Whichever wins the 'US-China Technology Cold War'
Under the presidential decree issued by President Trump, major US technology companies such as Google , Intel , Qualcomm and Microsoft are showing a move towards China's exclusion of Huawei. With regard to the confrontation between the US and China that has come to be called the “ Technology Cold War ” in the wake of the intensifying US-China Trade War , Ben, an analyst based in Taiwan who has worked in Apple and Microsoft, has also worked ・ Thompson analyzes the future from both the US and China perspectives.
China, Leverage, and Values – Stratechery by Ben Thompson
◆ The Beginning of the Technology Cold War
The technology war between the United States and China is nothing new. Thompson believes that the first move leading to the Technology Cold War begins with the US banishing ZTE , the same Chinese major smartphone maker as Huawei.
You can read more about ZTE banishment by the United States from the following articles:
China's leading smartphone maker ZTE is in crisis by default due to US government export ban-GIGAZINE
◆ Superiority of America
Mr. Thompson analyzes that there is a certain advantage in the United States about the Technology Cold War. For example, the majority of iPhones are made in China, but China estimates that making an iPhone only makes about 3.6% of the total profit that the iPhone produces. This means that companies in the US, Japan, Korea, and Taiwan bear the substantial value of high-tech devices produced by China, and it is possible for the United States to replace China, no matter how 'China 's factory '. It means that it is only one of the production areas.
In April 2019, Taiwan's leading electronics manufacturer Foxconn, which is known to be contracted to produce iPhones from Apple, announced that it will create production bases not only in China but also in India.
Foxconn Manufacturing iPhone Announces 'Starting Manufacturing iPhone in India'-GIGAZINE
In addition, China is still heavily drained from the United States in the manufacture and design of state-of-the-art technologies, especially the processors that are at the heart of high-tech equipment, and the software is dependent on the United States. China has also been catching up, such as Huawei developing its own operating system , but it will take years to catch up with the United States.
Of course, China also has countermeasures. One of them is the stockpile of supplies. According to foreign media Bloomberg reports , Huawei has secured parts that can continue production for at least three months, but if technology cold war is prolonged, it can not be said that it is a very sufficient stockpiling volume. Hmm.
And the card that will be China's biggest trump card is rare earth . Rare earths, which are essential for the production of electronic components, account for more than 90% of the global supply volume by China. China has fully understood that the rare earth is it affects strategic materials technology Cold War, 'on May 20, 2019 Xi Jinping Jintao is a rare earth production base in Jiangxi Ganzhou visited of which are a whim “No,” he points out.
◆ iPhone holds the key to battle
Thompson sees the iPhone as the key to the fight, for both the United States and China. China is a large-scale production area of the iPhone, and it is still a market where large sales can be expected. If China bans the iPhone from the Chinese market, Apple and other US companies will be hit hard. On the other hand, the iPhone has created millions of jobs in China, and Chinese leaders who do not want to increase their unemployment rate can not afford it with the iPhone.
In addition, additional tariffs to the iPhone can significantly change the situation. On May 13, 2019, the United States Trade Representative (USTR) announced the fourth additional tariff on goods imported from China. As early as late June 2019, this additional tariff imposes up to 25% additional tariffs on previously excluded 3805 items, and the list of items also includes the iPhone . If additional tariffs are triggered, it is inevitable that the price of the iPhone will rise, and end users who have used the iPhone in the past are expected to be responsive to the price increase of the iPhone.
Mr. Thompson thinks that the technology Cold War is generally dominated by the United States. The reason is that, as mentioned above, the superiority of high-tech equipment processors is great, and it can be said that the United States, which has Japan, Korea, and Taiwan as a friend, leads China greatly. China is also catching up fast, but it will still take time to catch up with the United States.
Thompson also sees the technology cold war as a battle between 'censorship and openness', 'control and creativity' and 'centralization and competition', and not only business owners and investors but anyone who touches high-tech equipment Concludes that it is a problem that you must seriously consider.