Huawei Chips Demonstrate The Perils Of Technology Protectionism

 

moon of alabama

Just a few month back I argued that the new economic protectionism the U.S. is pushing for will fire back:

Last week Secretary of the Treasury Janet L. Yellen gave a speech on the U.S.-China economic relationship. I called it a declaration of war.

Yesterday National Security Advisor Jake Sullivan held a speech on 'Renewing American Economic Leadership' which touched on some of the same themes as Yellen's speech.

Sullivan argues that the U.S. must change course from opening markets and liberalization to targeted protectionism and subsidies for specific sectors. The main argument for it is 'national security' but the real aim seems to be the suppression of competition from others.
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Sullivan's whole speech is an argument against free markets and for protectionism and sector subsidies. It does away with the economic framework the U.S. had build after the end of the second world war. This is supposed to be replaced it with bilateral and block wise agreements that are to the advantage of the U.S., to the disadvantage of its agreement 'partners' and which exclude China and other 'hostile' economies.

The so called 'decoupling' or 'de-risking' from China is actually an attempt to isolate it. It creates a dynamic that will lead to import replacements in China.

This will lower exports to China from the U.S. and its allies. The whole scheme will thereby eventually work to China's advantage.

Three years ago the U.S. prohibited domestic and foreign companies to stop the provision of 5G chips to Huawei. Thus a milestone of import replacement was revealed yesterday when Huawei announced a brand new 5G phone with Chinese made chips:

Huawei Mate 60 Pro has been silently launched in China. The successor to last year's Huawei Mate 50 Pro, brings several major upgrades including satellite calling support and an LTPO AMOLED display. The handset sports a 6.82-inch AMOLED display with an adaptive refresh rate that ranges between 1Hz and 120Hz and a 300Hz touch sampling rate.

The U.S. pushed to  stop supplies of 5G chips to Huawei. That led to a campaign to develop Chinese replacements. Huawei has also developed a graphic processor that is as fast as Nvidia's A100 GPU which is used for high performance computing and AI development. The new 5G chip the phone is using has been confirmed as being genuine.

The $300 billion import of chips to China has shrunken as the country is fast in developing domestic replacements.

On the same day Russia increased its autonomy with the first flight of the new SJ-100 SuperJet which is based on the replacement of systems that previously came from foreign suppliers but are now produced domestically:

United Aircraft Corporation CEO Yury Slyusar also highlighted the broader implications of the project, declaring it a "testament to Russia's technological self-sufficiency." Slyusar added, "Our primary aim now is to obtain full Russian certification for the plane and initiate regular shipments to airlines."

The launch of the plane and of Huawei's new phone came on the same day U.S. Secretary of Commerce Gina Raimondo ended her visit to China. It was certainly meant as a point.

Today's Global Times Editorial is rubbing it in:

Chinese companies will inevitably break through the blockade and move forward. This is the result of China's overall development and close integration with global interests. In this era of globalization, the idea of kicking Chinese companies out of the industrial chain will only encounter increasing resistance because it goes against the law of development. The resurgence of Huawei smartphones after three years of forced silence is enough to prove that the US' extreme suppression has failed. This also serves as a microcosm of the US-China tech war, reflecting the entire process and foreshadowing the final outcome. Recently, some American media outlets have been enthusiastic about hyping up things like Huawei is building a "secret" chip factory. Ultimately, these are all due to a failure to see or a refusal to believe in the general trend, and they hold on to outdated thinking that Chinese companies' technology is all "stolen." Essentially, it is Washington's technological arrogance, and the US will definitely pay the price for this arrogance.

As China is training more engineers and researchers than the U.S. and Europe combined, it will eventually take the technological lead in many fields. Other countries will have to either become more specialized or close their markets to imports from China.

The later will in the longer run cause a less competitive environment that will come with higher costs and can only be sustained for a relatively short time.

Posted by b on August 31, 2023 at 15:29 UTC | Permalink

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