The decision by Google, Intel and Qualcomm to freeze cooperation with Huawei could mark the point where the rumbling trade war between the US and China becomes a full-blown tech cold war.
By excluding China from western know-how, the Trump administration has made it clear that the real battle is about which of the two economic superpowers has the technological edge for the next two decades.
It can also be seen as a struggle by the US to curb what one expert calls Beijing’s ability to use technology to achieve geopolitical supremacy.
Headlines about tariffs on steel and aluminium obscured the underlying driver of Washington’s hardline approach in the dispute, which was concern about the loss of intellectual property to China through the so-called “forced transfer” of technology in existing trade arrangements.
Hu Xijin, editor of the Global Times newspaper in China, said the withdrawal of sharing by US tech companies would impact Huawei but would not be fatal because the Chinese firm has been planning for this conflict “for years”.
“Huawei has been seriously working on a back-up plan for many years,” he said in a social media post on Tuesday, adding that the freezing of tech integration would give China the impetus to fully develop its own microchip industry to rival America’s hitherto dominant producers.
“Cutting off technical services to Huawei will be a real turning point in China’s overall research and development and use of domestic chips,” he said. “Chinese people will no longer have any illusions about the steady use of US technology.We are bound to see the gradual decline of US chip companies. China will not be the one that suffers the greatest damage in the long run.”
Huawei’s founder, Ren Zhengfei, said on Tuesday that the Americans were “underestimating” China’s strengths and that the decision would not harm his dream of dominating the global rollout of 5G technology.
“Huawei’s 5G will absolutely not be affected. In terms of 5G technologies, others won’t be able to catch up with Huawei in two or three years,” he said.
Tweets by Trump in February revealed concern about how the US has fallen behind in the race to develop 5G networks. 5G, which is much more powerful than 4G, is the next frontier in mobile technology and would enable a new generation of smart devices. It is also seen as a possible rival to fixed line broadband services.
Huawei is believed to have 80,000 people working in research and development and owns the largest number of 5G patents. The US response has been slow in coming but it is taking shape. In September, the US federal communications commission in September released its 5G plan “to facilitate America’s superiority in 5G technology”.
“The race is on,” Lachlan MacGregor, an investment analyst with Alphinity in Sydney, told investing site Livewiremarkets.com.
Some tariffs imposed by the US have been targeted at technology, especially Beijing’s Made in China project, an industrial plan adopted in 2015 which aims to turn China into a “manufacturing superpower” by investing in IT, new energy vehicles, robotics and other forms of smart manufacturing. The conclusion of the US trade office investigation into Chinese trade practices, which was the basis of president Trump’s initial announcement of the tariffs in March, mentioned the Made in China policy more than 100 times.
Byt the battle is now in full view. Mastering the next generation of technology and controlling the rollout of networks across the world would hand the victors a windfall for the ages.
“Huawei could set the tech landscape for the next 10-15 years if it got that foothold,” says Christopher Balding, a China expert who is associate professor at Fulbright University, Vietnam.
He believes the escalating dispute is a tech cold war that could see the world fracture into two economic camps, reversing the pattern that has seen China integrated into the world economy for the past four decades.
“Huawei has been very smart and has been anticipating and planning for this type of events for years,” he says. “But what you will see is a type of splintering where there will be two separate tech worlds. We’ve been seeing this for a couple of years but this could be the straw that breaks the camel’s back.”
Taking the lessons of the dispute even further, Balding sets it in the context of the struggle for hegemony where the Trump administration sees it an an opportunity to decouple China from western economies.
“The Trump administration sees this as a consequential and fundamental dispute about China being able to dictate world policy and strengthen authoritarianism across the world,” he says.
Another China expert Bill Bishop, who writes the influential Sinocism newsletter, said that the US had now “significantly intensified” its efforts to thwart China and Huawei’s 5G dream. The move had also raised the heat in the trade war, he said, adding that although Trump could still strike a deal with Chinese leader Xi Jinping at next month’s G20 summit, “the mood in the US towards China is much darker now than it was a year ago”.