#56 Data Flows and Liberty, China's Chip Challenge, An Indian Path to Nuclear Power
What the Digital Personal Data Protection Bill says about sharing your data across borders, China Tries to Swing a Blow in the Chip War, Why India is Turning to Nuclear Power.
Cyberpolitik: Can you Control Data Flows?
— Bharath Reddy
The Digital Personal Data Protection Bill (DPDPB) 2023, places restrictions on the transfer of personal data to specific countries, as determined by the union government through notification. This implies that cross-border data flow should be permitted to all other countries without constraints.
While this marks a positive development in the bill's evolution, there still needs to be more clarity regarding which countries are subject to these restrictions and the factors influencing such decisions. This clarity is essential for data fiduciaries, allowing them to plan long-term. While waiting for the notification, examining the evolution of data localisation legislation in recent years is instructive.
The 2022 Draft bill adopted a different approach by creating an "allow-list" of countries instead of a "block list." As with the bill's current version, the criteria for inclusion in this "allow-list" were to be specified by a Central Government notification. In contrast, the 2019 Draft Bill required some sensitive data categories to be transferred only to jurisdictions that guarantee adequate data protection and do not impede law enforcement's access to the data. It also included alternative measures for suspending cross-border data flow. Thus, it is safe to say that we have made significant progress compared to previous iterations of the bill.
Additionally, certain specific data localisation requirements are applicable to various sectors. For instance, the Reserve Bank of India mandates that all system providers handling payment systems must store their data exclusively within India, with limited exceptions for foreign transactions. Telecom operators, under their license agreements, are prohibited from transferring subscriber data abroad, except in cases of international roaming or billing requirements. Additionally, the Ministry of Corporate Affairs necessitates the maintenance of a local copy of accounting records.
In their paper, Rishab Bailey and Smriti Parsheera effectively categorise the primary concerns regarding data localisation into three overarching areas:
The Civil Liberties perspective encompasses the right to privacy, domestic and foreign surveillance, and freedom of speech and expression.
The Government Functions perspective covers aspects such as the effectiveness of law enforcement, ensuring tax compliance, and other such considerations.
The Economic perspective involves factors like the expenses associated with maintaining local data centres, the readiness of data centre infrastructure, and the ongoing discussions surrounding data localisation within free trade agreements.
Looking back, the evolution of data localisation provisions offers valuable insights into the intricate interplay of diverse interests, encompassing domestic and international markets, governments, and society.
Matsyanyaaya: Has China Made Gains in the 'Chip War'?
— Josiah Neal
Recent developments have had political leaders, investors, and analysts rushing to reassess the relative positions of China and the US in ongoing efforts to securitise their semiconductor industries.
The release of the Huawei Mate 60 Pro smartphone, as evidence of Chinese technological capability, surprised experts and raised questions about the country's domestic semiconductor microchip industry. Perhaps conveniently timed, reports emerged that the CCP had instructed central government officials not to use iPhones at work.
These changes have resulted in questions about China's production capacity and the effectiveness of US-led sanctions on hindering its access to the inputs required to make cutting-edge chips.
Huawei Mate 60 Pro Release
China's foremost smartphone manufacturer, Huawei, debuted its new Mate 60 Pro, which Chinese state media have pointed to as evidence that US attempts to curtail Chinese microchip development are failing. The Global Times highlighted its release coincided with US Commerce Secretary Gina Raimondo's visit and claimed the US' "extreme crackdown" had failed.
Ottowa-based TechInsights published the findings of its teardown of the device. It reported that the Mate 60 Pro is the first Huawei with a seven nanometre (nm) chip and 5G capability. The processor is a proprietary Kirin 9000s chip manufactured by China's top contract chipmaker, Semiconductor Manufacturing International Corporation (SMIC).
For many, this was a shock. Chips under 14nm are produced using extreme ultraviolet (EUV) lithography machines, and the sole supplier, Netherlands-based ASML, agreed with the US to stop selling them to China. Huawei's global market competitiveness plummeted once it exhausted its stockpile of 7nm chips and has been unable to compete with the likes of Apple and Samsung. The Mate 60 Pro suggests China has circumvented this and can produce these advanced chips.
According to TechInsights, Huawei and SMIC likely produced them by tweaking a deep ultraviolet (DUV) lithography machine, which it can still purchase from ASML. This process, however, would have a significantly lower yield than the wafers produced with EUV lithography. Huawei, supported by its domestic market dominance and generous government subsidies, is willing to absorb this added cost.
Chinese Government Bans iPhones
The Wall Street Journal reported that a Chinese government directive to officials banned them from using iPhones and phones from other foreign firms at work. Bloomberg further suggested the ban might include government-backed agencies and state-owned enterprises employees. The news spooked investors – Apple's market cap dropped by $200m – based on fears it would affect sales in a primary market.
Some analysts see these fears as a disproportionate reaction, given Apple is predicted to sell 45 million new iPhones in China next year. Many government employees would not have used foreign phones already, so the impact on Apple's sales will be minimal. First estimates predict the ban might decrease sales by 500,000 units, or 1.1%. The ban is unlikely to be widened so that it affects Apple's margins, given that the trillion-dollar company directly employs 1 million Chinese and another 4 million indirectly. The CCP would want to avoid encouraging Apple's departure from China as a manufacturing hub, which could catalyse a mass exodus of foreign companies.
Nano Battles in a Chip War
Geopolitics is a longer game than stock trading, and there is doubt this move will have long-term negative implications in the West. The US and China view the other's tech companies as potential security risks for sensitive government data and infrastructure (e.g., TikTok and iPhones).
