What the New Tech Cold War Means for Taiwan
It is obvious that the Sino-American tech war is an extension of realist politics and is part of the Republican re-election campaign to portrait its leader as the Teflon president. The strategic competition between the Trump administration and the Communist Party of China (CPC) in information communication and technologies industries (ICTs) is all about the dominance of who defines the nature and rules of the global game for the future governance of technology. In fact, it seems that the United States is not simply apprehensive of Huawei’s innovations and quality of products, but rather, it is concerned about China’s increasingly dominant status in the ICTs sector as it cedes to Beijing’s unique power of control through the of agenda-setting of the global politics.
For example, the development of the future mobile communication standard is led by an industrial standard-setting consortium, the 3rd Generation Partnership Project, but its three most important Technical Specification Groups (TSG) are already populated with representatives from China’s enterprises. Ai Ming from Datang Mobile Communications Equipment Company Limited—funded by China’s State Council—is the vice-chairman of TSG CT (Core Network and Terminals). Huawei senior official, Georg Mayer, is the chairman of TSG SA (Service and System Aspects). Xu Xiaodong from China Mobile is the vice-chairman of TSG RAN (Radio Access Network).
Most important of all, the International Telecommunication Union is responsible for internationalizing communication standards, and its current secretary-general, Zhao Houlin, has been holding this position since 2015 with the full support from China. In response to all these perceived China threats, one of the fifty-one items on President Trump’s re-election platform announced in late August is to “win the race to 5G and establish a national high-speed wireless internet network” in his second term. (Although that plan is widely considered “as a short-term public relations ploy” to win the election.)
Nonetheless, the worries of other countries regarding China’s tech companies may be less about national prestige competition or geopolitics, but it is a matter of trust in China’s ICT products and services. China is a country with strong state-power and a weak civil society. In China, the CPC is the totality of the state as indicated in Article 1 of the National Constitution that states, “Leadership by the Communist Party of China is the defining feature of socialism with Chinese characteristics. It is prohibited for any organization or individual to damage the socialist system.” Furthermore, according to Article 30 of the Party Constitution, it will deploy CPC commissars in government agencies, schools, military, and even businesses “where there are three or more full Party members.” Huawei’s founder, Ren Zhengfe, is a former military officer and has been a CPC member since 1978. Also, CPC has a commissar, Zhou Daiqi, who is a high-ranking member in Huawei’s management board and is a member of its Disciplinary and Supervisory Committee. Both are bound to “carry out the Party’s lines, principles and policies” as specified by Article 32 of the Party Constitution.
Moreover, in 2017 China even passed the National Intelligence Law, and Article 7 commands any organization and individual to support China’s national intelligence effort. This fundamental worrisome directive embedded within the products and services offered by Chinese companies poses a valid security challenge to democratic societies in the West, and Chinese state influence in 5G infrastructure was discussed extensively by European representatives during what was later named as the Prague 5G Security Conference. This year, countries like Australia, India, Japan, and the United Kingdom are planning to avoid the use of Chinese-made equipment in their 5G rollouts.
The reputation of trust in the ICTs industry is an essential prerequisite for business success; China’s strong influence in domestic enterprises and its cyber warfare capabilities has spilled over to the commercial domain. The apprehensive global community has now witnessed China’s blurring of the dual use of technology between civilian and military purposes, which will inevitability lead to sacrificing its economic advancements and national ambitions.
In all this, the power dynamics between the United States and China bring multiple implications to the international community, and particularly to Taiwan.
First, given U.S. technology is so prevalent in the semiconductor industry, Chinese companies are destined to suffer difficulties in acquiring microchips in the short term. However, because China has a growing domestic and overseas market, especially in the developing world, the U.S. “decoupling” strategy can only slow down, but not suffocate China’s advancement in the tech sector. Past U.S. sanctions have already made Huawei plan to shift from using Android developed by Google to its self-developed “Harmony OS” on its mobile phone devices. The possible response from China is eventually transitioning to homegrown and self-reliant technologies. With the continuation of the purely politically-driven campaign by the Trump administration and the technological advancement made by Beijing with its global trend-setting agenda, it appears to present the divided ecosystem of ICTs world: one block led by the United States and the other advanced by China.
Second, under the evolving geopolitical environment, companies such as MediaTek, a leading Taiwanese fabless semiconductor company, are under immense pressure as they are closely interlocked with the supply chain of Chinese tech businesses. At the same time, while Taiwan Semiconductor Manufacturing Company (TSMC) lost its order from Huawei, the world’s largest semiconductor foundry continues to attract more international customers due to not only its innovative capabilities but also trustworthy branding without external state interventions. Soon, ICT companies will need to diversify not only their products and services but also customers to engage with these new challenges. But the lesson for Taiwan is that while China’s state-influence has backfired and damaged its ICT sector, Taiwan will continue to encourage innovations not reinforced by the state. In the past, Taiwanese industries have enjoyed successes due to their positive branding and credible reputations. As seen from China’s case, the CPC chose to weaponize this leading edge and leveraging their enterprises for the purpose of national security interests and national ambitions through the civilian and military infusion of technology. Such a policy can be very problematic and counterproductive in a trust-based global ICT market system.
Third, Taiwan has greater leverage in the global digital terrain. When Huawei was barred from purchasing from Qualcomm earlier this year, the Chinese giant sought out alternatives from Taiwan. Likewise, when the United States is looking for substitutes for Chinese-made ICT products, the Trump administration approached Taiwan. After the DoC announced the required software and manufacturing equipment ban in May, for example, TSMC decided to stop doing business with Huawei. In August, it was reported that Huawei cannot produce its own 5G chip—Kirin processor—because China’s domestic foundries are generations behind TSMC’s manufacturing capability, which was available to Huawei before the ban. It means that Huawei needs to find “another Taiwanese firm, MediaTek, for its chips” and industry analysts predict that Huawei purchases from MediaTek could “increase up to 300 percent this year due to the trade war.” Moreover, Chinese companies—with the underwriting of the central government’s semiconductor fund of $29 billion—are afforded to recruit the world’s best talents to China as the Trump administration restricts immigration which otherwise traditionally flows to the United States. Huawei and other tech giants have already recruited Taiwanese and other nationals with higher salaries and benefits.
Recognizing the critical importance of Taiwan for the effectiveness of the U.S. tech war with China in general and the political imperatives of the presidential re-election campaign in particular, the Trump administration signed a Joint Declaration with Taiwan on August 26 with the intention of future cooperation of “5G security.” The details are yet to be seen; nevertheless, it signifies that the highly advanced Taiwan is the critical interlocutor in the global ICTs enterprise and the evolving tech war between the two economic powers. It also signals that the Trump administration is quietly and cleverly using Taiwan in the president’s re-election campaign and geopolitical gamesmanship as “Teflon Don.” Therefore, it is important for Taiwan to realize its unique position in the American politics of international tech competition and make a strategic use of it for its own security, prosperity, and national identity.