In the past, trade wars used to focus on raw materials such as oil, metals and food. But in the digital era, targeting high-tech products is the best way to hurt your rival.
US President Donald Trump apparently knows this well. His administration’s decision to impose a seven-year export ban on Chinese telecommunications equipment maker ZTE Corp. is one such move.
The ban means ZTE will lose access to buy Qualcomm chips, Corning’s signature cover glass and even Google’s Android system. That will deal a huge blow to ZTE’s smartphone business.
Even before the export ban on ZTE, the US Congress barred the Pentagon from buying equipment from ZTE and Huawei Technologies. Last week, the Federal Communications Commission voted in favor of banning the use of government subsidies to buy equipment from the two companies, citing security concerns.
These moves will further slow the development of Chinese telecom firms in the US market.
But it is interesting to note that ZTE and Huawei are not always treated the same way in the United States.
In recent years, Huawei has spent a lot on research and development. For example, it now owns a wide range of patents for 5G technology, and it has developed its own Kirin chipset for smartphones.
Huawei, in fact, does not have to rely on chip suppliers like Qualcomm or MediaTek.
That is why the US government has treated Huawei and ZTE differently. For Chinese tech firms to survive in a trade war, the best defense is a good offense.
This article appeared in the Hong Kong Economic Journal on April 24
Translation by Julie Zhu
[Chinese version 中文版]
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