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Business News/ Opinion / Columns/  The US-China tech war is being fought across a bamboo curtain
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The US-China tech war is being fought across a bamboo curtain

The flexibility and porosity of the rivalry’s battle lines make space for interchanges that India could leverage to its advantage

Photo: APPremium
Photo: AP

It is becoming clear that the ongoing “tech war" between the United States and China is taking place along five fronts: semiconductors, network infrastructure, operating systems, platforms and content. While it was Beijing that first erected a defensive Great Firewall around its internet users over 25 years ago to censor content, it is now Washington that is on the offensive on all fronts. The ostensible reason for this, as cited by officials of the Donald Trump administration, is national security—to prevent espionage, surveillance and influence operations by the Chinese government, as also its corporate proxies and agents.

The deeper and less-articulated reason is strategic: the US wants to increase its relative technological advantage over China. It is doing this by containing China’s progress and by rejuvenating its own high-technology industrial base. Both sides of the partisan divide in Washington have recognized that three decades of globalization resulted in the relocation of high-tech industrial capacity away from its soil, and that even if American firms and investors reaped the benefits of free trade, the strategic consequence has been the empowerment of an economic competitor and political adversary in the form of China. Nation-states are sensitive to changes in relative power, and the US has decided that China is too close for comfort.

China will not be easily contained, but has prematurely turned the US against it. Take the semiconductor industry, for instance, where China heavily depends on imports from Taiwan, South Korea and Japan, all of which are US allies. Despite massive state-led investments in semiconductor manufacturing, China’s SMIC has only just become capable of producing chips using 14nm processes, while the Taiwanese TSMC’s 5nm chips are already in mass production. My colleague Pranay Kotasthane, an analyst of high-technology geopolitics, believes that SMIC will find it almost impossible to get these advanced levels on its own. With the US tightening export restrictions on sales of semiconductor technologies to Chinese companies, the silicon gap is likely to reduce China’s competitiveness at the upper end of the electronics value chain, and ripple across it. Chinese authorities and firms like Huawei are putting on a brave face, but the silicon setback they face is not only real but fundamental.

It’s a similar story on the infrastructure front. That Washington is cajoling, pressuring or incentivizing governments away from Chinese vendors of 5G equipment is well known. A similar game is taking place in the world of international submarine cables that connect the world and carry almost all of its data traffic. Earlier this year, Google and Facebook had to ditch their Chinese partner and Hong Kong landing point in order to be able to activate their cable to East Asia, which now only connects to Taiwan and Philippines. For its transpacific connection, the Chilean government chose a Japanese company to link to New Zealand and Australia instead of Huawei and Shanghai. As many of the cables built in the late 1990s and early 2000s reach the end of their economic lives, the topography of their replacements will be subject to intense geopolitical contestation. Beijing will have to fight to avoid being restricted to projects such as the one connecting Pakistan’s Gwadar Port to Mombasa in Kenya, as Washington seeks to limit the size and extent of the cyberspace Sinosphere.

As much as this is the year when Chinese apps and platforms were restricted in India and the US, it is also one which saw the launch of Chinese operating systems for desktops, smart phones and other devices. The software and content fronts of the tech war are more easily contested, but to prevail, the Chinese state will have to create massive network effects within and outside its borders. Chinese nationalism and Beijing’s diktat might drive domestic adoption of operating systems like Unity, Harmony and Kylin, but users in other countries are less likely to switch.

Unlike the Cold War, the challenge for the US and China is to take not only countries, but also companies and professionals along. Global supply chains are complex: economies of scale have resulted in some parts of it being concentrated in a few companies and locations, and Washington and Beijing cannot influence them beyond a point. Moreover, companies and individuals do not swing for geopolitical or nationalistic reasons alone. If semiconductor sales to China are banned, who will plug the $300 billion hole in industry revenues? Will Japanese and European firms decline lucrative contracts to build wafer fabs in China? To what extent can countries afford to reject Chinese 5G equipment or fibre-optic cable systems? China is wooing chip designers in South Korea, Taiwan, Japan and India with lucrative pay packages, but would they relocate at the cost of losing a US visa? A lot is uncertain. What is clear though is that political leaders, CEOs and technology professionals will confront tough choices in the coming years.

It is unwise to lapse into 20th century metaphors, for the battle lines of the US-China tech war are more in the nature of a flexible, porous Bamboo Curtain, rather than an impregnable iron one.

India must develop its own positions along the five fronts, without jumping to the comforting and illusory conclusion that self-reliance is the answer to all of them. It is not. The correct answer is some form of interdependence, with both the US and China, that ground realties and interests permit. Relations with China being what they are, New Delhi’s foreign policy goal must be to create circles of trust with the US, Japan, Taiwan, Australia, Singapore and South Korea that will help Indian companies, professionals and consumers find themselves in circles of opportunity.

Nitin Pai is co-founder and director of The Takshashila Institution, an independent centre for research and education in public policy

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Published: 30 Aug 2020, 07:53 PM IST
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