China's New Supercomputer Means Business

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China's New Supercomputer Means Business President Obama appeared jointly with Australia's prime minister at a press conference Wednesday. Announcing the deployment of 2,500 Marines to Australia, the president said the troops are coming to help "maintain the security architecture in the region."

The backstory here is pretty clear: The U.S. is responding "in the region" by sending troops to counterbalance a strengthening, and often bellicose, China. Yet when reporters pointed out the obvious to him, the president responded: "The notion that we fear China is mistaken."

But maybe we should fear China, at least just a little bit.

The Real Red Threat to the U.S.

No one is saying a Chinese invasion of the U.S. Pacific Coast (or Australia or even Taiwan) is imminent. Nor is this about China's oft-reported (and even more oft-denied) participation in the epidemic of computer hacking that is making U.S. government and corporate firewalls look like so much electronic Swiss cheese.

But America does owe China the kind of wary consideration that any economic actor should accord to a savvy, aggressive rival. Because even if China owned not one tank, missile, or stealth fighter jet, this country would still be a threat to America's economic dominance.

It was just a few months ago that China made a major push to join the U.S. as a "space power" when it launched the Tiangong 1 space station module into Earth orbit. Earlier this month, the country took a second step into space when it successfully launched and then docked a Shenzhou 8 spacecraft with the new station. And though not currently habitable, this rump space station is considered the first step in China's launching a wholly Chinese-owned rival to the International Space Station.

China's race to space is the story grabbing all the headlines these days. But if you ask me, it's China's down-to-earth move into semiconductor country that should worry investors most.

Coming to a Laptop Near You: Supercomputer Parts

In 2010, China shocked the world with the news that this still-industrializing country had just built the world's fastest supercomputer. Then last month, China released news that was even more significant: It just finished building a Sunway BlueLight MPP supercomputer that, although not the world's fastest, is built entirely from domestically produced parts.

Last year, China needed help from Intel (INTC) to give its Tianhe-1A supercomputer a bit of Western-tech oomph. This time The Chinese did it all on their own. Not a single Intel or Advanced Micro Devices (AMD) chip went into the Sunway. Instead, the Sunway uses domestically invented and produced ShenWei SW-3 chips -- 8,700 of the buggers, which, when linked together, are capable of performing 1,000 trillion calculations per second.

Since this new Sunway is not the world's fastest supercomputer -- it doesn't even break into the top 10 -- a lot of investors are going to write off China's announcement as interesting but irrelevant.

That would be a mistake.

Sure, supercomputing these days is more about bragging rights than about big business. IBM (IBM) has basically exited the supercomputing business, abandoning it to the likes of Cray (CRAY).

But what about the rest of us?

Bragging rights aside, the real import of China's Sunway announcement doesn't just concern supercomputers, but rather the humble desktop or laptop PC that you're probably reading this column on.

If China can build homegrown chips powerful enough, and reliable enough, to outfit even a welterweight "super" computer, then what's to prevent it from building chips powerful enough, reliable enough, and cheap enough to totally destroy the market share of Intel and AMD? China already does the assembly on 110% (it sometimes seems) of American PCs, after all. How much longer will it be before the perpetually profit-margin-starved Hewlett-Packard (HPQ) and Dell (DELL) -- I assume Lenovo is a foregone conclusion -- begin scarfing up cheap chips for their comps from China?

Motley Fool contributor Rich Smith holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of IBM and Intel and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Dell and Intel, and creating a bull call spread position in Intel.



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wfreeberg

Everyone talks about China stealing this and that and it may have been true in the past. As to the current situation; China is pumping out more scientists, engineers, and designers than we are. We might have been great once but they are gaining and passing us. Thier young go to the university to learn, ours go for the parties. My kids teach a major universities and they are disturbed by lack of focus and commitment the students from the USA have.

November 22 2011 at 7:26 AM Report abuse rate up rate down Reply
joe

If the U.S. went to war with Lichtenstein, the U.S. would slaughter them. Why? Because:
1. The U.S. is a physically larger country with many more resources.
2. The U.S. has far more people.
3. The U.S. has (had) far more cash to power their military machine.

If China went to war against the U.S.
1. China is a physically larger country with many more resources.
2. China has far more people.
3. China has WAAAYYY more cash than the U.S., and so could buy up ALL of U.S. armsmakers and/or build their own!
...yeah, be nervous.

November 22 2011 at 3:33 AM Report abuse rate up rate down Reply
drshnrob

i read an article they are going to build a economic free zone 60 square miles in idaho

November 22 2011 at 2:18 AM Report abuse rate up rate down Reply
schnellsalem

Stop buying stuff made in China !!!!!!!!!!

