By Chen Qingqing in Dongguan Source: Global Times Published: 2020/9/15 23:13:4034
US ban severely disrupts global supply chain, causes huge losses: industry insiders
In the short term, the ban will affect Huawei’s business deployment and the confidence of its downstream partners. But from a long-term perspective, Huawei will come up with solutions to deal with cut-off supplies, Ma Jihua, a veteran industry analyst, told the Global Times on Tuesday.
“In less than a year, such a dilemma will be fixed,” he said.
Huawei will not run out of chips despite the US attempt to kill it, as China has realized independent innovation on chips with a “Chinese system,” Ni Guangnan, an 81-year-old academician with the Chinese Academy of Engineering in Beijing, told the Global Times on Monday.
He said, “Even if our country purchases fewer or no new US CPU chips in the next few years, it will not have a significant impact on China’s new infrastructure.”
Even if our country’s chip industry is stuck, conventionally made domestic CPUs or a large number of old Intel CPUs, or even the readily available CPU chips for ordinary PCs, can be used to ensure the operations of our key information infrastructure and general data centers, the academician said.
Industry insiders told the Global Times on Monday that Huawei recently chartered a cargo flight to transport chip products made by suppliers such as TSMC and MediaTek.
At the same time, Huawei still owns a sufficient inventory of key raw materials, while some devices have been replaced to ensure a steady pace of shipment. “We won’t see any negative impact on the overall business in next one to two years,” Jiang Junmu, chief writer at telecom industry news website c114.com.cn, told the Global Times. Still, the firm is facing a long-term strategic adjustment and supply chain restructuring.
Seeking decoupling from China in high technology would also be painful for the US.
Over the next three to five years, US semiconductor companies could lose 8 percentage points of global share and 16 percent of their revenuesif the US maintains current restrictions on access to products containing US technology by Chinese companies included on the Entity List, a Boston Consulting Group analysis said in March.
“We can’t run away from the storm, but we believe we’ll see the rainbow after the storm,” a Huawei employee told the Global Times, as a rainbow appeared after a heavy downpour during the recent Huawei Developers Conference in Dongguan.
The United States’ technological dominance gives it an immense power. But how long will that last?
By Chris Miller
Mr. Miller is an economic historian.
- Sept. 15, 2020
Take Huawei, which the Trump administration argues exemplifies Beijing’s unfair state subsidies and corporate espionage. The company also represents the best of Chinese tech: It has capable products at competitive prices, and its smartphones and 5G equipment have found willing customers worldwide.
Huawei also illustrates China’s deep dependence on foreign — especially American — technology. As of Sept. 15, new Commerce Department regulations make it almost impossible for any company to sell Huawei computer chips without a license from the American government. But China cannot produce most of the essential advanced chips on its own. Beijing’s reliance on American tech demonstrates the United States’ extraordinary economic power — and how America’s slipping technological edge puts this power at risk.
Today’s advanced computer chips cannot be designed or manufactured without American tech. American firms like Cadence Design Systems and Lam Research make products that are all but irreplaceable. By cutting off access to these products and the chips they produce, the Commerce Department can halt the operations of almost any tech company worldwide.
Access to chips is crucial to any tech company — and Huawei has admitted it is already running out. Without chips, “What products can we still make?,” a Huawei employee has asked. The answer: not much. Fearing further pressure from the United States and seeing little hope for the future, some of Huawei’s top employees have already left the company. Huawei insists that it will soldier on. But it is hard to see how the company’s main products — like 5G equipment, network gear, smartphones and cloud computing services — will survive without access to chips.
Much as Beijing would like to, hardly any industry analysts expect China to wean itself off American tech soon. There’s just no way to create an entire industry from scratch, especially one that requires producing at the scale of nanometers. Beijing has no choice but to buy an estimated $300 billion worth of chips from abroad this year, more than it spends on any other product.
Huawei’s digital decapitation is a shocking display of American power. At the whim of the American president, any other Chinese tech company could suffer such a fate. Imagine if a foreign power could do the same to Google or Amazon.
Moreover, Washington’s weaponization of supply chains gives allies and adversaries alike a powerful reason to reduce their reliance on American products. Beijing has set up a $29 billion fund to support domestic chip technology. SMIC raised $7.6 billion in July. With funding like this, China is certain to make progress. And American allies like Taiwan and South Korea have their own programs to boost chip development.
This makes it all the more important that the United States not misinterpret the lessons from its pressure on Huawei. Washington has shown that it knows how to wield its technological power. But it is one thing to use power and another to accumulate it. The campaign against Huawei works only because other countries rely on American technology. Now they have an incentive to diversify. And the American position is no longer as unassailable as it once was. If the United States’ technological edge keeps slipping, the strangulation of Huawei could mark the peak of American power over the world’s tech companies.
Chris Miller (@crmiller1) is an assistant professor at the Fletcher School of Law and Diplomacy at Tufts University. He is working on a book about the political history of the computer chip, from the space race to the present.