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USA vs Huawei, which could be the consequences?

May was a difficult month for the Chinese giant Huawei. The administration of Donald Trump placed the company on the blacklist to do business, forbidding any kind of commercial relationship with the United States without first having a special permit from the Department of Commerce. Derived from alleged “backdoors” in their devices that allowed the Chinese regime to spy on US citizens.

Huawei sanctions are not new, they began in January when the government of President Trump filed a lawsuit against the Chinese company, stating that it had conspired to steal intellectual property to the operator T-Mobile. Derived from these recent actions, Google made the decision to break relations with Huawei so it will immediately lose access to updates to the Android operating system, including access to the Play Store (its app store), Gmail and other functions, in the next Huawei smartphones.

This prohibition delays and jeopardizes the supply chain for the implementation of 5G services in the world, but future sales of the company are the most dangerous. Huawei, nevertheless, communicated that they have a “plan B” which consists of that they have increased for months the inventories of the necessary components to continue arming their equipment and for the development of their own operating system. Kirin, as it is known until that new operating system, will be released later this year or early 2020.

However, the company’s plan B does not seem to calm telephony service providers. Vodafone and EE, two of the largest operators in the United Kingdom, have decided to temporarily suspend orders for mobile phones with 5G technology to the Chinese manufacturer. For its part, Softbank and KDDI, the largest operators in Japan, have opted for the same maneuver. To make matters worse, the SD Association expelled Huawei, so the Chinese company will no longer have access to the use of microSD cards, technology that make use of most of their smartphones.

Huawei, inside China, enjoys great popularity since it is living a different reality from the West. For example, searches are done through Baidu, the Youtube alternative is called Toktok, and the most popular chat application is Wechat. Undoubtedly, Huawei is in a critical position where it seems that China is being confined, the future of this great Chinese company will depend on its trade negotiations with the rest of the world, but – mainly – with the United States. The world must consider that the supply chains nowadays are global and the fall of one of the most important companies in technological innovation can affect other international companies.

Or, in the effort to try to block China’s technological advance through this company, it could have the opposite effect and cause it to accelerate the development of technologies that compete with those Americans that currently dominate the market. Thus, we could see in the short-term progress in the development of Huawei devices that allow them not only to be self-sufficient, but to be a real alternative to Western technology.

THE WAR THAT COMES WITH TECHNOLOGICAL LEADERSHIP

According to experts in the field, China and the United States are in a competition to lead the world of technology, which has caused tensions between the two countries. On December 1, 2018, Meng Wanzhou, Huawei’s financial director and daughter of the founder of Huawei, was arrested in Vancouver, Canada for alleged violation of US sanctions against Iran.
Huawei, is the most important Chinese company in the manufacture of components for the development of fifth generation or 5G mobile networks. It is expected that this technology (5G) creates a new ecosystem of the Internet of Things, satisfying the communication needs of billions of devices connected to the network. We have found reasons to think that Iran is simply a pretext for the United States to stop the development of this technological giant. It must be taken into account that EE. UU has used commercial and financial penalties for political purposes.
This shows that China’s technological aspirations have raised concerns in the United States. UU In this regard, President Donald Trump has said that the trade war with China will protect US dominance and curb Beijing’s plans to achieve economic and technological supremacy – according to the New York Times.
On the other hand, in 2015, China approved a strategic plan known as “Made in China 2025”, an initiative that seeks the development of ten key sectors of high technology to modernize its manufacturing base, for example, in aeronautics and robotic. One of the main objectives is that, by 2025, Beijing will be 70% self-sufficient in these high-tech sectors. Added to this, Jun Canrong, associate dean of the International Study School of Renmin University in Beijing, said that “Even if the US it tries to block China’s development, it will not succeed, since China’s huge domestic market alone is enough to drive a mature industry of AI (Artificial Intelligence). ”
“Made in China 2025” has already given something to talk about. In the midst of the aeronautical crisis generated by the plane crashes of the Boeing 737 Max, which forced them to remain on land and contemplate the possible cancellation of more than 5,000 units, China announced to international markets the arrival of a plane that will compete with it. , the C919 of the COMAC company, which has a capacity between 168 and 190 passengers. This aircraft will represent an alternative to Boeing aircraft and a new competitor in the aeronautical market dominated by Airbus and Boeing.
So far, 815 COMAC C919 units have been requested. Those who have shown interest in this aircraft are, mainly, local companies and small companies from countries with great dependence on China. The COMAC C919 costs almost half the price of its competitors, but still needs to improve its energy efficiency, which puts it at a slight disadvantage.
It is worth mentioning that China is the main Boeing market, with 25% of the aircraft of this US company. Boeing even has a manufacturing plant in China, and has strategic alliances with Chinese companies that supply their components. Thus, a new Chinese competitor in the sector can bring as a consequence readjustments in the Asian aeronautical market. Boeing will be forced to adapt to these changes. However, derived from the crisis generated by the accidents of two 737 Max, Boeing is in a very delicate situation to commit to the development of new aircraft.
This situation benefits China to impose reciprocal measures against the United States for the Huawei case. China was the first country to order its airlines to suspend flights of the Boeing 737 Max aircraft. In addition, negotiations are currently underway to reach a trade agreement between China and the United States. One of the points in discussion is the export of Boeing 737 Max aircraft to the Asian country. Thus, it remains in China, given the crisis caused by these planes, how to continue with the talks, and what position to take to be benefited.
Without a doubt, China has given much to talk about. On the one hand, the Huawei case exposes the concerns of the US government. UU for the Chinese rise in technology, which could take away their leadership. On the other hand, China has been clear in its intentions to lead the world technology sector and the arrival of COMAC C919 brings it closer to its goal.

Do you know how this battle for technological leadership can impact your business? Write to info@riesgospoliticos.com.mx to provide you with the advice you need.

 

 

Photo by Lachlan Gowen on Unsplash