Dragoman Digest

Intel split talks signal shift in semiconductor strategy
US chip pioneer’s potential breakup reflects broader industry fragmentation as it struggles to compete in the AI race
US-based Intel’s discussions with Taiwan’s TSMC and compatriot Broadcom about splitting its chip design and manufacturing operations mark a potential end to the industry’s last major IDM. This follows a decades-long industry shift toward specialisation into either chip design or manufacturing. The breakup talks, occurring as the company searches for new leadership after former CEO Pat Gelsinger’s December ouster, would see Broadcom acquiring the chip design business. Meanwhile, a TSMC-led consortium would purchase Intel’s chip fabrication facilities. The discussions come as Intel’s market position has fallen significantly, with the company losing US$150 billion in value – nearly 60 percent of its market capitalisation – since 2021.

Intel’s manufacturing stumbles, particularly its fateful decision to delay adopting crucial next-generation equipment between 2014-2016, saw it cede its manufacturing technology lead to TSMC from 2017. These missteps, combined with its slow pivot to AI-focused chips, has seen it lag further behind TSMC and Samsung in producing cutting edge chips. Irrespective of whether a sale occurs, Intel is already planning to create a specialised and separated manufacturing unit subsidiary with its own board.

Any sale of Intel will face significant regulatory and political hurdles. Intel has been the largest beneficiary of subsidies under the CHIPS Act, having received US$7.9 billion. The receipt of these subsidies was made contingent on Intel maintaining majority ownership of its fabrication facilities. The Trump administration, which has already complained of Taiwan having “stolen” the US semiconductor industry, appears unlikely to support a majority sale. Increasingly politicised immigration restrictions could also complicate TSMC’s ability to deploy its engineers to operate US facilities. These potential obstacles highlight the complex intersection of commercial and national security imperatives that now permeate the semiconductor industry.
 

China impedes industrial diversification and catch-up efforts of key non-Chinese competitors
China will not let its centrality in global supply chains fade without a fight
China is employing formal and informal mechanisms to curtail Western and Asian supply chain diversification efforts. On January 10, China’s Ministry of Commerce proposed restricting the export of lithium iron phosphate (LFP) cathodes – a component used in LFP batteries that are increasingly dominant in EVs. China currently supplies 99 percent of the active materials in LFP cathodes globally. China’s latest initiative comes on top of earlier restrictions on the export of rare earths, tungsten, and tellurium and associated extraction and processing technologies. These formal export restrictions have been paired with informal measures disrupting the flow of technology and expertise out of China. Foxconn, Apple’s primary manufacturing partner, has encountered a growing number of customs delays in dispatching machinery to India. It has also faced significant obstacles in recruiting Chinese technical managers.

These measures are clearly aimed at China’s competitors. India has been unabashed in its ambitions to develop its manufacturing sector and capitalise on China +1 diversification efforts. Apple’s objective to assemble up to 25 percent of its iPhones in India by 2027 is the prize exemplar in these efforts to date. Restrictions on LFP cathodes are directly aimed at South Korean companies. Companies like LG Energy Solutions, Samsung SDI, and SK On previously dominated the EV battery sector. Caught flat footed in the shift to LFP batteries, they are now trying to catch up with China through procuring LFP cathodes and developing technology partnerships with Chinese companies. China’s tech restrictions appear to mirror Western export controls in areas like semiconductors, which are designed to keep China several generations behind the cutting edge.

Leading Chinese companies, including CATL, have not been spared from export restrictions. Under restrictions announced in January, CATL will have to apply for export licenses to deploy its lithium extraction technology at its US$1.4 billion Bolivia project. CATL might also be required to import advanced materials, such as LFP cathodes, from China, rather than sourcing or producing them locally. Beijing will have to strike a balance between allowing Chinese companies to adapt to new global trade realities while keeping as much manufacturing as possible onshore.
 

Mali displays truculent resource nationalism
Mali’s new mining code and coercive measures are part of a broader shift taking place across West Africa
Mali’s Finance Minister Alousseni Sanou announced that Mali is receiving US$1.2 billion of back payments of taxes and additional dividends from mining companies in Q1 after harsher implementation of its 2023 mining code. Mali is one of Africa’s largest gold producers. Gold  accounts for 80 percent of total exports. The country has claimed that it loses US$580 million annually to illicit financial flows and corporate tax avoidance. In August 2023, President Col Assimi Goita, who came into power after a 2021 coup, ratified a new mining code that grants the state a 10 percent stake in mining projects, with the option to acquire an additional 20 percent within the first two years of commercial production. The revised code further stipulates that an additional five percent be ceded to local stakeholders. Investors have raised strong concerns about the ambiguity of the codes, particularly regarding whether it will be applied exclusively to new mining projects, or existing ones also.

