to spread the virus.
Some observers attribute Washington’s increasingly hostile stance towards China to election rhetoric, but Trump didn’t have to throw a hand grenade into the semiconductor supply chain to get votes.
There is another, more ominous motivation. America faces a GDP decline of perhaps 10% during 2020, and an extremely uncertain recovery as it gradually reopens business activity without widespread testing or contact tracing.
The Asian economies – where the epidemic is largely under control– are coming back on line rapidly, and intra-Asian trade is booming (see “Who’s Decoupling from Whom?,” Asia Times, May 11, 2020).
Defense Secretary Mike Espers warned May 4 that China will use the pandemic to expand its footprint in Europe, “as a way to invest in critical industry and infrastructure, with effect on security in the long term.”
As a spinoff from its flagship 5G product, Huawei offers a series of artificial intelligence (AI) applications for healthcare, including diagnostic, telemedicine, and pharmaceutical research. China’s AI capacity played a key role in suppressing the epidemic, and hopes to lead in medical AI, possibly the 21st century’s biggest industry. China’s success in applying AI to epidemic control is an important selling point.
China meanwhile badly misplayed what should have been a strong hand. Navarro’s allegation that China deliberately spread the epidemic is inflammatory nonsense, and Secretary of State Mike Pompeo has yet to provide evidence that Covid-19 came from the Wuhan Virology Lab, as he alleged vociferously last week.
But China did prevaricate for weeks before admitting that an epidemic was underway – despite warnings from top Western virologists early in January that the world might face a global pandemic.
Western scientists had an accurate picture of the risk by the first week in January, but with few exceptions failed to persuade their governments to act quickly. Beijing’s ham-handed attempts to buy influence through so-called face-mask diplomacy annoyed the Western countries most sympathetic to China.
Washington hopes that China’s loss of face through the epidemic will make it easier to impose controls on technology.
Retaliation against China through extraterritorial bans on chip sales is a high-risk response. LAM, Applied Materials and other American equipment makers dominate the present market, although Holland’s ASML has a monopoly on extreme ultraviolet lithography (EUV), the technology required to make the chips with the highest density of transistors.
Late last year the US persuaded the Dutch government to block the sale of a EUV machine to China. Last year the Chinese Academy of Sciences announced that it had developed its own EUV machine, but it is far away from application to large-scale production. If China puts its industry on a wartime footing with Manhattan-Project style resources, it might develop substitutes faster than the US expects.
According to Dr Handel Jones, the CEO of International Business Strategies, a prominent semiconductor consulting firm, “Blocking 5 and 7 nanometer sales to Huawei” from Taiwan Semiconductor and other fabricators “will have a major impact on the ability of Huawei to be competitive in smartphones.
Blocking radio frequency devices and other products to Huawei will stop the buildout of 5G in China, and that will not be tolerated. Even switching designs to [the mainland Chinese fabricator] Semiconductor Manufacturing International Corp at 14 nanometers would take a year.”
“It is both a very serious and volatile situation,” Dr Jones added. “There is a 120-day grace period where hopefully compromises will emerge.”
China meanwhile is considering its response. From the Chinese side of the board, elementary game theory indicates a maximalist response designed to inflict extreme damage on the already-weakened US economy.
The Chinese English-language daily wrote May 17: “Some industry analysts believed that a counterstrike against US companies like Qualcomm and Apple might prompt them to lobby against such restrictions as their interests in the Chinese market are important for maintaining their sustainable growth. For instance, 65% of Qualcomm’s total revenue lay in China, according to media reports in August 2019.”
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Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
After a long day at a work event in July, Kathryn Kozody was relieved when she spotted a car with a lit-up taxi sign.
She thought it was odd when the driver told her she’d have to pay her fare with a debit card. Still, a tired Kozody hopped in the car.
“I was like, ‘Fine, it’s kind of weird, but let’s go home,'” said Kozody, who lives in Calgary.
Nothing else seemed off — until the next day when she discovered that almost $2,000 was missing from her bank account. On top of that, her debit card had someone else’s name on it.
Kozody concluded that the taxi driver was a fraudster who, during the debit card transaction, recorded her PIN, stole her card and handed her back a fake.
“I started freaking out,” she said. “It’s terrifying when they have your debit card.”
