Research Publication – Reality Bytes – Clash of the Titans

RFM teams up with Alastair Newton of Alavan Independent to provide subscribers with an in-depth political and technical assessment of the current trade/technology war between China and the USA. 

This rivalry is going to last. This is because even with a trade deal in place, the USA and China are going to fiercely compete for global technology leadership. This is likely to lead to the emergence of dual standards with other countries being forced to choose. These will be the standards of tomorrow. In semiconductors and handset software, the Chinese are hopelessly outclassed for which Huawei is already paying the price. However, where standards have yet to emerge, the Chinese will invest heavily to be neck and neck with the USA. This can already be seen in AI, but as AI does not cross boundaries very well, it will not help the global ambitions of either party.

• Technology rivalry. Behind the rhetoric and ever-increasing tariffs is a rivalry where the USA and China each seek to create the technology that is adopted by the rest of the world. This rivalry will persist beyond the current administration and will be decided in future technologies rather than those that exist today.
• Economic fall-out. There is very little similarity to the cold war as the economies of the USA and China are deeply integrated whereas the USA and the USSR were completely isolated from one another. This means that a long and drawn out trade war will have economic implications for the global economy as will the technology war that follows any trade deal.
• Dual standards are very unlikely to happen in semiconductors or smartphones where the technologies at play are very well established. Instead, this could occur in 5G with the creation of an incompatible Chinese version, augmented reality or vehicle data and self-driving.
• Made in China 2025 is likely to badly fail in semiconductors. Furthermore, as China is unable to source the capital equipment for the cutting-edge nodes, it is almost certain to remain behind. The emergence of a new system such as quantum computing offers an opportunity but this is years away.
• Artificial Intelligence: is becoming increasingly important as more and more human lives are lived within the digital domain. Hence, AI will be critical but there are no barriers (unlike semiconductors) meaning that AI is a level playing field for anyone who wants to invest. However, the nature of deep learning means that AI developed in China won’t work in the USA and visa versa. Hence, AI means very little when it comes to global technology dominance.
• Smartphone software: Outside of China, it is virtually impossible to sell a smartphone without Apple or Google software installed on it. There are no practical workarounds leaving smartphone makers dependent on Google software to sell smartphones outside of China. Huawei’s collapsing market share is all the evidence needed to make others very nervous.