China and Brazil will sign cooperation agreement on chips – 03/23/2023 – Market

Brazil is going to sign a cooperation and exchange agreement with China in semiconductor technologies, 5G, 6G and the next generations of mobile networks, artificial intelligence and photovoltaic cells (for solar energy generation).

The memoranda of understanding will be signed during the visit of President Luiz Inácio Lula da Silva (PT) to China, next week. The agreements, which involve the Ministry of Science and Technology, the Ministry of Communications and Anatel, provide for training in application development, cloud, internet of things and algorithms in applications for the industry.

All these technologies are sensitive and are at the center of the technological cold war between the United States and China.

In recent months, Washington has several times signaled to members of the Lula government its interest in promoting investments in the semiconductor chain in Brazil.

The Chinese, as part of the package to honor Lula in Beijing, should suggest the possibility of cooperation in semiconductor factories in Brazil, with production aimed at the Brazilian market.

One idea would be to invest in Ceitec (Center of Excellence in Advanced Electronics), the state-owned semiconductor company that went into liquidation under Jair Bolsonaro and that Lula is considering reopening.

China dominates almost half of the world market for the so-called semiconductor backend stage, the finalization – testing, tuning, cutting and encapsulation of components. The country also operates in the frontend, a stage that includes component manufacturing. But the Chinese cannot produce the most advanced chips, whose technology is still a monopoly of Taiwan and Korea.

Today, Brazil has 11 large companies in the semiconductor production chain, but with capacity only in the so-called backend of the chain.

The Brazilian government seeks cooperation in the backend and also partnership for frontend development.

With investment and technology transfer, plants already installed in the country could begin manufacturing less advanced semiconductors and start manufacturing, in the medium term (10 to 15 years), 14-nanometer chips to supply the domestic automobile industry, according to assessment by the Ministry of Development.

According to a member of the Brazilian government who is accompanying the negotiations, the trip will give “impulse” to closer relations with China. This person claims, however, that there is no alignment with China or the US. According to him, Brazil just wants to take advantage of technology development opportunities.

On the trip, Lula will also go to the telecommunications giant Huawei, and should visit the headquarters or meet with the presidents of BYD, maker of electric cars, of State Grid, of energy, and of the builder China Communications Construction Company (CCCC).

During the Jair Bolsonaro (PL) government, the United States pressured Brazil to veto Huawei from supplying equipment to operators competing in the 5G auction, held in 2021.

The Americans argue that Huawei’s networks are unsecure and open to spying, with the company sharing data with the Chinese government. But the Brazilian government resisted and did not exclude the Chinese giant.

Countries such as the United Kingdom, Sweden, Japan, Australia and Canada have imposed restrictions on the company. Washington sanctions also prevent US companies from exporting components to Huawei.

The draft memorandum with the Ministry of Communications contains only the guidelines for the partnership aimed at fifth and sixth generation communication technologies (5G and 6G), as well as cooperation for the development of data protection systems. The action plan will be defined after the signing of the document by technicians from the portfolio and from Anatel.

These were precisely the points that the Bolsonaro government vetoed during the preparations for the 5G auction.

At the time, to avoid postponing the event, the government decided to create a private network for federal public administration bodies without Chinese components, particularly the giant Huawei.

Now, Lula resumes the partnership to advance in the development of technologies common to both countries, both in terms of hardware (telecommunications network equipment) and software (network solutions).

The president is targeting sixth-generation communication (6G), a technology that Huawei has already mastered, with few competitors in Europe.

Lula’s initiative in this area is also a resumption of a cooperation agreement with China initiated by the Michel Temer (MDB) government. In 2017, there was a memo focused on e-commerce. The idea was to create tools to improve security requirements in transactions.

BYD, Tesla’s biggest competitor in the manufacture of electric cars, is in negotiations to buy the Ford factory in Camaçari, Bahia.

CCCC, which already operates in Brazil, is one of the main builders in projects financed by China’s Belt and Road Initiative. Brazil is one of the few countries in Latin America that did not join the project, which promotes infrastructure works. Argentina, Bolivia, Chile, Ecuador, Peru and Uruguay are part of it.

The launch of another CBERS satellite in partnership with the Chinese will also be announced during the trip, which will monitor the Amazon.