There is a new cold war coming, and this time it is all about tech supremacy, a tech war.
A tech war does not have soldiers or guns, but new weapons
of mass destruction and the consequences are far more significant.
GadgetGuy asked our geopolitically experienced US
correspondent Sam Bocetta to brief readers on the coming tech war. While his
view reflects the US position (and a moderate one at that), there is no doubt
that Australia and its five-eyes alliance with the US will feel the effects.
The Next Cold War is a Tech War – USA and China
The imminent threat of a cold war is just that. If one side steps
out of line, the other beats it into submission. In the cold war, the threat
was about nukes. In the tech war, it is tariffs.
We never really fought a Cold War – it was all about posturing
I don’t know if many GadgetGuy readers are old enough to
have lived through the last cold war. I have.
Geopolitical tension, spy versus spy – between the Soviet
Union with its satellite states (the Eastern Bloc), and the United States with
its allies (the NATO Western Bloc) after World War II that lasted until 1991.
Not a shot fired!
Historians call it the dominant influence on American
society (and equally the Soviet Union) for much of the second half of the 20th
century. It was also fought purely on ideological grounds than by physical
Posturing – well both sides had unsteady fingers (some may say ill-qualified and maniacal) on the nuclear missile buttons 24×7. Just in case!
Now its China’s President Xi Jinping and US President Donald Trump (just a replay).
Yes, for us it was ‘Reds under the beds’ fuelling doubt and
suspicion that your next-door neighbour could be a commie spy – or a sleeper as
they were often euphemistically called.
Yes, championing the innovation and affluence that
capitalism brought while relating communism to oppression. In contrast, the
Soviets preached social equality and portrayed the West as being greedy,
selfish and weak.
It fuelled major spending on physical defence (war is good
for an economy), atomic research, drove the space race and reinforced
patriotism as devotion to the American way.
As a consequence, Americans felt compelled to ‘shop local’ –
buy its cars and consumer goods to help the economy grow. In turn, the U.S.
became the world’s dominant economic power and continues to be so today.
By the way, I am beginning to hear some US media referring to China as the Yellow Peril. Even your Sydney Morning Herald et al., are beginning to use the term in Australia. Cultural conditioning is the tip of the iceberg.
Well, we are on the brink of a new cold war – a tech war – that could have far-reaching consequences.
The virtual fallout is already beginning. Its doctrines
parallel the last cold war, almost playbook for playbook. On one side, it is
good old American capitalism – a never-ending battle for truth, justice and the
American way made famous by Superman in the 50s and beyond.
Our enemy is portrayed as spies, crooks, oppressors,
communists, human rights violators, child labour exploiters, and ruining the
world’s climate balance by devotion to cheap coal.
It does not help China’s cause by the student (and now
general populace) riots in Hong Kong fearing the Chinese communist regime. It
does not help that the Republic of China (Taiwan) lives under the threat that
China’s military might forcibly bring it back into the communist fold.
Sorry, media is swinging public opinion that China is not
‘cool’ anymore. Except to the Chinese that live in a state-controlled, heavily
censored environment that thinks what is happening in Hong Kong is the result
of ‘foreign white-eye interference’.
As I understand it down in Australia, there are major issue too
Alleged links between
the Chinese Communist Party and Labor governments
Chinese doctrine in the school and university systems
that if Chinese student enrolments fall, the Australian University system is
with the US means that Australia’s relations with China are part of the health
of the US-China relationship
Pacific Islands affairs and building facilities and bases there
repression of the Christian, Tibetan Buddhist, Uyghur Muslim, and Falun Gong
China regards any
pressure over political and economic reform, or issues such as Taiwan, Hong
Kong or Tibet as incursions into ‘Chinese sovereignty’. In other words, stay out
of our affairs.
Major private property
ownership making it hard for Aussies to buy homes (Chinese now own 11% of
Ditto for commercial
property where entire suburban centres are being bought up
Ownership of many
strategic resource utilities (ports, infrastructure and even water in the
controversial Murry-Darling Basis)
agricultural production (9.1 million hectares or around 15%)
Worse still it has
just taken over Aussie icon R.M. Williams – what next Akubra! No, well Dairy Farmers
Big M/Dare/A2, Bellamy’s infant formula and infant formula catcher Huggies just
And the left (politics
and media) fighting the right over its new policy of not tolerating CCP (Chinese
Communist Party) interference in Australia. And it is not a good look for the left.
Although the good news is that Australia kicked out a Chinese billionaire and Chinese investment is now slowing in favour of Europe and South-East Asia.
