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Saturday, 28 April 2018

A sales ban of American technologies could bring down the Chinese economy (Forbes)

Analysis: ZTE's Collapse Reveals China's Huge Dependence On U.S. Technologies

"The most important lesson we learned this past week after the U.S. imposed a 7-year ban on the sale of American technologies to China's second largest telecommunications supplier ZTE (effectively killing the company), is that all the major Chinese companies - and China itself - are deeply dependent on U.S. technologies for their existence.

ZTE and Huawei of course, but also the BATX (Baidu, Alibaba, Tencent, Xiaomi), Didi (China's Uber), and the largest Chinese companies including ICBC, Bank of China, China Mobile, China Telecom, Petro China or SAIC Motor, just to name a few.

They all rely, in some way or another, on technologies, components, software and intellectual properties from many American companies like Apple, 3M, AMD, Applied Materials, Cisco, Corning, Google, Intel, Micron, Microsoft, Qualcomm, Seagate or Western Digital.

A sales ban of American technologies could bring down the Chinese economy

Although difficult to imagine, but not impossible at the current state of the US-China trade dispute, if the U.S. decides to extend the American technology ban to other - or all - Chinese firms, this could bring the entire Chinese economy to its knees.

A realization that Chinese president Xi Jinping had probably in mind when he announced the "Made in China 2025" initiative earlier this month with the intent to create Chinese champions in industries like information technology (IT), renewable energy, electric vehicle, and robots.

China's Plan B: Copy American technology

Technology independence is a noble goal.

And at its current pace, with extensive government subsidies, China could reach its objective of becoming self-sufficient in core technologies like processors, memories, storage, networking or wireless in the next 7-years, and even perhaps in just 5 years.

The bad news is, what do you do while waiting for your technology industry to catch up?

Luckily for China, there's a plan B.

It would most likely take 3 to 6 months for advanced Chinese tech companies to duplicate U.S. core hardware components and software, which most are already available in open source anyway.

Of course, that would be totally illegal and infringe on the intellectual property of U.S. companies if these products or components were to be sold outside of China.

However, inside of China, the local government would probably see this as fair game."

Source: https://www.forbes.com/sites/jeanbaptiste/2018/04/22/analysis-ztes-collapse-reveals-chinas-huge-dependence-on-u-s-technologies/#6f751c5e7326

Author: Jean Baptiste is a Vice-President and Principal Analyst at Atherton Research, a global technology intelligence firm helping clients deliver successful go-to-market strategies.