US-China tech war to be ‘defining issue of this century’, despite signing of phase one trade deal

Trade deal and tech war are in ‘parallel universes’ with minor progress on tariffs a mere sticking plaster in wider deterioration, academic says

Report states that decoupling is inevitable in the crucial semiconductor space, with a ‘new era of techno-nationalism’ set to shake up global value chains

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China is aiming to increase its reliance on domestic production for key semiconductor components, including chips and controlling systems, to 75 per cent by 2025. Photo: shutterstock

Published: 7:30pm, 17 Jan 2020Updated: 11:37am, 5 May 2020

Forget the phase one deal, a bitter superpower tech war will overshadow any minor progression in US-China relations emanating from this week’s trade agreement.

That is the message contained in a new report to be released on Monday, the author of which says that tariffs are “a subset in a much larger, overarching, systemic rivalry between two superpowers, which is the defining issue of this century”.

“The trade deal, which is focused on tariffs, is in a completely different space,” said Alex Capri, a visiting senior fellow at the National University of Singapore. “These are in parallel universes – we have tariffs on one side then we have the US-China tech war on the other. These are two completely disjointed, totally divergent issues.”

Capri wrote the report, subtitled How a New Era of Techno-Nationalism is Shaking up Semiconductor Value Chains, for Hong Kong’s pro-trade Hinrich Foundation. It says we are in “a new strain of mercantilism that links tech innovation directly to economic prosperity, social stability and to the national security policies”.

At ground zero of this conflict are semiconductors, which provide the vital materials and circuitry for microchips, “the central nervous systems and brains inside all new age technology”. And on this front, decoupling between the United States and China is inevitable, the report said, and it will “have a traumatic impact on the entire technology industry, and alter the global economic landscape”.

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