The Huawei release has triggered conversations in Washington DC about tightening sanctions on China, including preventing ASML from selling DUV lithography machines, suspected as the source of their newfound production capability. Remember: ASML already refuses to sell the most advanced machines (EUV) to China.
The iPhone ban spooked business leaders as concerns increased that China is becoming "uninvestable", to quote US Commerce Secretary Raimondo. Recent CCP actions, including police raids on foreign firms, new amendments to anti-espionage laws, intellectual property theft, regulatory issues, and discrimination towards domestic producers, have made foreign firms question their future there. Based on the most recent economic data, China should not be alienating foreign investors and producers.
The Outlook
The Huawei Mate 60 Pro's release demonstrates China has the determination and potentially the technological know-how to sidestep these sanctions. Its ban on iPhones codifies existing precautions, but the decision may be partly motivated by newfound confidence in its domestic technological capability.
These developments will soon be lost amidst the constant salvos between the US and China in this 'chip war'. China's domestic capability has proven resilient, and some might consider Western sanctions as the catalyst behind its determination to improve its production. We can expect the US and allies to explore sanctions to further hinder China's ability to develop advanced semiconductor chips. It remains to be seen if these will prevent China from producing cutting-edge chips for use in Huawei phones and many other civilian and military, applications.
Fission Factor #1: India's Gradual Turn to Nuclear Power
— Saurabh Todi
Unit-3 of the Kakrapar Nuclear Power Plant recently reached full capacity, which is India's largest self-designed reactor and reflects the country's commitment to expanding nuclear power generation capacity. Recent announcements of collaborations in advanced nuclear technologies, such as Small Modular Reactors and Advanced Modular Reactors with the US and France, underscore this commitment.
However, nuclear energy constitutes just 1.6% of India's energy mix, while fossil fuels dominate at 57%, and renewables and hydropower contribute 41%. With India's power demand expected to double by 2030, this discrepancy poses a critical challenge. The global resurgence of nuclear power, driven by energy cost spikes following the Ukraine conflict, presents an opportunity. Technological innovations like small modular reactors (SMRs) promise enhanced safety and economics.
To harness this momentum, India must signal commitment and implement reforms. Encouraging private companies to join state-owned entities in nuclear ventures will attract investment, foster innovation, and relieve the government's financial burden. Foreign investment in the emerging nuclear technology field, especially for SMR technology, should be explored for collaboration and innovation.
To achieve its 2070 net-zero emissions goal, India must significantly expand its nuclear power capacity. Addressing policy obstacles will improve public and investor sentiment. Nuclear energy offers a low-carbon, reliable solution to meet India's surging energy demands, support economic growth, and enhance energy security, making it a vital component of India's energy strategy.
Read my recent op-ed on this issue in Nikkei Asia
Fission Factor #2: Why We Can't Wish Away Nuclear Power
— Aditya Ramanathan
While Saurabh's article above lays out a viable roadmap for how India can expand nuclear power generation, I'll address a more fundamental question: Do we really need fission from atoms to keep the lights on?
Consider the stats. Before the COVID-19 pandemic, the International Energy Agency projected India's overall energy demand would rise by nearly 50% between 2019 and 2030. India could expand its use of fossil fuels or renewables to meet that demand, but both present challenges. Much of India's coal reserves have high ash content and poor calorific value, while importing coal is expensive. Coal-fired plants are also strongly associated with low air quality, respiratory diseases, and carbon dioxide emissions that contribute to climate change.
India's solar and wind power programmes have experienced considerable success. However, both energy sources are land-hungry in a country where real estate is precious. A 2021 study concluded that for India to achieve net zero emissions through renewables by 2050, it would have to dedicate up to 75,000 square kilometres of land to solar energy and another 20,000 square kilometres to wind energy, an area roughly equal to the entire state of Bihar. Besides heavy land use, the inherent variability in solar and wind power means that electric grids will require some cheap and efficient form of energy storage that is not yet technologically within reach. The alternative, then, is to have backup plants that are either coal-fired or nuclear.
This is where the promise of nuclear energy becomes evident. No other existing power source can match thermal power's baseload reliability while simultaneously producing zero carbon emissions. However, fear of accidents has hobbled efforts to build more nuclear power plants.
This resistance to nuclear energy has only increased since the 2011 Fukushima disaster. Yet, the wider public barely understands what actually happened at Fukushima.
While the 2011 earthquake and tsunami in Japan killed more than 20,000 and caused immense suffering, the Fukushima nuclear accident caused no immediate fatalities. In 2018, the Japanese government recognised one worker had died of lung cancer attributable to radiation exposure. However, it is also important to remember that while the three reactors at Fukushima were affected, another eight reactors operating in the region shut down and remained safe.
None of this takes away from the seriousness of the Fukushima disaster, but it does put it in perspective. After all, coal-based power can be much deadlier. One study concluded that 78,000 deaths in India in 2018 were attributable to coal-fired plants. On the other hand, nuclear reactors have become safer over the decades. Many newer reactors have safety features such as passive cooling systems and 'core catchers' that will contain a reactor core during a meltdown.
In India, safety concerns and the traumatic memory of the 1984 Bhopal gas disaster have understandably slowed the adoption of nuclear power. But we'll have to learn to manage the risks rather than wish them away.
What We're Reading (or Listening to)
[Opinion] The signals from this 'Made in China' smartphone story by Amit Kumar.
[Report] Leveraging Commercial Space Services: Opportunities and Risks for the Department of the Air Force by Jonathan P. Wong, Yool Kim, Krista Langeland, et al. RAND Corporation.
[Podcast] Why should we go back to the moon? | TechTank Podcast. Brookings Institution.