Or as KPMG puts it, “Chinese investors now have an increasing concern around transparency of regulations, high costs and their continued perception of being unwelcome as reflected by negative Australian media coverage.”
And the majority Coalition Government has started to flex its muscles over infrastructure ownership and control including telecommunications, electricity, gas, water and ports. That list soon could be expanded to military supply, transport, roads, mining, agriculture, horticulture and much more – as President Trump is promising as well.
(Note I do not live in Oz – as much as I wish I could – so
forgive me for a rapid summary of major Oz newspaper headlines this year).
The Tech War is not just about cybersecurity.
On the surface, it is about the fear that Chinese made
consumer electronics (a.k.a. Huawei) could be feeding personal data the CCP.
It is fundamentally about the potential to tip the balance
of world economic power from the USA (and its allies the West) to China (the
We all know what the US ‘Entities list’ has done for
Huawei’s business here – killed it. Well, whether Huawei was spying or not for
China is now immaterial. Throw enough mud and some sticks.
It is Huawei’s response that makes you wonder if it did not want a very public bloody nose to enable it to pursue a different path to other global smartphone makers.
Huawei’s CEO Ren Zhengfei said that the company can survive without the United States and has dismissed Washington’s campaign against it as ineffective. “We can survive very well without the U.S. The China-U.S. trade talks are not something I’m concerned with.”
It is now free of US technology constraints and with significant public sympathy (at least from the Asian bloc).
For example, as a stopgap measure, it will use free public domain Android (not Google Android or services – GadgetGuy article here). It has launched its own Browser, Voice Assistant and expanded AppGallery with 45,000+ apps including alternatives to all Google Apps (that buyers could not use in China anyway).
Next, we see it developing HarmonyOS to replace Android.
Sure, it will not be ready for some time but will underpin all its Chinese
devices. And it and Alibaba are collaborating to make AliOS (reported a
HarmonyOS clone) the standard for China and its Eastern bloc.
Scratch any reliance on Google and offer the world’s largest smartphone market (and we venture every other eastern bloc country) as a non-US alternative.
This has the potential to kill a large portion of Google’s revenue and any hope of global standards for Android and iOS mobile phone operating systems.
Already Huawei has moved to Chinese suppliers (or invested
in them) for LCD and OLED screens, China-made Xensation toughened glass (like
Gorilla Glass) and pretty well every other component needed for a smartphone.
There are big grey clouds over the Intellectual Property (IP) – whether it has
been homegrown, reverse engineered or stolen. But mark my words – such IP does
not happen overnight as it appears to have. That potentially violates every
tenet of copyright and honourable trading.
Then there is the fact that Huawei can no longer use
ARM-based technology. ARM powers 100% of the world’s smartphones. Huawei can
use ARM for it’s recent Kirin 990 (Mate 30/Pro), and it can regurgitate older
ARM chips, but pretty soon it must ‘clean-room’ develop an alternative
architecture. That is a huge task but where better to try than on Chinese
Analysts say that it would be almost impossible to stop
Huawei using ‘architecture extensions’ – add-ons that it develops for currently
licensed ARM chips while it develops core logic to run HarmonyOS and AliOS.
The question is who the tech war will hurt most – the US, and its economy or China and its economy.
Well, the US ban enabled Huawei and China to accelerate compliance with Made in China 2025 program (MIC 2025) that mandates that almost everything made in China will use pure Chinese developed technology and parts. Its called fait accompli.
China’s version of the Tech Wars – the US and other nation manufacturers are not welcome
Recently Samsung announced that it has closed its last smartphone factory in China. Why?
To the casual observer, this might sound like a strange business decision. China is the biggest market for smartphones and has the highest number of Internet users of any country. Labour costs are much, much lower than in the US, allowing Samsung to make its phones there comparatively cheaply.
Why, then, would it close this factory? Well, there is more
at stake here than simple economics.
Until recently, more affluent Chinese consumers flocked to
buy Apple and Samsung phones because they were not Chinese companies. Largely
because they (rightly) suspected that the government could track what they did
online if using a Chinese designed phone.
Samsung’s official reason for closing its factories in China was that the Chinese government would force it to share its IP and trade secrets under the MIC 2025 policy. Samsung said that it could not afford to have its patents potentially available for government-sponsored companies to ‘appropriate’ (OK, steal).
The reality is more complicated.
GadgetGuy reported on a Chinese educational app called ‘Study the Great Nation’. It is developed by the Chinese Communist Party’s Propaganda Department with help from Alibaba. It is (by western standards) a hugely intrusive piece of spyware that potentially violates several fundamental human rights.
