- The Trump Administration has amplified its campaign to harm Chinese technology companies, widening its focus from Huawei and 5G to the Chinese social media apps TikTok and WeChat.
- This desperately misguided strategy is destined to backfire.
- Most importantly, the administration’s campaign against Chinese tech may prevent the U.S. from accomplishing what claims to be its true objective: establishing a leading position in 5G and building on that lead in the future.
The Trump Administration has amplified its campaign to harm Chinese technology companies, widening its focus from Huawei and 5G to the Chinese social media apps TikTok and WeChat. It’s clear that these maneuvers are designed to distract from pressing domestic issues and to hobble Chinese tech firms for the commercial benefit of U.S. competitors.
Sen. Marco Rubio, in an op-ed published by CNBC last week, called for the U.S. and its allies to find alternatives to Huawei to develop 5G networks.
This desperately misguided strategy is destined to backfire. First, it will destroy U.S. dominance in the global semiconductor industry — American chip-making equipment firms currently export about 90% of their production, most of it to East Asia, including China.
It will also deny U.S. businesses the chance to sell hardware, software and apps: last year alone, Huawei spent $18.7 billion buying components from U.S. companies. Tens of thousands of American jobs are jeopardized by the actions against Huawei at a time of massive unemployment.
Cutting off Huawei’s supply of US technologies may be intended to hurt the company in the short run. But the longer-term effect will be to push Huawei – and other companies headquartered in China – toward greater self-reliance, as a recent report by CSIS, a U.S. think tank, points out.
Research by the Boston Consulting Group shows that, over the long term, a full decoupling would shrink American chip-makers’ revenue by 37% and lower their global market share to 30% – while boosting the market share of Chinese chip companies by an order of magnitude.
Most importantly, the administration’s campaign against Chinese tech may prevent the U.S. from accomplishing what claims to be its true objective: establishing a leading position in 5G and building on that lead in the future.
An opportunity to achieve this goal was presented to the U.S. government last year, when Huawei founder Ren Zhengfei offered to license the company’s 5G technology to one or more U.S. companies. American license-holders would then have access to Huawei’s entire 5G patent portfolio, including software source code, hardware designs, and technologies related to manufacturing, network planning, and testing. The license-holder could manufacture and operate leading-edge 5G networks with no security concerns; the U.S. government could appoint any U.S. company willing to take on the challenge.
Granted, the Administration has other options. It could acquire a controlling stake in either one or both of Huawei’s main competitors in the network equipment business, Ericsson or Nokia, as was suggested by U.S. Attorney General William Barr. It could nationalize America’s 5G networks, as was reportedly considered by U.S national security officials in 2018. Huawei’s offer presents a less interventionist option with the same level of flexibility, security and accountability.
America’s current 5G effort relies almost entirely on just two vendors, Ericsson and Nokia, as the U.S. companies that once dominated the market for telecoms equipment left the business years ago.
Licensing Huawei’s portfolio would jump-start 5G deployment in America and get the U.S. on a fast track to 5G leadership. Accelerating 5G connectivity would allow U.S. industries to take full advantage of the transformative capabilities that 5G and artificial intelligence will have on industries. This will provide a much-needed economic boost in the wake of the pandemic.
Perhaps even more importantly, rapid 5G adoption could serve as an incubator for future generations of wireless tech: 6G is expected to be commercialized around 2030.
For the U.S. telecommunications industry, Huawei’s offer represents a potentially transformative opportunity and an economically viable shortcut to ubiquitous 5G networks that will benefit American consumers, business and industry. More than that, it is a near last-ditch effort to rescue global innovation before it succumbs to a harmful isolationism that could end U.S. tech leadership once and for all.
Paul Scanlan is Chief Technology Officer at Huawei.