Battle of chipmakers results in a big loser

If China chooses to ignore this fine, the US may just choose to ignore its financial obligations to China's bonds... Which would hurt more, do you think?

How much would it hurt if China converted all of its reserves in dollars to something else? Would it be enough?

If the US ignored its bonds that China holds, they couldn't be converted to anything because they'd be worthless right? Granted, this would be an extreme step that would probably destabilize the world's economy to a great extent. However, that's politics: if you ignore obligations, others obligations to you may be ignored.

The fine will be ignored by the Chinese as China has no interest in losing their chipmaking capability.
In the US, Obama will suck it up and not do a thing, since the US is over a trillion in debt to China.
In the meantime, EU and US consumers and companies will continue to non-stop buy good old pirated, stolen, dangerous, pet-killing, fake, unreliable, poorly made Chinese junk. Why? BECAUSE IT'S CHEAP.
Suckers and politicians, now there's an unholy mix!

cheap chinese goods used to break but these days i find they just keep working and they are still cheap to buy. look at mp3 players for example - "brand x" player from china costs little to buy and just keeps working. why buy an expensive variant?

is this an anti-capitalism venture perhaps?

The US no longer has the economic power to impose anything on China. China has so much of US business under its control that it should be frightening.
There will be a secret negotiation involving people and problems we've never heard of, and the press will tell us that a solution has been found, move along, nothing more to see here.

Its always amusing to see people react from fear. Yes, China is a growing economic powerhouse but not without cost. They've externalized many of their cost, in the forms of weak labor laws, environmental laws, etc., which they'll have to deal with at some point.
China is not some monster that is going to swallow the west.

Give me a break about China. China grows fast, but is relatively hollow when it comes to equity. The average Chinese citizen is poor, which means the country relies mostly on exports to provide for its economy, rather than domestic industries that can operate internally. When the importers are looking more inwards due to recession or whatnot, the factories close and people are out of jobs.

China has also enjoyed a lot of success by pegging its yuan to the dollar, which artificially kept its value low, and makes their exports more attractive. They only recently unpegged it after a lot of pressure from the US. On the same note, the Chinese buy a lot of US Treasury bonds. It's a terrible investment. Why buy them? It prevents the devaluation of the dollar, which would make exports from China more expensive, which would kill their economy. They need to hide the trade surplus to continue growth--and social stability as a result.

The fact that a chip maker may go out of business because of a fine, and the circumstances surrounding that fine demonstrate just how underdeveloped China's industries are. It also shows how wary other countries are with partnering with China on anything more than basic manufacturing. This contrasts directly with Taiwan, which is a huge player in industry, and trustworthy as well.

For a while people thought that the oil producers were holding all the cards, when really it's just a modern form of colonialism without the need to manage the people of the colony. But what happens when oil is not precious anymore? Or it runs dry? The lack of real substantial domestic industry will cause the country to collapse.

What will happen to the Chinese chip maker? It'll go out of business, and a new business will spring up in its place. Like a bankruptcy, the factories don't magically disappear; the company just changes hands.