It took Kozody about two weeks to get her money back from her bank, and she’s still rattled by the experience.
The day after taking what she thought was a ride in a taxi, Kathryn Kozody of Calgary found out someone had withdrawn almost $2,000 from her bank account. (James Young/CBC News)
“It really felt like an invasion of privacy and a violation to be a victim of this scam,” she said. “I really don’t want it to happen to anybody else.”
The taxi scam isn’t new; Toronto and Montreal have been seeing it for years. But the crime is becoming more widespread.
This summer, police in Calgary,Edmonton and at least five cities in southern Ontario, including Kingston and Ottawa, posted warnings online that they had received multiple reports of the scam.
Police and the Canadian Taxi Association say the fraudsters have a helping hand: with the click of a button, they can purchase a generic — but official looking — taxi roof sign on e-commerce sites like Amazon.
Edmonton Police posted this alert on Facebook in July, warning people about an ongoing taxi scam. The city’s police department says that it received about 10 reports of the scam that month. (Edmonton Police/Facebook )
“They do have a moral responsibility to at least sell the signs to individuals that are properly licensed,” said association president Marc André Way.
However, the U.S.-based company continues to sell the product to all customers.
“These lights are legal to sell in Canada,” Amazon told CBC News in an email.
‘Eye-popping’ numbers
The taxi scam has several variations but typically ends the same way: the victim pays with a debit card, then the scammer secretly steals it and hands the victim a similar but fake card. Shortly thereafter, money disappears from the victim’s account.
Ron Hansen, deputy chief of police in Sarnia, Ont., said his department received 12 reports of the scam in July, with one victim losing $9,900.
Toronto police report that since June 2023 the department has received 919 reports of the taxi scam, totalling $1.7 million in losses.
Jessica Chin King of Toronto said after a recent cab ride, she got a suspicious activity alert from her bank. She learned $600 had been withdrawn from her account. (Craig Chivers/CBC)
The numbers are “eye-popping,” said Toronto police detective David Coffey.
“When they do get a victim, they are quick to go right into the bank accounts. They’re quick to empty them out.”
Jessica Chin King of Toronto said just 15 minutes after a recent cab ride, she got a suspicious activity alert from her bank. Turns out, $600 had been withdrawn from her account.
“I was like, ‘Wow, I can’t believe that just happened.’ I was in shock,” said Chin King, whose bank later reimbursed the cash.
She said she too was fooled by the taxi sign atop the car.
“I was in the car with somebody who wasn’t a taxi driver. Anything could have happened,” she said. “I was thankful that it was only my bank [account] that was compromised.”
Taxi light for $35 on Amazon
CBC News bought a taxi sign from Amazon for $35. It has a magnetic strip on the bottom, so it easily sticks to the top of a car.
To power the light, an attached wire can be run through the driver’s window and plugged into the car’s auxiliary power outlet, also known as the cigarette lighter outlet.
The taxi association says licensed taxi drivers typically get their roof signs from speciality suppliers, and they are hardwired to the car — not powered via the cigarette lighter.
“When you see that … it’s obvious that it’s not a legitimate taxi,” said Way, the association president.
“This is not a safe, practical way to distribute the trusted ‘Taxi’ signs,” he wrote.
CBC News ordered this $35 taxi sign on Amazon. The attached wire can be run through the driver’s window and plugged into the car’s auxiliary power outlet, while the lights for licensed drivers are hardwired into the vehicle. (Sophia Harris/CBC News)
But Amazon told Way — and CBC News — the signs will remain on its site, because the company isn’t breaking any rules.
“It’s going to be quite difficult, I think, for anyone to stop Amazon from selling a product that is perfectly legal to sell,” said Toronto criminal lawyer, Daniel Goldbloom. “It’s true that these taxi signs can be used to commit scams, but kitchen knives can be used to commit murder — and we don’t stop retailers from selling those.”
But Way isn’t giving up hope.
He says the taxi association also plans to ask other online retailers, such as Temu and eBay, to stop selling the taxi signs and will lobby provincial governments for legislation that regulates the sale of the product.
However, Coffey said he believes the best way to fight the taxi scam is to educate people about it.
“Never, never give another person control of your debit card,” the detective said.
Victims Chin King and Kozody also want to spread the word.
“The more people know, the less likely it is to happen again to somebody else,” Kozody said.
