<div id="readability-page-1"><div><div><div><div>Giving businesses the freedom to do their thing while we maintain national security is much more difficult than it looks. Two stories from last week show how much harder.For two decades now, the jewels of our industry have been vanishing or turning red. In their different ways, iRobot and ASML shed light on a crisis no one really wants to acknowledge.Last week, iRobot filed for bankruptcy and was immediately acquired by Picea Robotics, its China-based contract manufacturer. You may know iRobot for its Roomba vacuum cleaner, launched in 2002. But that’s only a part of the iRobot story.The company was established in 1990 by a trio of MIT alumni, including Rodney Brooks – probably the US’s best known roboticist.iRobot was DARPA’s choice for a tactical military robot in 1998, and its defence and industrial work was its mainstay for years, even as the Roomba took off.The company’s machines were called on in emergencies – navigating the rubble of 9/11, and the Deepwater Horizon spill almost a decade later.This combination of industrial, consumer and research contracts seemed like a perfect fit.In Germany, which has a less voracious financial sector, it would have been permitted to continue to excel at all three. But Wall Street didn’t like it one bit.A hedge fund called Red Mountain Capital told iRobot chairman and co-founder Colin Angle he was spending too much on research and development (R&amp;D).The fund wanted the cash to go on share buybacks instead.Red Mountain called iRobot’s VC investments an “egregious and abusive use of shareholder capital”.Therefore, iRobot reluctantly sold off its defence and industrial businesses to a private equity firm in 2016.Now it had to go head to head with better capitalised rivals in the brutal consumer market, where forging a distribution channel is difficult and expensive.A sure sign that iRobot had hollowed itself out was when it assigned the design to a Chinese contract manufacturer.One reviewer last year reported that Roombas now “looked like much of the midrange competition: a generic, lidar-based robot vac with the Roomba name and a few design tweaks plastered on”. The models tested had “significant issues”.So the iRobot’s story was an emblematic one: the West was denuding itself of industrial capacity.The other startling news last week was that China will be producing chips comparable to the most advanced Western microprocessors years sooner than anyone predicted.Today, the chips with the highest performance are produced by just one Dutch equipment maker, ASML.Trying to recreate its cutting-edge extreme ultraviolet (EUV) lithography has been compared to the Manhattan Project to create the first atomic bomb.In April ASML’s chairman insisted parity would take “years and years” to achieve.However, Reuters reported that China has now reverse engineered the techniques and is on course to achieve it by 2030.It did so with the aid of “recently retired, Chinese-born former ASML engineers and scientists”.I shall leave aside the argument over whether this actually matters as much as some insist.Possibly far more consequential is that we built the wrong artificial intelligence (AI), drunk on Davos talk of productivity miracles. Your pension pot may well soon reflect this generational error.The fact is, ASML’s EUV was perceived to matter a great deal, and, like the cutting-edge Nvidia chips, was the subject of embargoes.Arrests have been made for allegedly smuggling Nvidia chips into China. It’s akin to treason.But, hang on a second. Why are we prohibiting the sale of confectionery manufacturing equipment to our superpower adversary, when we just sell them the sweets directly? Because that’s exactly what’s happened.For years the US semiconductor industry has lobbied against embargoes.ASML fought the sanctions too, arguing China’s defence sector didn’t need the latest and greatest chips.But this month, the Silicon Valley venture capitalist David Sacks and Trump’s AI tsar has succeeded in punching holes in the Nvidia embargo too in an astonishing turn of events.Sales of Nvidia’s H200 chips to China will resume, and the US government will retain a 25pc cut.Sacks’ argument is that direct sales to China will disincentivise home-grown technology. Some chance of that.China wants something, and thanks to the greed and short-sightedness of the tech sector it will get it.The moral of iRobot’s story is that Wall Street hates R&amp;D and prefers financial engineering to the real thing.The moral of the semiconductor story is that it’s Silicon Valley greed that runs foreign policy, not the state department.Denuding the West of vital industrial capacity to appease financial interests has been going on for years.A Pentagon report in 2021 warned that concentrated supply chains, offshoring and a “business climate that has favoured short-term shareholder earnings” had all “severely damaged” America’s ability to arm itself.Suppliers went from two to one to none, in critical defence sectors ranging from milling to chemicals.It’s what Karl Marx identified when he predicted, “the last capitalist we hang shall be the one who sold us the rope”.He was saying that greedy businessmen can’t resist a deal, even if it’s a deal that ultimately kills them.Alas, the modern, monopoly-friendly, globalist version of capitalism has left us in the same spot. A war with any adversary will be very short indeed.</div></div></div></div></div>

IRBTQ

IRBT

The article highlights the West's delayed response to China's technological threat, exemplified by iRobot's bankruptcy and acquisition by a Chinese firm, and China's rapid progress in microprocessor technology. It criticizes Wall Street's preference for financial engineering over R&D and Silicon Valley's influence on foreign policy, warning of the West's diminishing industrial capacity and its consequences for national security.

The West has woken up to China’s threat far too late