Guess what – all phones sold in China must have it installed.
And Chinese propaganda has been very effective in making it
‘uncool’ own a non-Chinese phone (such as Apple). Remember Cold War tactics –
promote patriotism and buy local!
Well by 2025 it might be impossible to sell non-Chinese tech
in the country, thanks to China’s ambitious MIC 2025 program.
In this context, it looks like Samsung has made a brave
business decision: abandon the Chinese market and concentrate on dominating
everywhere else. Not only does this mean that Samsung does not have to share
its technology with the Chinese government: it also benefits from a perception
that it is no longer ‘aligned with China’.
Made in China – well anywhere else would be better
Already many US companies that make/assemble in China are
moving some manufacturing to more US-friendly countries.
President Trump has ordered all major US companies to begin
moving manufacturing or assembly out of China. He was more explicit when it came
to joint-technology ventures – there must be none.
On the tech front, 80% of Apple’s suppliers are in China, and 100% of hardware is made there. It will take Apple years to undo the omelette, but it has set targets of 15-30% of its assembly to move south-east Asia. Despite its apparent China loyalty, it’s China market share has deep-dived to less than 6% in Q2 2019 (July-September). Huawei has grown from 25-36%, and OPPO/vivo have a combined 38% (Source).
HP and Dell are moving at least 30% of production from China
(equating to about the percentage of Chinese made product they sell in the US).
Google is moving its Pixel production to Vietnam. A host of white-goods appliance
makers are looking closely at Mexico.
The common thread is to move production of US-bound goods to
lower-cost nations that will not suffer the tariffs imposed on China by Trump.
The Cold War was a clash between two superpowers with differing views on how the world should be run. The Tech War is more than just a struggle for market dominance.
China sees the role of technology in startlingly different
terms than the US, and in trying to dominate the tech market, China seeks to
further this ideology.
The Chinese government is aware of what MIC 2025 must mean.
Short term pain for a long-term gain.
Specifically, in the last six months, there has been a
massive shift in manufacturing contracts away from US-owned companies like
Qualcomm towards China-friendly MediaTek. MediaTek SoCs are now
commonplace among the bulk of the mass-mass market devices.
Though MediaTek is based in Taiwan, a country with a long, complex, and sometimes violent relationship to China, the company maintains significant links to the Chinese government. It is apparently working with BBK (the company behind OPPO, vivo, realme, and OnePlus) to develop smartphone chips that comply with China’s MIC 2025 program: that is, components developed, designed and made entirely in China.
In a similar move, it’s been reported that Huawei, the
single biggest smartphone manufacturer in China, is also talking to MediaTek to
take over the fabrication of its Kirin Chips and modems.
Stop press – the Tech War is escalating
China must overcome significant obstacles if it is to
achieve MIC 2025. Most obviously, it will not be allowed to use ARM technology,
or US patented technology and must develop alternatives. Part of the tech war
fallout will be the raft of accusations that China has stolen US tech. But you
know – no amount of western law and layers can stop that. The genie is out of
Beyond these technical differences, however, there also lies
a huge difference in the way that the two tech superpowers – the USA and China
– view the technologies they are developing. Much of this is based on the
political and social histories of the two countries.
In the USA, there
remains an assumption of user privacy and corporate independence. China, by
contrast, seems to be building surveillance and technology transfer into its
tech products from the ground up.
Another worry is how much impact the Chinese tech
renaissance will have on users outside the country. Within China, the
government will ban non-Chinese tech from being used by 2025.
On the other hand, the USA’s power to limit Chinese tech
used within the US is not only more limited than it is in China, but it is also
‘sabotaged’ by the country’s free-market mentality.
Companies take advantage of this ‘freedom’ through the use of a sophisticated and ‘democratic’ system based on acquiring positive reviews. When Chinese products receive the proverbial ‘thumbs up’ from US consumers, things get even trickier for the American government.
While achieving this aim certainly gives China an edge when it comes to advanced consumer products, it does far more. Regarding AI, the similarity between the present situation and the previous Cold War becomes most apparent. Though we think of AI tools as productivity aids, AI is also has a massive role in the design of cyberweapons, and already has a huge role in cybersecurity.
Many of the consumer technologies we take for granted
(Teflon, Velcro, Microwaves…) were developed during the previous Cold War and
were the direct result of government-sponsored weapons or space development
It seems that mobile
technologies, microchip architecture, and AI are sure to follow that trend.
Except that this time the foe is China, and the battleground