Impressions from Shanghai

This has been a busy 10-days in Shanghai. With the exception of Saturday evening, each evening was filled with dinners and typically I had meetings during the day as well. Rather than describing each day individually I figured I jot down some of my overall impressions to make it less boring.

Shanghai is about making money. This is probably an over-simplification but everyone I talked to was either in the process of setting up a new company or already running a company. Some of these are startups, others are 10-year-old established businesses with 30+ employees. It was fascinating to listen to these folks. They were all looking for my feedback, new ideas and in some cases, they wanted me to join.

Most of folks I talked to, but not all, were in the semiconductor business. There is a semiconductor boom in China, all fueled by the geopolitical conflict started by the previous and continued by the current administration. What was clear last time I visited, China wants to become self-sufficient, is now in full overdrive. Folks are investing heavily in storage, networking, SOC’s, CPUs (mostly ARM and RiscV), synthesis tools, foundries, etc. This boom is in part made possible by the US when they put Huawei onto the entity list.

Let me explain. What I was afraid of has come to fruition. Huawei through its subsidiary HiSilicon had done an amazing job over the last 10-years in attracting the best semiconductor talent that China had available. The result of this was that all the semiconductor expertise was concentrated in a single company. There weren’t many companies that could even come close to Huawei’s expertise and execution capabilities. However, because Huawei is now on the entity list it can no longer manufacture its products with TSMC, Samsung or others. I get the impression that Huawei is running on fumes and rapidly depleting its inventory with no immediate path to producing more products.

This makes Huawei a less exciting place to work. Many of its experts have left Huawei/Hisilicon. Some moved to other large companies (Alibaba, Baidu, Tencent), but many started their own companies. Where the semiconductor knowledge used to be contained to a single company, Huawei, it has now blossomed all over China. So, while putting Huawei on the exception list was a temporary setback for China, the net effect is that the knowledge has now been spread all over the country and where it matures much faster than what it would have done inside a single company.

Talking about Huawei, I still have some friends who work for Huawei, and I had dinner with one of them last Monday. This is tricky because according to my company’s Legal guidance I can meet Huawei employees on a personal basis, but I cannot discuss technology with them. Now in this case my friend is in sales, so the probability of us exchanging technical information is pretty low but I’m still very conscious of the situation. In this particular case we decided to have dinner in a German biergarten (this wasn’t the first biergarten I visited this week, they are popular in Shanghai) and we talked about each other’s families, jobs, the situation in the world today and how much had changed since we last met. During dinner I couldn’t help but notice that there was a Caucasian man sitting by himself, drinking beer, and fiddling with his phone in direct line of sight of us (40ft or so) the whole time we were there. It’s probably my imagination that’s playing tricks on me, but I couldn’t entirely dismiss the idea that someone was recording our conversation. It made me even more conscious of the situation.

The view from my restaurant during the last night in Shanghai.

Apart from being worried that I’m spied upon, I also hung out with a rather vibrant expat community. Some of these folks have been in China for 15-years and built quite a diverse set of companies. Naively I assumed, as is the case in the US, that these folks were fully integrated in China and preparing to stay. Nothing could be further from the truth. None of these folks were in China on a permanent resident visa. Instead, they were on a 5-year work visa that is renewed every 5-years. As part of this renewal process, they have to leave China for 1 full month. Nobody can explain why, China probably wants to remind folks that they are not part of China and never will be. 

UPDATE: In Beijing someone explained to me why expats are leaving China for 1 full month every 5 years. Not unsurprisingly, its a tax thing. If you leave for a month every five years then you are only taxed for your income in China, not your world-wide income.

By the time you are 62 China stops renewing your visa and you will have to leave the country. It is possible to get an extension but that’s on a year-by-year basis. They described a particular case to me of a 70-year-old who had spent most of his working life in China but now had to leave because his visa was not renewed. An added complication was that this person in question had to sell his house in Beijing (if I remember correctly). While this added up to a nice retirement sum, about $20M, he couldn’t get his money out of China, so he was stuck for his retirement.

It’s interesting to compare this approach to importing foreign expertise with the USA. The USA is very welcoming to top talent, and it promotes folks to integrate and become part of the society and stay. China wants to attract top talent but doesn’t really want them to become part of their society or stay.

Of course, it’s important to keep in mind that my sample size of expats is really small. I actually know one person who did get a China permanent resident status but it’s also notoriously hard to get.

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