November 22 2011 at 12:29 AM Report abuse rate up rate down Reply
Richard

In 1996, President Bill Clinton personally signed an executive order transferring control of satellite technology to the Department of Commerce; thus releasing restraints on a wide variety of sophisticated space and missile technology which were then exported to China. ALSO...The Washington Times is reporting …“ President Obama recently shifted authority for approving sales to China of missile and space technology from the White House to the Commerce Department -- a move critics say will loosen export controls and potentially benefit Chinese missile development.” President Obama issued a little-noticed ‘presidential determination’ Sept. 29 that delegated authority for determining whether missile and space exports should be approved for China to Commerce Secretary Gary Locke.” “The presidential notice alters a key provision of the 1999 Defense Authorization Act that required that the president notify Congress whether a transfer of missile and space technology to China would harm the U.S. space-launch industry or help China's missile programs. “The law was passed after a late-1990s scandal involving the U.S. companies Space Systems/Loral and Hughes Electronics Corp.”

“Both companies improperly shared technology with China and were fined $20 million and $32 million, respectively, by the State Department after a U.S. government investigation concluded that their know-how was used to improve China's long-range nuclear missiles.”

November 22 2011 at 12:04 AM Report abuse rate up rate down Reply
1 reply to Richard's comment
M

A little backstory on the Space Systems/Loral and Hughes Electronics Corp. business --- they needed to get some commercial sattelites launched, and the Space Shuttle fleet was grounded at that time. More than a couple of consecutive Air Force launches from California had failed on the semi-retired Delta(?) boosters, destroying their payloads. The U.S. had no viable boosters for commercial sattelite launches available, and apparently the French and the Russians were fully booked.
To get their sattelites placed in the proper orbit, those companies "tweaked" the Chinese boosters, knowing it was necessary for success --- those "tweaks" applied to any missile launch systems, including military uses.

Further back, one of the national TV news shows (Sixty Minutes maybe?) interviewed a middle aged Russian university graduate student in the U.S.. The interview was about secret nuclear technology making its way to the Soviet Union, and after confirming he was taking nuclear physics courses, the interviewer plainly asked the man if he was a Soviet spy. The man's reply was a non-denial along the lines of would-you-know-if-I-was?
This predated the Chernobyl power plant incident as I remember it, so no sympathy points for that...

It is amazing how money gives access to so many things.
The Loral/Hughes business *may* have been along the lines of "The Bridge On the River Kwai" where the bigger picture was forgotten/overlooked, as British POW's were forced to build bridges for enemy military use. The Russian grad student was probably paying out-of-state tuition rates too.

If the Chinese have already docked with an orbiting space station, I would guess they have everything they need in space and missle technology.

For those readers young enough to not have read about the Apollo moon landings, the basic $1.00 four-function hand calculator is more powerful than the computers that planned and carried out those launches, landings, and returns. Imagine what a current-day supercomputers can accomplish.

November 22 2011 at 5:21 AM Report abuse rate up rate down Reply
stjohn1701d

Better learn to speak chinese.

November 21 2011 at 11:54 PM Report abuse rate up rate down Reply
1 reply to stjohn1701d's comment
alfredschrader

Chinglish ?

November 22 2011 at 5:48 AM Report abuse rate up rate down Reply
Richard

The U.S is not sending troops to Australia just because of Chinas super computer technology and hacking capabilities, something more than that is behind this troop deployment. What that reason is is anyones guess, but something is definitely brewing that this government is not telling us. These are dangerous times in a dangerous world. China is no friend to the U.S and has its sights set on being the number one military power in the world. God help us if that happens.

November 21 2011 at 11:32 PM Report abuse rate up rate down Reply
Benjamin Willis

People keep saying how great China is. China steals technology and copy righted material, manipulates its currency, under pays it's people, making them work in condition that are dangerous and so physically stressful that many go insane or kill themselves.China cheats to win., but China plays to win. America plays to be competitive. "We must be competitive....Competition is good" Play to win, or don't play at all. China knows this. Doing any thing just to compete and you always finish last or second. American global corporations are mercenaries selling out America at ever opportunity.Cold war America played to win. We lead then.

November 21 2011 at 10:24 PM Report abuse rate up rate down Reply
1 reply to Benjamin Willis's comment
tony

I sure the f dont say that.

November 22 2011 at 3:53 AM Report abuse rate up rate down Reply
wstrvlr

Some mentioned the Chinese can't invade us. How foolish a thought. They already HAVE started the invasion. One intellectual property after another they have stolen for years! Who do you think the top hacks are? The Chinese, Russian & other easter block countries as well as those out of India & that part of the globe; that's who!

Do any of you folks have a clue as to the value of those intellectual properties that have been hacked from outsourced storage facilities? Many TRILLIONS. Does Tech Wars ring a bell? It's been going on for years & lately the USA is on the losing end of things. These folks are SMART & DANGEROUS.

Any idea what can happen in a country that's being hacked? Power grids can be took down, transportation systems shut down, intelligence facilities fried, satellite craft hijacked, etc. This isn't scifi anymore. It's the present folks.

November 21 2011 at 10:00 PM Report abuse +1 rate up rate down Reply
adika3z

in america still have the best high technology and super computer in the world,
china copy steal from america,
china can give to ussr russia,
never know

November 21 2011 at 9:39 PM Report abuse rate up rate down Reply