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. Sam writes:

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.

Tech War posturing

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 incursions.

Tech was - spy versus spy

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.

Tech War - Reds under the beds

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.

Yellow Peril

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.

Tech War Superman
Superman was fighting commies, just Like Captain America

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

Chinese links to Labor party
Thanks – you can see more of his work here
  • Alleged links between the Chinese Communist Party and Labor governments
  • Infiltration of Chinese doctrine in the school and university systems
  • Universities warning that if Chinese student enrolments fall, the Australian University system is unviable
  • Australia’s alliance with the US means that Australia’s relations with China are part of the health of the US-China relationship
  • Participation in Pacific Islands affairs and building facilities and bases there
  • Persecution and repression of the Christian, Tibetan Buddhist, Uyghur Muslim, and Falun Gong religious groups.
  • 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 Aussie homes)
  • 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)
  • Ownership of 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 sailed east!
  • 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.”

Australian Attitude to China - UQ

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 East).

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 CEO Ren Zhengfei to Chinese President Xi Jinping
Huawei has long prepared for an American assault – Huawei CEO Ren Zhengfei to Chinese President Xi Jinping

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 guinea-pigs.

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.

China exodus

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 the bottle.

MIC 2025

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.

A quick look at recent news stories is enough to confirm this. As we’ve previously reported, China has used government-sponsored apps to spy on users and has deliberately put back-doors into new IT and (more worryingly) IoT products.

China spies

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. 

The limited power of the US to control or limit Chinese tech is evident from the scandal that erupted when the US government tried to block Huawei from the 5G rollout within the US.

China owns and operates a growing number of SaaS-based businesses that are widely and critically used by US firms. 

Perhaps even more worrying is the fact that China owns half of all free virtual private network applications (as of early 2019) and therefore that technologies used by Americans to stop their own government from spying on them could be sending the same data to China.

Tech Wars is ultimately about the Future: AI and Skynet

It is also apparent that the Tech War between the US and China is only just beginning. As Scientific American reported earlier this year, the next battleground is likely going to be over AI. Alongside the MIC 2025 program, the Chinese government has now set an aim to be the global leader in AI technology by 2030. 

Skynet

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 programs.

 It seems that mobile technologies, microchip architecture, and AI are sure to follow that trend.

Tech War AI

Except that this time the foe is China, and the battleground is cyberspace.