Recently, the US Federal Communications Commission (US FCC) designated Chinese telecom vendors Huawei and ZTE as national security threats. Click here to know more.
The issue has now evolved into a full-scale duel between the two global technology powerhouses (US and China) and hints at a tech cold war.
What happened?
In February 2011, Huawei published an open letter to the US government.
It denied the security concerns raised about the company or its equipments.
It also requested a full investigation into its corporate operations.
In response, the House Permanent Select Committee on Intelligence began an investigation in November 2011.
It looked into the counterintelligence and security threat posed by Chinese telecommunications companies doing business in the US.
The committee submitted its report in 2012.
It noted that Huawei and ZTE could not be trusted to be free of foreign state influence and thus posed a security threat to the US.
In June 2020, the US Federal Communications Commission designated the two companies as national security threats.
How is U.S-China tech relations?
China has traditionally resisted allowing American big-data companies such as Facebook and Google to operate within its jurisdiction.
But there have still been significant dealings between the two countries on the technology side until now.
In 2019, Apple recorded $100 million of daily sales in China.
Chinese Huawei Technologies reported record revenues primarily from its exposure in western markets, including the US.
The latest US steps against Huawei mark the first real prohibitory action by a western government in nearly two decades.
The current events mark an escalation of the Sino-American tech tussle to beyond just these two countries.
What are the possibilities of a tech cold war?
Most observers see this as a ‘technological cold war’ that could extend beyond just the US and China.
This could have a bearing on the growing competition to dominate next-generation technologies.
Both countries would strive to limit the other’s access to its advanced know-how.
So, it could compel other countries, including India, to effectively choose between the two.
The US has blockaded Huawei on the ground that its equipment is designed to aid snooping.
There are fears that this would make American telecoms players dependent on subsidised Chinese technology.
But the question is whether other countries think the risks are high enough to dump a cheaper, viable option.
For China, the action has come at a time when 5G is set to be rolled out globally, with Huawei generally ahead in the race.
Undeniably, for most countries, a viable 5G rollout will need Chinese firms.
But, importantly, the 5G network in China relies on key components from the US.
The new American restrictions on the use of chipmaking tools mean Huawei could face shortages in the supply of specialist chips.
This is notably an area where the Chinese are trying to build expertise through their home-grown contender SMIC.
[SMIC (Semiconductor Manufacturing International Corporation) is a publicly held semiconductor foundry company.]
The conflict is thus being described as a geopolitical struggle over technology that threatens to divide the world into two distinct technological blocs.
How have India-China tech ties been?
Much of India’s telecom growth story has been supported by Chinese companies in both hardware and software.
But after the standoff in Ladakh, India has asked state-owned telecom service providers to exclude Chinese companies from the scope of their network upgrade contracts.
This was part of the wider decision to signal curbs on Chinese investments and tech companies in the country.
India also banned 59 mobile apps with Chinese links on grounds of a threat to national security.
Nevertheless, India’s has been hesitant in acting against Chinese equipment makers in the telecom industry.
This is because the Chinese have brought in a reasonable competitiveness to this market.
[It was earlier dominated by pricier European firms such as Nokia and Ericsson.]
However, the border clashes and the US action could now force New Delhi into the anti-China camp.
With the Chinese being increasingly blocked by governments in 5G networks, other global players could be at a competitive advantage.
This could have a bearing on how the global 5G rollout takes place, especially in the countries outside of North America and Europe, including India.
