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Today it is one of the world’s three biggest providers of equipment on cell towers, alongside Finland’s Nokia and Sweden’s Ericsson.
Huawei’s critics often allege that its success rests on a foundation of stolen intellectual property, though this is only partly true.
Theft of intellectual property may well have benefitted the company, but it can’t explain its success. No quantity of intellectual property or trade secrets is enough to build a business as big as Huawei. The company has developed efficient manufacturing processes that have driven down costs and built products that customers see as high-quality. Huawei’s spending on R&D, meanwhile, is world leading.
A Wall Street Journal review of total subsidies provided by the Chinese government reached a figure of $75 billion, in the form of subsidized land, state-backed credit, and tax deductions at a scale far above what most Western companies get from their governments, though the benefits provided to Huawei might not be too different from what other East Asian governments provide to priority companies.
The lack of clarity about Ren’s transition from the People’s Liberation Army to Huawei remains puzzling. The company’s complex and opaque ownership structure has also provoked reasonable questions.
Nevertheless, the thesis that Huawei was purpose built by the Chinese state has never had strong evidence behind it.
Huawei’s ambitions only grew. Having provided the infrastructure that makes phone calls possible, it started selling phones, too. Soon its smartphones were among the world’s best sellers.
company had two key vulnerabilities: access to Google’s Android operating system, the core software on which all non-Apple smartphones run, and the supply of the semiconductors that every smartphone requires.
By the end of the 2010s, Huawei’s HiSilicon unit was designing some of the world’s most complex chips for smartphones and had become TSMC’s second-largest customer.
“Spectrum is far more expensive than silicon,” explains Dave Robertson, a chip expert at Analog Devices, which specializes in semiconductors that manage radio transmission. Semiconductors have therefore been fundamental to the ability to send more data wirelessly.
Partly, 5G networks will send more data by using a new, empty radio frequency spectrum that was previously considered impractical to fill. Advanced semiconductors make it possible not only to pack more 1s and 0s into a given frequency of radio waves, but also to send radio waves farther and target them with unprecedented accuracy.
Cell networks will identify a phone’s location and send radio waves directly toward a phone, using a technique called beamforming.
American chips and other components constitute nearly 30 percent of the cost of each Huawei system. However, the main processor chip was designed domestically by Huawei’s HiSilicon chip design arm and fabricated at TSMC. Huawei hadn’t reached technological self-sufficiency.
If the trends of the late 2010s were projected forward, by 2030 China’s chip industry might rival Silicon Valley for influence. This wouldn’t simply disrupt tech firms and trade flows. It would also reset the balance of military power.
1991 Persian Gulf War—and the fear that the surgical strikes that had defanged Saddam’s army could be used against any military in the world—was felt in Beijing like a “psychological nuclear attack,”
Beijing’s aim isn’t simply to match the U.S. system-by-system, but to develop capabilities that could “offset” American advantages, taking the Pentagon’s concept from the 1970s
Georgetown University’s Ben Buchanan has noted that a “triad” of data, algorithms, and computing power are needed to harness AI. With the exception of computing power, China’s capabilities may already equal the United States’.
China doesn’t have any built-in advantages in gathering data relevant to military systems.
Measured by the number of AI experts, China appears to have capabilities that are comparable to America’s. Researchers at MacroPolo, a China-focused think tank, found that 29 percent of the world’s leading researchers in artificial intelligence are from China, as opposed to 20 percent from the U.S. and 18 percent from Europe. However, a staggering share of these experts end up working in the U.S., which employs 59 percent of the world’s top AI researchers.
In the third part of Buchanan’s “triad,” computing power, the United States still has a substantial lead, though it has eroded significantly in recent years. China is still staggeringly dependent on foreign semiconductor technology—in particular, U.S.-designed, Taiwan-fabricated processors—to undertake complex computation.
researchers at Georgetown University, found that less than 20 percent of the contracts involved companies that are subject to U.S. export controls. In other words, the Chinese military has had little difficulty simply buying cutting-edge U.S. chips off-the-shelf and plugging them into military systems.
All these efforts to use microelectronics to spur a new “offset” and reestablish a decisive military advantage over China and Russia, however, assume the U.S. will keep its lead in chips. That’s now looking like a risky bet.
China had driven U.S. solar panel manufacturing out of business. Couldn’t it do the same in semiconductors? “This massive $250 billion fund is going to bury us,” one Obama official worried,
Yet the twin pillars of American tech policy—embracing globalization and “running faster”—were deeply ingrained, not only by the industry’s lobbying, but also by Washington’s intellectual consensus.
Obama administration moved slowly on semiconductors, one person involved in the effort recalled, because many senior officials simply didn’t see chips as an important issue.
But during the decades Washington thought it was “running faster,” its adversaries had grown their market share while the entire world had become frighteningly reliant on a handful of vulnerable choke points, in particular Taiwan.
