China's New Supercomputer Means Business

China's New Supercomputer Means Business
China's New Supercomputer Means Business

President Obama appeared jointly with Australia's prime minister at a press conference Wednesday. Announcing the deployment of 2,500 Marines to Australia, the president said the troops are coming to help "maintain the security architecture in the region."

The backstory here is pretty clear: The U.S. is responding "in the region" by sending troops to counterbalance a strengthening, and often bellicose, China. Yet when reporters pointed out the obvious to him, the president responded: "The notion that we fear China is mistaken."

But maybe we should fear China, at least just a little bit.

The Real Red Threat to the U.S.

No one is saying a Chinese invasion of the U.S. Pacific Coast (or Australia or even Taiwan) is imminent. Nor is this about China's oft-reported (and even more oft-denied) participation in the epidemic of computer hacking that is making U.S. government and corporate firewalls look like so much electronic Swiss cheese.

But America does owe China the kind of wary consideration that any economic actor should accord to a savvy, aggressive rival. Because even if China owned not one tank, missile, or stealth fighter jet, this country would still be a threat to America's economic dominance.

It was just a few months ago that China made a major push to join the U.S. as a "space power" when it launched the Tiangong 1 space station module into Earth orbit. Earlier this month, the country took a second step into space when it successfully launched and then docked a Shenzhou 8 spacecraft with the new station. And though not currently habitable, this rump space station is considered the first step in China's launching a wholly Chinese-owned rival to the International Space Station.

China's race to space is the story grabbing all the headlines these days. But if you ask me, it's China's down-to-earth move into semiconductor country that should worry investors most.

Coming to a Laptop Near You: Supercomputer Parts

In 2010, China shocked the world with the news that this still-industrializing country had just built the world's fastest supercomputer. Then last month, China released news that was even more significant: It just finished building a Sunway BlueLight MPP supercomputer that, although not the world's fastest, is built entirely from domestically produced parts.

Last year, China needed help from Intel (INTC) to give its Tianhe-1A supercomputer a bit of Western-tech oomph. This time The Chinese did it all on their own. Not a single Intel or Advanced Micro Devices (AMD) chip went into the Sunway. Instead, the Sunway uses domestically invented and produced ShenWei SW-3 chips -- 8,700 of the buggers, which, when linked together, are capable of performing 1,000 trillion calculations per second.

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Since this new Sunway is not the world's fastest supercomputer -- it doesn't even break into the top 10 -- a lot of investors are going to write off China's announcement as interesting but irrelevant.

That would be a mistake.

Sure, supercomputing these days is more about bragging rights than about big business. IBM (IBM) has basically exited the supercomputing business, abandoning it to the likes of Cray (CRAY).

But what about the rest of us?

Bragging rights aside, the real import of China's Sunway announcement doesn't just concern supercomputers, but rather the humble desktop or laptop PC that you're probably reading this column on.

If China can build homegrown chips powerful enough, and reliable enough, to outfit even a welterweight "super" computer, then what's to prevent it from building chips powerful enough, reliable enough, and cheap enough to totally destroy the market share of Intel and AMD? China already does the assembly on 110% (it sometimes seems) of American PCs, after all. How much longer will it be before the perpetually profit-margin-starved Hewlett-Packard (HPQ) and Dell (DELL) -- I assume Lenovo is a foregone conclusion -- begin scarfing up cheap chips for their comps from China?

Motley Fool contributor Rich Smith holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of IBM and Intel and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Dell and Intel, and creating a bull call spread position in Intel.

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