By Kumar David –
Struggle for 21st Century world economic and technical leadership: The Sino-US technology duel flares up
The arrest of Ms Meng Wanzhou, Executive Board Director of the Chinese technology giant Huawei in Vancouver, Canada, at the behest of the U.S. allegedly in connection with investigations into violations of U.S. trade sanctions is but the tip of an iceberg. It is far more than about sanctions busting or concerns that Huawei products in Western country communications systems pose a security threat though I will discuss these issues anon. What is at stake is global economic and technological rivalry as the twenty-first century unfolds. Both sides know this well and that is why neither will climb down; it is the struggle for leadership in this century. It is of far greater import than trade-wars or Trump’s weirdness. Some idiot savant wrote a book about the ‘End of History’; and history is only just getting started, how pathetic!
I will begin with a narrower canvas, the technological ramifications of the incident itself. There are three competing explanations fighting to be heard.
- The US is nervous that Huawei devices and networking equipment, in particular China’s 5G advancements will overshadow American technology, and leadership of the sector-apex will pass to China reducing Silicon Valley to second best.
- Huawei is intimately linked to the Chinese government; its systems and smartphones are “wired” to collect sensitive strategic and commercial data and relay it back home through a “backdoor”. That is to say Huawei poses a security threat.
- America is leading an intensive effort to overthrow the Iranian government and bring regime change to Teheran and has instituted a raft of biting sanctions. Huawei, like the Chinese company ZTE before it has been supplying Iran with telecoms gear and busting American sanctions. (This is the official US ‘reason’ for the extradition request against Ms Meng).
The plain fact is that all three are true in degrees and deserve attention. Though I would like to focus on the first only this is not possible since it will leave readers up in the air. First, what is 5G? The great leap of Fifth Generation communications over 4G, the current top of the range, is speed of data transfer and millisecond connectivity. But the point is this, 5G is not only inside a device but is in the system; it is part of the communications backbone (access and core networks) that connected devices run on. A 5G cell-phone in a location without a 5G backbone-system is like a Ferrari in a country that has no highways.
[For those who want a little jargon: Browsing speeds will go up from 70 Mbps for the median 4G user to 1.4 Gbps for the median 5G user, with response times 20 times faster. Download speed will rise from 100 Mbps to 10 Gbps (10,000 Mbps). You can download an entire movie in a few seconds. 5G mobile data speeds will far outstrip the fastest home broadband network now available. 5G, it is claimed, will be as much as 1,000 times faster than 4G].
The second point is that it is in data-transfer that the advantage will show. Your daughter drooling over your new 5G Huawei mobile when it becomes available (promised for 2019) with her boyfriend will enjoy no better sensations; voice-calls will see no perceptible gain. It is links that receive and send huge amounts of data that will see benefits (video/movie channels, data heavy companies, governments, defence establishments, self-drive vehicles, drones and AI research). And it will be fast! An electrical engineer friend in New Zealand who visited a Huawei exhibition where they had step up a demonstration said “Wow, it really flew!”. So that point is settled; the Chinese have surpassed the Americans in 5G communications technology – note I am not saying technology leadership in general, but one cutting edge aspect.
The American’s are fighting back by sealing their market to Huawei products and attempting to close the markets of their Western allies. They have taken steps to block the firm from entering US including banning government purchases of Huawei gear and denying government help to any carrier that uses Huawei equipment. Top carriers Verizon Communications and AT&T pulled out of deals to distribute Huawei smartphones earlier in 2018. The Committee on Foreign Investment ordered Qualcomm to delay a shareholder vote on a Broadcom (a semiconductor maker) offer to acquire Qualcomm. It said that the purchase would give Huawei the upper hand in 5G technology because Broadcom would cut back on R&D funding at Qualcomm, strengthening Huawei’s position at a time when rivals are grappling with weak telecoms R&D budgets.
AT&T and Verizon will deploy 5G networks in a few cities in 2019; T-Mobile and Sprint the following year. Vodafone, meanwhile, the world’s second largest carrier trusts Huawei. “A very innovative company; very open. We never found anything less than normal in Huawei equipment and software.”. The expectation is that at home China will blanket the country with 5G coverage before the US. Nevertheless, exclusion from the US communications market is a severe setback to Huawei but it is unlikely to hold it back for long enough to give American competitors time to catch up.
