US blockade of Huawei could be watershed for Chinese chipmakers’ self-reliance

Source:Global Times Published: 2019/5/21 21:18:36

Illustration: Luo Xuan/GT

The US Commerce Department announced last week that it is adding Huawei Technologies Co and its affiliates to the so-called "Entity List," blocking the telecom giant from buying parts and components from US companies without a license.

The US is the leader in information and communications technology (ICT). It will be a challenge not to rely on US components, and short-term pains will be inevitable. Yet, we should be confident in the semiconductor research and development capabilities China has developed for decades.

A decisive moment is needed to change people's perceptions. Once the world realizes that Huawei's development still continues, everyone will know it is useless for the US to engage in a technical blockade and Chinese technology companies cannot be hindered.

For a long time, the US has held a certain contempt toward China. They seem to believe that it is impossible for the Chinese to master advanced technologies by themselves, unless they steal US technology to develop. Under their logic, China achieved all its technological progress and development by stealing US technologies, which is why they spend lots of effort accusing China of stealing US intellectual property.

In 2018, the US restricted exports of nuclear technologies to China General Nuclear Power Group (CGNPG) and China National Nuclear Corporation (CNNC), citing complaints that China was stealing US nuclear technology. In fact, despite the US restrictions, the two Chinese nuclear giants haven't seen much impact on their development, with various projects still advancing steadily. Now it is clear that there is no use in the US blocking China from accessing its nuclear technology.

The blockade and anti-blockade of Huawei can also become a threshold for the self-reliance of China's ICT industry. This will not only change the US sense of superiority but will also eliminate the Chinese fear that domestic companies cannot develop under US sanctions.

From the perspective of the ICT industry, the US blockade of Huawei is actually a gamble, as there is no guarantee that it will win.

Most of the global ICT industrial chain and brands are concentrated in East Asia, with five out of the world's 10 biggest chip buyers in the region (Samsung, Huawei, Lenovo, BBK, and Xiaomi). 

It will be hard for this industrial chain to move to the US. The unemployment rate in the country is not high, and the manufacturing industry needs to offer more competitive salaries to attract labor from the services industry. Meanwhile, demographic changes also make it difficult to provide enough workers to support large-scale manufacturing.

The biggest US advantage lies in semiconductor design and the manufacturing of some semiconductor products. On the other hand, it is a natural disadvantage for the US to be far away from East Asia, the world's ICT manufacturing center. At present, with its semiconductor technology advantages, US companies participate in the industrial chain to gain profits, and downstream companies have no other choice but to buy their products.

The US blockade of Huawei has actually pushed China to increase investment in the core areas of the US ICT industry. Once China catches up in these areas, there will be a complete ICT industrial chain in the region without the need to make purchases from US companies thousands of miles away.

The US is playing with fire. If it insists on banning Huawei for one or two years, the weaker US technology companies will see an impact first as they will find themselves being replaced by Chinese suppliers. The US restrictions give Chinese chipmakers opportunities to participate in market competition and to grow and develop.

Once they are replaced, it will be very difficult to reenter the East Asian industrial chain. This is why it is so important for Americans to bring the manufacturing and industry chain back to the US.

This is a race in which the Chinese are scrambling for technological advances in the semiconductor field, while the Americans are striving to maintain their semiconductor technology advantages and to bring the industrial chain back to the US.

China is prepared for a protracted tech war with the US. Just as China was able to ensure the development of its military companies, which had been cut off from the US for many years, it will certainly protect the survival and development of Chinese technology companies.

The article was compiled based on a report by Ning Nanshan, a Shenzhen-based economics commentator.


blog comments powered by Disqus