High loss for China in “Technology War” with the US

Too many major barriers that China could not build technology companies that compete with US competitors.


In the midst of a fierce trade war, the United States and China seem to be falling into a “Cold War of technology” to rival the dominant role of future technologies. Government of the US President Donald Trump launched a series of measures to prevent American technological knowledge from falling into Chinese hands to gain advantage in this new war.

Analysts say that in order to win the war, China needs to become a creative power with national corporations ready to challenge Intel, Apple or Google to dominate the heights of power in the technology world. But to grow to become such a threat, Chinese technology corporations need to overcome huge barriers.

1

Very few companies in the world, especially from emerging markets, have demonstrated the ability to rapidly break into large alliances in the global technology field. Even South Korea’s Samsung Group must go through a long and arduous journey to climb the high rungs of creativity.

The worry in Washington today is that China is turning its tide around by providing massive subsidies to domestic industries, from electric cars to semiconductors to gain as much advantage as possible. But these policies are easier to undermine than to strengthen China’s technological ambitions, experts say.

Modern economic history shows that the method of injecting government money into favored industries is often unable to create innovative companies. The success rate is even lower than in China because most of the subsidies are poured into bulky state corporations, burdened with bureaucratic styles.

2

Generous subsidies will lead to excess productivity in large corporations, which can make companies more competitive. So far, China has not achieved uniform results from subsidy programs for businesses. It has spent tens of billions of dollars in subsidies to the electric vehicle industry, eventually creating a series of inexperienced startups and poor-quality cars.

When the “Cold War of technology” broke out, American technology conglomerates would certainly not sit still and wait for Chinese companies to move ahead to destroy them. As China races to catch up with the US, US companies and their competitors, which have a strong foothold globally, will also continue to rise.

4

Although China established the International Semiconductor Components Manufacturing Corporation (SMIC) nearly two decades ago, China’s chip industry is still sluggish and lagging behind 5-6 years compared to its counterparts. Thu, according to Linley Gwennap, chairman of Linley Group, a group that specializes in the chip industry. He said that during SMIC’s efforts to fill that gap, they would realize that the opponent had jumped a step ahead.

Although Chinese companies can succeed in developing competitive technologies equally with the world’s leading technology firms, they will not be able to automatically become full-scale competitors. China will have to convince other companies and consumers to dismiss suppliers and brands they have long believed. In some cases, to do that, Chinese companies will take decades.

3

Two US semiconductor companies, Intel and Advanced Micro Devices, still dominate the field of microprocessors for computers and servers because the computer industry is developing based on software platforms around the two chips. This fact makes it difficult for newcomers to make a breakthrough.

Recently, Huawei said it is ready to use the self-developed operating system to replace Android of Google and Windows of Microsoft. But Huawei also made it clear that the company will only move on if Washington maintains its ban, preventing US companies from selling components and technology to them. Leaders in Huawei are smart enough to understand that switching to a self-developed operating system will cut their smartphones from the mainstream software ecosystem in the world and that will limit users from reaching those Popular services like Google Search, Google Maps or YouTube …

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