Technology

China’s ‘Achilles Heel’ in technology war with the US


The US-China relationship in the technology sector is hard to save. Due to its dependence on foreign technology supplies, China is weaker than the US in this war.

“Long before China was seen as a US technology rival, Washington tightly controlled China’s technological advances,” said Nina Xiang, founder of China technology tracking platform Money. Network, write on Nikkei Asian Review.

Adopting agreements such as the Wassenaar Agreement – a multilateral export control mechanism – the United States and its allies ensure to keep a technological distance from China. As a result, despite its expanding scale and growing at an impressive rate, China still heavily depends on foreign technology.

The Huawei Technologies story is only one testament to this vulnerability. China’s entire technology sector is inherently vulnerable, possibly even crumbling, if it does not continue to import foreign technology.

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China relies entirely on foreign-made chips for the local aircraft ARJ21. Photo: Getty Images.

Depends on foreign technology

A few years ago, hardly anyone imagined the scenario of a technology split. However, the administration’s policies of former US President Donald Trump have caused Chinese businesses to begin to worry.

“The fact that the United States proactively blocks China’s technological advances is based on a deeply hostile stance,” wrote Ms. Xiang. According to assistant professor Mario Daniel at Georgetown University, history shows that export control is an instrument of economic warfare.

The US-China technology war has received special public attention over the past few years. However, it has long since rekindled. For decades, the United States focused on keeping at least two generations away from China in global modern semiconductor manufacturing capabilities.

Furthermore, when trying to build a foothold in the market with a lower level of technology, Chinese companies were soon beaten by foreign competitors with high-end products.

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Foreign companies have a 100% share in China’s lithography market. Photo: Reuters.

Such as lithograph, also known as lithography, or stone printing.

Around 2015, China’s Shanghai Micro Electronics tried to start mass production of 90-nanometer lithography equipment. However, the Wassenaar Agreement suddenly changed, allowing foreign companies to export equipment higher than 45 nm to China (the higher the nm number, the less advanced the technology).

Chinese chipmakers flocked to buy 65-nm lithography equipment from Dutch company ASML. Because they outperform the new 90-nm machines developed by Chinese companies.

According to official data, foreign companies have a 100% share in China’s lithography market. In which, ASLM accounts for 68% of the market, the remaining 32% is held by Canon and Nikon of Japan.

China’s reliance on foreign technology isn’t limited to semiconductors. China is currently the world’s largest auto market in terms of both production and sales, but about 80% of the chips needed by automobile engines and transmissions are imported.

Weakness in the relationship

Since 1978, China opened up the auto sector to foreign joint ventures and required foreign businesses not to hold more than 50% of the shares. However, after four decades of restrictions, Chinese manufacturers have yet to become the engine builders.

According to Xiang, the current shortage of automatic chips suggests that if supplies are suddenly disrupted, Chinese factories could shut down and production stalled.

In the medical sector, imports account for 80% of China’s high-end medical equipment segment. China also relies entirely on foreign-made chips for local aircraft ARJ21 and C919. Both use imported engines.

China also imports about 80% of mid-to-high-end sensors, while Microsoft’s Windows accounts for 88% of desktop operating system demand in a billion-dollar country. Apple’s OS X operating system also had a market share of 5.4%. Android and iOS account for nearly 100% of China’s market for phone operating systems.

In fact, the Covid-19 translation also exposes America’s dependence on China. Some studies show that 80% of the basic ingredients in the US-made medicine come from China.

However, the difference lies in the advanced technology. China cannot manufacture those products and has few alternative suppliers.

On the other hand, the US depends on China for low-end goods for cost savings. They are also available with alternatives.

Xiang said that it is difficult to reverse the technology divide between China and the US. However, the speed and scale will depend on future US policies.

“President Joe Biden should understand that trying to maintain China’s dependence on technology is in the interests of America,” wrote Ms. Xiang. In fact, Mr. Trump’s measures have spurred China’s efforts to achieve self-sufficiency.

“Alleviating short-term pressure on Chinese companies will prolong China’s dependence on US technology while avoiding severe global production disruption. much more than a sudden, violent split, “she concluded.

According to the Zing / Nikkei Asian Review

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