US-China trade war to definitely make a big impact on technology
“AS THE ULTIMATE goal of the US in current tensions lies in containing China, Chinese tech companies are set to face more difficulty in importing sensitive technologies and technology acquisition.”
In an exclusive interview with Natixis Chief Economist Asia Pacific Alicia Garcia Herrero, Tech Wire Asia learns of some of the issues that now concern those in the technology sector, in light of the strained relationship between US and China.
“This will present more hardship going forward for China to climb up the technology ladder with a good example as Austria, New Zealand and the US’s decision to ban Huawei as the provider for the 5G network.”
Although Huawei’s case has received considerable coverage by the media across the world, China’s technology footprint comprises of much more than just the telecom giant’s offerings.
The country, is, for example, one of the first in the world to export road-safe autonomous trucking and last-mile delivery solutions which are being leveraged by companies such as Walmart and XL Parts.
TuSimple, the autonomous trucking organization, is considered a class and category-leading technology company in the US, having its Level 4 Class 8 autonomous trucks in the state of Arizona for over a year.
TuSimple recently began generating revenue hauling freight for commercial carriers in the state as well.
The company has also raised almost US$100 million through Series B and Series C funding rounds back in 2017, which has fuelled the company’s expectations to expand its autonomous fleet to 200 trucks in the US and 500 trucks worldwide this year.
However, all that progress — and TuSimple’s autonomous trucks — might come to a grinding halt.
In the case of Huawei, concerns raised by the US about the company’s 5G solution has stirred a fair bit of trouble for the company globally.
And as we talk about Huawei, we must not forget about ZTE and other smartphone companies in China who are locked out of US markets and are struggling as a direct or indirect consequence of the trade war.
“As Chinese smartphone suppliers remain heavily dependent on US software and hardware input, trade tension will certainly cast a shadow on China’s 5G development. Despite Huawei’s progress, the US and its allies rejection on security concerns remain a huge roadblock ahead.”
At the height of the tensions, ZTE feared bankruptcy as a result of the sanctions placed on it by the US because it meant the company would not be able to source components such as processors, memory, optics, antennas, screens, operating system or applications from the likes of Google, Intel, Micron, Qualcomm, as Garcia Herrero pointed out.
— U.S. Commerce Dept. (@CommerceGov) June 7, 2018
“Tariff may disrupt the supply chain of Chinese tech exporter and cause a delay in their introduction of products. On top of that, lobbying of US over security issues for sensitive technology exported by China will also cast a shadow in foreign markets.”
Garcia Herrero’s insights suggest that TuSimple and other businesses like it such as Baidu, Huawei, and even Alibaba might not just have trouble setting up and nurturing their relationship with companies in the US but also struggle to create meaningful relationships in other foreign markets — as a result of the trade war.
Eventually, in the long-term, countries might even have to take sides, Garcia Herrero.
“In the long term, the trade war will likely lead to fragmentation of the global economic and financial system, given the strategic moves from both sides in forming alliances.”
However, the truth remains that the US-China trade war will definitely hurt Chinese technology companies a fair bit.
Companies with greater dependence on foreign sensitive technology will be likely to suffer more given the external economic warfare.
“Overall, we expect China to face more hardship given China’s structural dependence on productivity growth and technology progress, especially with population growth slowing down,” concluded Garcia Herrero.