US, China tech fight facing critical point
Elon Musk took time out on Tesla’s last earnings call to cosy up to China. He called it “profound” that the US electric carmaker has been given approval to build the first wholly-owned foreign car plant in the republic, adding it was “symbolic of [China] wanting to open the market and have fair rules for everyone”.
It is a promising sign. But with barely three weeks before the next round of threatened US tariffs on Chinese electronics imports, the US needs more than symbols from its campaign to get China to change its ways. The fight for greater market access and protection for American intellectual property is about to come to a head.
The twin thrust of US policy has left many tech executives feeling decidedly ambivalent.
Putting more protections around US IP is an objective most can get behind. But slapping tougher export controls on promising new technologies risks hampering US companies as they try to build a global market for their next big breakthroughs.
The second part, involving tariffs, has been a blunt weapon. The US has punished Chinese exporters, but it has also hurt its home-grown tech companies.
Chipmakers grouse about being penalised for importing their own products into the US, after sending them to China for low-value packaging and testing work. The March deadline could see an increase in tariffs on everything from data centre equipment to electric scooters.
All of this will quickly be forgotten if China makes real commitments to IP protection and opens its markets more. Promises, of course, will be worthless without real enforcement, and tackling all the informal, nontariff barriers to market access is notoriously hard.
Also, the US Department of Justice has recently accused China of upping its use of cyber-hacking to steal IP, in a sign of how the battle can easily switch to a different domain.
Even so, if the US and China are able to reach a workable agreement, their tech rivalry will move into a new phase. The dispute, and the new geopolitical realities, mean neither side will feel comfortable with a return to the old interdependence. The race will be on for leadership in the most strategic industries.
Charles Giancarlo, a veteran US tech executive who once oversaw the transfer of much of Cisco’s manufacturing to China, says it took years of benign neglect on the part of the US to allow the country’s electronics base to slip away. It was not that policy was deliberately geared to shipping jobs offshore, there simply were not any incentives to keep the operations in the country.
The new policies that will reverse this have yet to be advanced.
Foxconn’s off-again, on-again plans
The dispute, and the new geopolitical realities, mean that neither side will feel comfortable with a return to the old interdependence.
for a factory in Wisconsin have only served to highlight the relative unattractiveness of establishing electronics manufacturing in the US, even with huge financial incentives.
At this week’s State of the Union address, meanwhile, US President Donald Trump promised investments in the next strategically important tech industries. Taking the rhetorical high ground is easy compared to what lies ahead. The very different challenges of 5G wireless communications and AI — two of the key technologies in the White House’s sights — highlight the issues.
It is more than a decade since Lucent, formerly part of AT&T and the US telecoms equipment champion, was swallowed in a succession of cross-border mergers. In that time, Huawei has become the monster of the equipment industry, with the costs and advanced technology to give it a strong position in 5G.
Blocking Huawei’s access to a global market is one way to hold it back. But building a US base in advanced wireless equipment to match Huawei’s scale and range will not happen overnight.
AI, on the other hand, is a field in which the US still leads, thanks to its strong background in research.
But it has no monopoly on smart researchers, and much of the brainpower behind Silicon Valley’s AI boom comes from Chinese nationals trained in US universities. Supporting a world-beating talent base that keeps the US ahead highlights the broad policy areas that need attention — an approach to immigration that continues to draw in the world’s best, and a stronger education system to promote homegrown talent.
Whatever the rhetoric from the White House, there is little sign that the US is ready to tackle the broad issues of industrial and social policy that will determine future tech leadership.