Like all wars, the US tech war on China is proving costly and pointless
- The US is recklessly forging ahead with a campaign to block China, in particular telecoms giant Huawei, from access to the global market and advanced technologies
- Yet as China continues to lead in 5G innovation and has made strides in developing its own microchips, the US is hurting both itself and its allies
For a country so profoundly familiar with wars worldwide, it is a puzzle to me where such myopic naivety comes from, and why it persists.
Surely the principal lesson of war is that it is catastrophic for all parties concerned, bystanders included, and should be avoided at all costs. Unlike democracy, which Winston Churchill described as “the worst form of government – except for all the others that have been tried”, wars are the worst way of settling arguments, with no exceptions.
The same surely goes for trade wars, and in particular the technology war that the Trump administration launched on China in 2018, and on which President Joe Biden’s administration has doubled down.
As Secretary of State Antony Blinken elaborated recently, “China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it.”
While I flatly disagree with Blinken’s ideas on Beijing’s intent, there can be no doubting China’s rising capabilities, or the Biden administration’s determination to pursue its technology war against China – whatever the eventual self-harm, and damaging consequences for all concerned.
I was reminded of this by the Canadian government’s announcement on May 20 that it would join the US, the UK, Australia and New Zealand – the “Five Eyes” intelligence-sharing grouping – in banning Huawei from any involvement in the country’s 5G mobile networks.
The aim is to hobble their access to the latest technologies, in particular the newest and most powerful microchips, and to blunt China’s competitive progress.
This has been accompanied by a global blizzard of diplomatic activity to pressure other governments to agree with the US on the “China threat” and follow its lead in barring Huawei from their telecoms networks.
Three years into this attritional war, Huawei remains emblematic of the China technology challenge, and the primary target in efforts to protect US national security. So how successful has the effort been? How much has it hurt China’s technological advance? And how much self-harm has been inflicted in the process?
A dozen or so of the US’ closest allies have joined in the 5G ban, but few of Huawei’s long-standing clients across Southeast Asia and Africa have severed links.
A recent report from the New York-based Council on Foreign Relations says Huawei still accounts for 70 per cent of 4G networks in Africa, with most expected to stick with it as they gradually upgrade to 5G. The company claims today to serve 140 5G networks in 59 countries.
This is in part because, despite repeated US expression of security concerns, no American companies have been able to offer an alternative (Huawei’s main competitors are Ericsson in Sweden and Nokia from Finland).
As the Council on Foreign Relations report said, “no US company offers an end-to-end 5G solution … Washington cannot expect countries to sit on the sidelines and forego upgrades to their networks while the US gets its act together.”
At Brussels-based think tank ECIPE, Hosuk Lee-Makayama recently noted: “Although cut from state-of-the-art chip sets … Huawei’s footprint on the global carrier equipment markets seems to have suffered relatively little.”
This is reflected in Huawei’s recently unveiled 2021 results. While revenue fell sharply from US$134 billion in 2020 to US$100 billion last year, net profits virtually doubled to US$18 billion. As rotating chair Guo Ping noted in the report, “we have kept plugging away, improving the quality of our operations and investing in the future”.
While Ericsson and Nokia have made gains in international markets, the awkward reality is that China remains by far the world’s most innovative 5G market, and Huawei its clear leader.
China’s Ministry of Industry and Information Technology says the country now boasts 1.43 million 5G base stations – 60-70 per cent of the world’s total, and about one for every 1,100 people. By comparison, the US, with 100,000 5G base stations, has one per 3,300 people.
So has the US’ technology trade war been good or easy to win? The answer on both counts has to be a firm “no”. Huawei remains a global leader in telecoms innovation, and retains a dominant market position both globally and at home.
Given China’s progress in innovation and sheer market size, the idea of decoupling seems preposterous: international competitors want a presence in China’s market, and to benefit from its technological development.
Will the technology war inflict substantial self-harm on the US economy? Only time will tell, but I think my initial observation holds: wars – including technology wars – are the worst way of settling arguments, with no exceptions.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view