In the last few months, Mali has also employed aggressive efforts to crackdown on what it claims is tax avoidance. On January 10, the Malian government seized US$245 million worth of gold from the Loulo-Gounkoto complex, operated by Canada’s Barrick Gold. The seizure related to the Malian government's claims that Barrick owed US$5.5 billion in taxes to the state. Mali has prevented Barrick from shipping gold out of the country since November and detained four mining employees. Around the same time, three executives from Australia’s Resolute Mining were detained for ten days for their alleged failure to pay US$160 million in taxes. These executives were released shortly after Resolute paid half the claim, with commitments to settle the rest.

Mali’s actions are emblematic of a wider regional embrace of resource nationalism across West Africa’s so called “coup belt”. In December 2024, Niger seized French company Orano’s uranium mine. Orano claims that Niger has prevented it from exporting nearly 1150 tonnes of uranium, worth nearly US$210 million. In Burkina Faso, interim leader Ibrahim Traore mused about the prospect of revoking the licenses of foreign companies to increase local participation in the sector. Concurrently, Senegal’s Ministry for Energy and Mines has begun auditing mining, oil, and gas contracts, aiming to “rebalance them” in the “national interest”.
 

Japan doubles down on perovskite solar moonshot
Perovskite technology has genuine potential to dilute China’s chokehold over the solar industry
In late December, Japan announced US$1.5 billion in subsidies to Sekisui Chemical, a key player in the development of perovskite solar film. Perovskite is an ultra-thin, light and flexible next-generation solar technology that could disrupt China’s dominance in the global solar market. Perovskite solar cells offer the potential for mass adoption in urban environments where space for conventional solar farms is limited. This makes them ideal for Japan, which boasts the highest density of solar panels installed globally on flat land on a kilowatt per square kilometre basis. The latest subsidies follow US$400 million in existing state funding which was awarded to Sekisui Chemical in the early stages of perovskite solar development. Sekisui has already deployed prototypes in various locations, including Osaka and Tokyo, and is pushing forward to develop factories capable of producing 100MW per year by 2027.

China controls 85 percent of global solar cell production and 79 percent of the polysilicon market. Polysilicon is the material used in traditional solar panels. Perovskite’s key material is iodine, a chemical primarily supplied by Japan and Chile. Therefore, perovskite production in Japan offers a much more compatible form of supply chain diversification than seen in many other markets. Most PV “factories” in the US assemble panels with largely Chinese content. Challenges will remain in scaling production. Sekisui is still working out how to increase the width of the solar film from 30cm to one metre and is developing methods to fix the panels to different urban surfaces. Once these technical hurdles are overcome, Sekisui is confident that it will be able to manufacture perovskite panels at a cost level that is comparable to traditional panels.


Chinese drugmakers emerge as global biotech innovators
Trial speed and scale emerge as key competitive advantages
China’s biotech sector achieved a significant milestone in September 2024 when Akeso’s experimental cancer drug demonstrated unprecedented efficacy in late-stage trials, nearly doubling the time patients lived without their cancer worsening compared to Merck’s Keytruda. This breakthrough exemplifies China’s growing presence in pharmaceutical innovation, as its firms transition from primarily manufacturing generics to developing novel treatments. The evolution is reflected in licensing trends, with Chinese firms accounting for nearly one-third of large pharmaceutical licensing deals (worth over US$50 million) with Western companies in 2024, a three-fold increase from its 2020 share. In this same time, the total value of drugs licensed from China to Western markets has increased fifteen-fold, reaching US$48 billion.

Growth in Chinese drug development has been enabled by advantages in conducting clinical trials. These include a much lighter touch regulatory system, vast untreated patient population, and strong incentives for cash-strapped hospitals to develop alternative revenue streams. Clinical trials are now progressing up to three times faster than in other markets. This speed, combined with a “fast-follower” strategy of improving existing drugs rather than pursuing novel breakthroughs, has proved particularly attractive for Western pharmaceutical companies.

China’s biotech sector is not without challenges. Private investment hit a seven-year low in 2024 amid a broader biotech market slowdown. Additionally, growing geopolitical obstacles to Chinese companies marketing drugs directly to the US and Europe has enabled Western companies to successfully negotiate lower licensing fees. In response, some Chinese companies have adopted innovative approaches like the “NewCo” model of creating separate US based entities with local management teams. The licensing model has its critics. Certain domestic companies have questioned the merits of selling innovative Chinese drugs on the cheap, arguing for more government support to commercialising promising discoveries.