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Are we entering a tech cold war with China?

Are we entering a tech cold war with China?

May 24, 2019
And where would the battle lines be drawn?
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The U.S. and China continue to lob salvos at each other over trade. The tech industries of both countries are kind of caught in the middle. Huawei, the jewel in China’s tech crown, is weighing options in the wake of Google’s decision to cut ties with the company. It comes after a decision by the Trump administration to ban dealings with Huawei. There’s been a temporary reprieve, which is just adding to the air of uncertainty for tech companies doing business in China.

But there’s a wider question being asked: Are we entering a new cold war around technology? And if we are, where do the battle lines get drawn? After all, as in everything from cars to fashion, American and Chinese companies are entwined.

Jed Kim talked with Ina Fried, chief technology correspondent for Axios, where she also writes the daily tech newsletter called Login. She said it’s one thing to say we want to be more independent from our competitors, but that’s not the reality. The following is an edited transcript of their conversation.

Ina Fried: The U.S. manufactures almost none of the products that are designed here. Your iPhone, your Nest Cam, your GoPro camera: designed in the U.S., manufactured in China. By contrast, China would very much like to be independent of the U.S. but still relies on many, if not most, of its semiconductors from the U.S. as well as things like services and software. If they want to make a phone using Android, they need software from Google.

Jed Kim: How far out is China from being able to do all this on its own?

Fried: China has a very aggressive road map to try and get all of these technologies over the next decade or so so that they can be independent. The U.S. is far less likely to be fully self-sufficient, but, certainly, I think you’re going to see the U.S. recognize this issue and try to be not as reliant on China to try and see where else in the world that’s less geopolitically sensitive it might be able to get some of these capabilities. I think both countries have a road map and a desire to get to independence, which may or may not be a good thing. Long term, do you want the two technology superpowers developing parallel incompatible worlds, or do you want them working together? At the moment, we’re taking a step toward parallel independence. But I think, long term, we had a cold war. I remember reading about it and living through it. I’m not sure that’s a good thing to repeat.

We’re not hearing from a lot of the companies most affected. The Qualcomms and Intels and Googles of the world are saying pretty little.

Ina Fried

Kim: What does a long-term tech cold war look like?

Fried: I think it looks like a lot of rules like we’re seeing today and a lot of pain on both sides. For example, the U.S. banning Huawei. Huawei isn’t what powers most U.S. networks. No big deal, right? It turns out, it’s actually a really big deal. The U.S. banning Huawei right now also means that Huawei can’t support all of its existing networks and devices which are used throughout the world. You might say, “OK, great, that’s more business for Ericsson and Nokia,” which are companies not based in the U.S. but at least based in Western Europe. The problem is, Huawei served a very important role and serves as a very important role in bringing internet to the developing world. It’s gear is much, much cheaper. There are parts of the world where building a modern cell network isn’t cost effective using Nokia or Ericsson gear. It only makes sense if you have a lower cost option.

Kim: How are U.S. tech companies feeling about the conflict?

Fried: Interestingly they’re staying pretty quiet in and of themselves. I think they’re all making plans quietly. We’re not hearing from a lot of the companies most affected. The Qualcomms and Intels and Googles of the world are saying pretty little. Who we are hearing from are their trade groups, the folks that they have on their behalf lobbying in Washington. I’ve talked to folks from the Semiconductor Industry Association from CompTIA, which represents a large swath of the tech industry. They’re saying, “We want this settled. We want U.S. interests protected. We want intellectual property protections, but we want a deal.”

Related links: more insight from Jed Kim

Who are the winners and losers in a tech cold war? A Bloomberg article makes the case that it’d be a boon for Chinese tech giants. That’s because the Chinese government will have to redouble efforts to develop homegrown semiconductors and chips. That means pumping in lots of money.

On the other hand, the Atlantic calls the current situation a “Gift to U.S. Tech Companies” — the gift being that more attention focused on foreign tech companies means less attention paid to the peccadilloes and problems our own tech giants have at home.

What does all of this mean for you? TechRadar has an initial breakdown of how the Google break with Huawei will affect end users. There’s a lot of uncertainty over whether phones will continue to have access to Android security updates.

What about laptops? The Verge calls Huawei’s MateBook X Pro one of the best Windows laptops available in the U.S. But at the moment, Microsoft appears to have removed Huawei laptops from its online store.

One thing I haven’t seen that I’d dearly like to read is an analysis of China’s many historical instances of technological isolationism and how that may or may not inform the current situation. If you come across something, send a link my way to mptech@marketplace.org.

Finally, because if I’m asking for something, I should also give, I’ll share an article from Grist that looks at fifth-generation wireless technology and weather forecasting. Yes, 5G promises to make data transmission a dream, but it has its downsides. Frequencies that phone carriers want to use could cause a lot of potential noise for weather satellites. That means dropping the accuracy of weather forecasting by up to 30%, or as one expert told a House subcommittee, bringing predictions back to where they were in 1980.

The team

Molly Wood Host
Eve Troeh Senior Producer
Stephanie Hughes Producer

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