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The Cost of China-U.S Tech Decoupling: A conversation among Huawei USA Chief Security Officer and Geo-technology experts

The Cost of China-U.S Tech Decoupling: A conversation among Huawei USA Chief Security Officer and Geo-technology experts

By Nina Huang

The Trump Administration has brought technology to the center of U.S.-China trade conflicts and is forcing American companies to stop selling its technologies to Chinese companies. On August 1, China Institute’s Center for Business organized a panel discussion with Andy Purdy, Chief Security Officer of Huawei USA, Paul Triolo, Head of Geotechnology Practice at Eurasia Group, and Douglas Fuller, Professor at the City University of Hong Kong, to help people better understand what the tech war is about and what the consequences are. Moderated by Shery Ahn, Bloomberg TV host, the illuminating panel has attracted a crowd of over 150 people. Here are the panelists’ take on a few questions that might help you better understand the situation we all occupy.

How did tech become such a key in those trade tensions?

Fuller: It has been developing in quite a number of years. On the U.S. side, Americans have been unhappy for a number of years of what they perceived as inadequate protection of their intellectual properties in China, and in some areas, less access to the market than they would like. Triolo: It’s important to know that a lot of these issues have been around–China’s industrial policies and market access–for a long time. What’s new is that this administration has chosen to put technology the front center. In 2017, a new national security strategy in the U.S. talked about, for the first time, National Security Innovation Base, which said the whole U.S. technology sector now is much closer to U.S. defense and security. Then you have for the last two years of U.S. revamping the U.S. export control system and revamping of the reviews of the foreign investment in the U.S.

Huawei’s view on where Huawei fits in the global tech space

Purdy: We are not interested in being a bargaining chip between U.S. and China. [Americans] have to find a way to have an accommodation. We have to find a way to build trust and build communication like the China Institute does because there is an awful amount of mistrust. It’s clear that Huawei can go it alone. It’s gonna be a bumpy road, but we are going alone. The certainty is that the $11 billion dollar we spent on American companies—that could go away. And if Huawei goes our own way, we might not come back.

How does Huawei respond to the concerns over security?

Purdy: It’s more about the country than the company that the U.S. is worried about Huawei. Some government officials…they believe that China is not a rule-of-law nation. They believe that China would order whomever they want to do whatever they want. Specifically they believe that they would put backdoors in our products to force us either to steal intellectual properties or commit national security espionage, or launch attacks in a 5G world. They’d be able to shut down services that we depend on… But we don’t have the access [to data about] Chinese customers or American customers. The telecom operators control the access. There is no way that data is collected or sent back to China without people knowing it.

What’s the cost of China-U.S. tech decoupling?

Fuller: if you actually have a tech divorce, the cost would be extremely high. Principally, the U.S. dominates theses electronic design, automation tools, which make it very difficult to design any types of chips without those tools. There could be a way to work around it, but you will lose the efficiency. That could be a huge loss on the China Side. On the U.S. side, we are losing out in so many other areas. China is making a big push now to the semiconductor space. They are really trying out to learn the Taiwanese experience. But frankly, the Taiwanese experience actually, in some regards, save the U.S. semiconductor capital of equipment industries. The Taiwanese firms are pretty exposed to use U.S. equipment, as opposed to the major competitor of the time, Japanese equipment, and that really helped U.S. industries. …If China was cut off the U.S. there, it would not only help Chinese vendors, it would more importantly, help vendors from the third countries, and in this area, particularly Japan.

Triolo: Chinese companies are already designing out U.S. semiconductors for example. We are at a critical time that if the situation gets worse, the decoupling will go deeper. The ties between U.S. and China is so deep though. Some of the efficiencies that have been built into the system over the last 30 years [will be gone]…the accumulative effect on that could be very negative, depending on how deep it goes.

See the full event video via our YouTube channel:

Nina Huang is the Business Program Manager at the China Institute.

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