Time to support domestic chip industry
The US Commerce Department on Monday banned American companies from selling components to China’s telecommunications-gear maker ZTE Corp. With plenty of gadgets, especially chips, purchased from the US, ZTE will suffer heavy losses. The company has already halted trading of its shares in both Hong Kong and Shenzhen, and shares of its US suppliers fell sharply, with some tumbling more than 30 percent.
The US launched an investigation into ZTE a long time ago. In 2016, Washington fined ZTE for shipping sanctioned telecommunication equipment to Iran and North Korea, but reconciliation was reached in 2017. This time Washington insisted that ZTE had not disciplined or reduced bonuses on employees it had promised to discipline. Observers believe that this is merely an excuse by the US.
As the case has lasted a long time, it’s unclear whether the US, by issuing the ban, intends to pressure China on trade. But the event will for sure stir Chinese society and prompt us to speed up development of chips and other semi-conductor technologies.
China still lags behind the US in technology. But after decades of reform and opening-up, China has laid a solid foundation and accumulated experiences in this regard. The key issue is that while globalization offers a more convenient and cheaper solution, it has also bred laziness. If importing chips is easier and more cost-effective than domestically producing them, the market will opt for purchasing them, and will become gradually reliant on foreign technologies.
China has the capability to manufacture medium- and low-end chips. The production of high-end chips requires more input and a positive response from the market. If the $200 billion that China spends importing chips every year can be used to support domestic technologies, domestically made chips will accrue huge potential. Meanwhile, US high-tech companies will lose the impetus to upgrade their products if they lose the Chinese market.
China has never questioned the reliability of US suppliers in the past. But ZTE’s case suggests that US supply is not reliable. The global supply chain is fragile in the face of politics. Americans have started to reckon upon means to counter China’s rise and restraints on high-tech exports to China are their leverage. The US may use this tool more widely in future.
China must prepare for the worst and integrate resources to support the development of core technologies. China’s technological exploration shouldn’t be upset by US factors. It’s time for China to make up its mind and develop domestic technologies.
China is the world’s largest telecommunications market and it makes sense for the country to offer up a slice of that market in exchange for technology. Now that the US refuses this approach, China should take advantage of the market to directly support domestic high-tech companies. There may be some difficulties during the process, but the country can overcome all hardships and realize technological renovation of domestic firms.
China won’t allow the US to use chips as a stick against it. China can take steps to replace foreign-made chips with domestic. The Trump administration is helping us Chinese make such a decision. Probably we Chinese will be grateful for Trump’s ban some day in the future.