Time to sup­port do­mes­tic chip in­dus­try

Global Times - - Editorial -

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.

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