The security threat story is the hardest to swallow though a raft of pro-US countries and carriers have moved against Huawei raising a red flag. US intelligence agencies allege that Huawei is linked to the Chinese government and its equipment could contain “backdoors” for use by government spies. No evidence has been produced and the firm has repeatedly denied the claims. Not just the American government but no rival system makers or investigators has produced a shred of evidence of this anal orifice or of the leakage of toxic vapours and valuables. Court cases are pending and let us see what hard evidence American prosecutors put out.
What is true is that China engages in flagrant abuse of intellectual property. For example, all foreign countries and companies that set up ventures in China are compelled to hand over their technology. This means that the best stuff is simply handed over gratis on a platter. This has provoked much bitterness. Theft of intellectual property is multisided and every country is doing it all the time; America is the biggest loser because it holds some of the best stuff.
On sanctions busting, morally I am on the side of anyone who busts American sanctions imposed on Iran to tilt the balance of power in the Middle East in favour of itself and Israel, and at worst to force regime change in Tehran. This is old style imperialism. Unfortunately, countries and companies have no choice but to bow their heads and follow the American dictate. Nearly all international transactions are in dollars and pass through global, that is American banking systems and to fall foul would mean exclusion from global trade. Huawei’s smaller rival ZTE Corp pleaded guilty last year to conspiring to evade embargoes by selling US equipment to Iran. Then the US Commerce Department said ZTE violated that settlement and barred it from buying any US components – a move that all but halted many ZTE operations.
The big picture
What about the big picture of global technology leadership in the rest of this century? Let me keep two perspectives in mind – up to a decade from now say to 2030 and secondly up to the middle of the century; I am not fool enough to stray beyond that. There is little argument that on the broad front, the best US technology still holds a commanding lead but in several specific domains China has pulled ahead in the last 10 to 20 years. In heavy engineering and manufacturing, and in civil engineering and infrastructure, the Chinese have built a big lead. In highspeed rail and integrated transportation hubs the lead is so great that the Americans will never close the gap. China is also world leader in the generation of electricity from solar energy. The US is well ahead in military hardware and software, aircraft and avionic systems and where it really holds a decisive edge is in logistics and in flexibility of thinking at organisational, systems and network levels.
Huawei’s leap shows what will happen on a larger scale in the next decade. The company was founded in 1987 by former military officer Ren Zhengfei, remains privately owned, and is based in Chinese tech hub Shenzhen across the border from Hong Kong. The plausible background picture is that like all Chinese breakthrough technology enterprises there is a deep but inscrutable connection to the state. Reliance on the state gives China’s technology-drive its purposive strength; I cannot see how otherwise a single company can take on and beat the whole of Silicon Valley. The US state supported technology from the 1960s up to the fall of Soviet Union via NASA and the Pentagon but slackened afterwards.
Huawei was a pioneering supplier of telecom gear at the time when China was spending heavily to upgrade its networks; it began competing internationally in the 1990s and was known for undercutting rivals on price. Competitors branded it a cut-rate vendor of copycat equipment, and companies including Cisco and Motorola filed lawsuits over alleged trade secret theft. But Huawei continued to spend heavily on research and development with state encouragement, and is now global leader in telecom network technologies and high-end smartphones. In contrast, its Western rivals, Nokia and Ericsson, have struggled with R&D budgets while Huawei continues to expand into new areas including chip development, artificial intelligence and cloud computing. Apple has no plans to introduce 5G devices in 2019 and perhaps even 2020.
What I am driving at is that it is the state motivated, if not directed drive that explains China’s extraordinary rise to prominence in technical fields. I have counted a number of areas in which China is ahead of the US already and I will add the following hat-trick as candidates that will fall into China’s bag in the next decade; on-line services, artificial intelligence and global freight and port services. What I mean by on-line services are the likes of: (a) e-commerce giants Alibaba and JD.com (China’s Amazons), (b) social media (Tencent is China’s Facebook) and (c) Baidu (China’s Google).
By the middle of this century China will strive to reach the top in biotechnology and to close the gap with the US on military capability. I am of the view that China cannot match American superiority in the projection of military power across the globe in the foreseeable future. This is of great significance since all my Hong Kong and China friends are convinced “The Americans will never let China rise; they may even go to war to prevent it.” Recall that the Sino-American rapprochement of the 1970s happened because, in the context of a dangerous Sino-Soviet rift, Mao and the Party became convinced that a Soviet nuclear strike on China was possible!