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.