How Trump Is Threatening Global Tech and Telecom
The Trump administration in its latest move against global trade has China in its crosshairs. The move goes beyond restricting Chinese imports; it has got more to do with stopping China’s advances and influence in technology. Tech magazine Wired reports that China is trying to invent new forms of computer chips as part of its plan to lead the world in artificial intelligence by 2030. The US is also trying to nix a takeover bid of an American tech company, Qualcomm, by Singapore-based Broadcom.
In the short term, however, the sanctions plan poses a headache for US companies reliant on Chinese circuit boards, servers, chips, or manufacturing plants—and potentially their customers, too. The implications of this are beginning to be visible in the high tech business. Wired reports that the effects could be felt beyond hardware companies. For example, Chinese suppliers are important to the Open Compute Project that internet companies such as Facebook, Google, and Microsoft support to make servers and other data center equipment cheaper.
The New York Times (NYT) reported that the US Commerce Department has blocked ZTE, a leading Chinese technology company’s access to American-made components until 2025. One of China’s leading global technology suppliers, with nearly $17 B in revenue employing 75000 people and operating in 160 countries, ZTE is facing the imminent threat of closure.
ZTE’s products for the infrastructure of telecommunications networks, as well as its smartphones, use an array of American parts, like microprocessors from the chip maker Qualcomm, glass made by Corning and sound technology from San Franciscobased Dolby, states the NYT article.
The economic sanction on ZTE has implications for the telecom industry, not only for ZTE as an equipment vendor but also for its service provider customers. ZTE has laid thousands of miles of fiber optic cable in Ethiopia, and it recently signed an agreement with MTN of South Africa, a wireless carrier that serves 220 million people in 22 nations in Africa and the Middle East, to test 5G.
How would China react to this? It looks like it will do everything possible to manage the short-term, but in the long-term, it would ensure that it is not dependent on the US. Chris Lane, a telecom analyst in Hong Kong with Sanford C. Bernstein, believes that China now has the resolve to whip its semiconductor industry into world-leading shape, even if it takes a decade to do so.
We in India have the good experience of US sanctions. Our best forays in nuclear science, space research, and supercomputing were made on the face of US sanctions. China too would do the same, perhaps only faster. The US should understand that sanctions don don’t t work in a globally integrated world.