“Policy can, in principle, slow the diffusion of technology, but it cannot stop the spread.” Neither of these claims was backed by evidence; they were simply assumed to be true. However, “globalization” of chip fabrication hadn’t occurred; “Taiwanization” had. Technology hadn’t diffused. It was monopolized by a handful of irreplaceable companies. American tech policy was held hostage to banalities about globalization that were easily seen to be false.
So Washington kept telling itself that the U.S. was running faster, blindly ignoring the deterioration in the U.S. position, the rise in China’s capabilities, and the staggering reliance on Taiwan and South Korea, which grew more conspicuous every year.
China would use its position as the world’s key manufacturer of electronics to insert back doors and to spy more effectively, just as the U.S. had done for decades.
on the National Security Council, a handful of discreet officials led by Matt Pottinger, a former journalist and Marine, who eventually rose to become Trump’s deputy national security advisor, were transforming America’s policy toward China, casting off several decades of technology policy in the process.
The new administration’s China team didn’t agree. They concluded, as one senior official put it, “that everything we’re competing on in the twenty-first century… all of it rests on the cornerstone of semiconductor mastery.” Inaction wasn’t a viable option, they believed. Nor was “running faster”—which they saw as code for inaction.
“Our fundamental problem is that our number one customer is our number one competitor.”
most people barely noticed how different parts of the government—from Congress to the Commerce Department, from the White House to the Pentagon—were refocusing on semiconductors in ways unseen in Washington since the late 1980s.
What the ZTE saga showed above all was the extent to which all the world’s major tech firms relied on U.S. chips. Semiconductors weren’t simply the “cornerstone” of “everything we’re competing on,” as one administration official had put it. They could also be a devastatingly powerful weapon.
Three companies dominate the world’s market for DRAM chips today, Micron and its two Korean rivals, Samsung and SK Hynix.
DRAM requires specialized know-how, advanced equipment, and large quantities of capital investment.
After deliberating, the Trump administration decided to use the same tool it had deployed against ZTE, reasoning that it made more sense to address a trade dispute with a trade regulation. Jinhua was cut off from buying U.S. equipment for manufacturing chips.
This gave the U.S. a powerful new tool to put out of business any chipmaker, anywhere in the world. Some of the doves in the Trump administration, like Treasury Secretary Mnuchin, were nervous. But Commerce Secretary Wilbur Ross, who had the authority to impose export controls, thought “why the fuck wouldn’t we use this?” according to one aide. So after Jinhua paid invoices to the U.S. firms that supplied its crucial chipmaking tools, the U.S. banned their export. Within months, production at Jinhua ground to a halt. China’s most advanced DRAM firm was destroyed.
Why did Australian and British cybersecurity experts differ in their assessment of Huawei risk? There’s no evidence of technical disagreements. UK regulators were quite critical of deficiencies in Huawei’s cybersecurity practices, for example. The debate was really about whether China should be stopped from playing an ever-larger role in the world’s tech infrastructure.
The United States government didn’t agree. The issue with Huawei went far beyond the debate over whether the company helped tap phones or pilfer data.
The real issue was that a company in the People’s Republic of China had marched up the technology ladder—from, in the late 1980s, simple phone switches to, by the late 2010s, the most advanced telecom and networking gear.
The pressing question was: Could the United States let a Chinese company like this succeed? Questions like this made many people in Washington uncomfortable.
Huawei’s business model wasn’t much different from that of Sony or Samsung when they first won a major position in the world’s tech ecosystem. Wasn’t a bit more competition a good thing? On the National Security Council, however, competition with China was now seen primarily in zero-sum terms. These officials interpreted Huawei not as a commercial challenge but as a strategic one. Sony and Samsung were tech firms based in countries that were allied with the U.S. Huawei was a national champion of America’s primary geopolitical rival.
Hobbling Huawei’s rise became a fixation of the administration. When the Trump administration first decided to turn up its pressure on Huawei, it prohibited the sale of U.S.-made chips to the company.
One might have expected the offshoring of chipmaking to have reduced the U.S. government’s ability to restrict access to advanced chip fabrication. It would certainly have been easier to cut off Huawei if all the world’s advanced chipmaking was still based on U.S. soil. However, the U.S. still had cards to play. For example, the process of offshoring chip fabrication had coincided with a growing monopolization of chip industry choke points. Nearly every chip in the world uses software from at least one of three U.S.-based companies, Cadence, Synopsys, and Mentor
Many of these choke points remained in American hands. Those that didn’t were mostly controlled by close U.S. allies.
international political and economic relations were increasingly impacted by what they called “weaponized interdependence.” Countries were more intwined than ever, they pointed out, but rather than defusing conflicts and encouraging cooperation, interdependence was creating new venues for competition.
it’s surprising that China’s done nothing to retaliate against the hobbling of its most global tech firm.
Beijing has evidently calculated that it’s better to accept that Huawei will become a second-rate technology player than to hit back against the United States. The U.S., it turns out, has escalation dominance when it comes to severing supply chains. “Weaponized interdependence,” one former senior official mused after the strike on Huawei. “It’s a beautiful thing.”
So great is China’s government support for YMTC that even during the COVID lockdown it was allowed to keep working, according to Nikkei Asia,
