> Are you saying that Chinese semiconductor companies are outcompeting US semiconductor companies because they have greater access to capital? That doesn't seem right to me.
Suppose you have two companies in an industry where the start up cost is ten billion dollars. One can borrow ten billion dollars at 0% interest for the next five years, but they have to pay it back. The other just gets ten billion dollars from the government that they can keep.
Obviously the second company has a competitive advantage. The first has to charge higher prices in order to pay back the loan, which they can't do if the second undercuts them in the market.
This has been China's business model for decades. Then once all the competition is out of business they can raise prices to the point of profitability, but not to the point that anyone who hasn't already paid off their fixed costs can enter the market, and use the profits to do the same thing to the next industry.
Suppose you have two companies in an industry where the start up cost is ten billion dollars. One can borrow ten billion dollars at 0% interest for the next five years, but they have to pay it back. The other just gets ten billion dollars from the government that they can keep.
Obviously the second company has a competitive advantage. The first has to charge higher prices in order to pay back the loan, which they can't do if the second undercuts them in the market.
This has been China's business model for decades. Then once all the competition is out of business they can raise prices to the point of profitability, but not to the point that anyone who hasn't already paid off their fixed costs can enter the market, and use the profits to do the same thing to the next industry.