Jun 7, 2018

Why our tech battles with China are so complicated

Illustration: Lazaro Gamio/Axios

As tech companies get drawn into the deepening trade fight between the U.S. and China, sound bites are winning at the expense of a smarter understanding of the two nations' web of competition and cooperation.

The bottom line: Understanding where the U.S. is vis-à-vis China means accepting hard and competing truths. It's true that China would love its tech industry to take over more of the leadership and value the U.S. has in areas like chips, software and internet services. And it's equally true that the U.S. is utterly dependent on China.

"That complexity doesn’t translate well on a bumper sticker."
— Dean Garfield, head of Information Technology Industry, a trade group representing U.S. and global tech companies.

Where we are now: Facebook is the latest company to get caught up in the battle over China, with leading papers blasting headlines such as "Facebook Gave Data Access to Chinese Firm Flagged by U.S. Intelligence."

To be sure: That's true, but keep in mind these headlines could also be true...

  • "Google shares entire operating system with nearly every Chinese phone maker"
  • "Apple tells Chinese manufacturer exactly how to build its iPhone"

The fact is that Chinese companies are critical suppliers and partners to U.S. tech companies. Using Chinese manufacturing allows consumers around the globe to get the technology they want at prices they can afford, Garfield said.

  • "No one wants to pay $500 for a t-shirt or $10,000 for a phone," he said. Access to the giant Chinese market is also attractive to U.S. tech companies.

Reasons for concern: This dependence, though, is challenging.

"There is no doubt there are legitimate concerns — both national security and economic — related to China. The thing that we in the tech sector try to avoid is being reductionist in assuming simply because it is China that it is bad. That is simply not the case."
— Dean Garfield

It's complicated: Political consultant Bruce Mehlman says there is naiveté among both elected officials and industry players, with elected officials "not realizing how global the supply chains have become" and tech companies underestimating the global implications of China's "overwhelmingly aggressive" 2025 plan to dominate the tech industry.

"The core issue is that both nations want to dominate a sector defined by network effects. The best innovators leverage bigger data sets, larger consumer bases, global customers, while the most aggressive nationalists aim to box-out others’ products and people."
— Bruce Mehlman to Axios

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