The US on May 15 announced a set of strict new rules intended to cut Huawei off from all advanced semiconductor makers. These rule changes set WeChat abuzz with what to do next.
Proposed responses range from a massive national project to catch up in semiconductor technology, to the rise of a new generation of Chinese young people better equipped to navigate and rewrite the rules of the global governance regime. A disconcerting number of articles suggest, at times as a casual aside, that Huawei’s problems would disappear if China takes control of Taiwan, and with it Taiwan Semiconductor Manufacturing Corporation (TSMC), the world’s largest contract semiconductor manufacturer.
Even the cooler heads propose rather aggressive industrial policies. Ning Nanshan, an anonymous Shenzhen-based commentator on Chinese industrial and economic developments, argues that Huawei will be able to buy cutting-edge chips that are free of American technological components in a matter of years, and that in the meantime Huawei’s business can survive in order to maintain China’s dominance in 5G.
He outlines the capabilities that Huawei and Chinese domestic fabricator SMIC would need to develop in the next few years in order to produce cutting edge and wholly “de-Americanized” chips, focusing on investments in EDA software, advanced lithography machines, and chip design research. In the interim, he suggests several measures that Huawei could take to shore up its business, and argues that it should use the 120-day buffer period to stockpile chips for 5G bases, even if that means letting the mobile phone business wither:
The U.S. has not attacked Huawei because Huawei is the second largest smartphone maker in the world, but because Huawei is the global leader in 5G technology.Therefore, Huawei’s chip stockpile must be used first and foremost to supply the needs of its 5G bases.
Meeting this demand should not be difficult. The number of base stations globally is in the tens of millions, constituting a small source of demand compared to the billions of mobile phones in the world. Nor will Huawei be building every single base station. Therefore, it is fully feasible to meet the chip demands of 5G base stations. In China, for example, there are expected to be 550,000 5G base stations built in 2020. Huawei can stockpile the millions of chips needed to build these base stations.
It is also important to note that because Huawei already provides 2G, 3G, and 4G services to more than 100 countries around the world, it is impossible for the United States to completely prohibit fabrication on behalf of Huawei. It will at least have to allow for the supply of chips for maintenance of existing infrastructure, lest it pose a threat to the network stability of many countries.
Of course, the mobile phone market is a different matter. Huawei shipped 240 million units in 2019, and supplying these phones with chips will be difficult under present conditions.
Li Guangman, a columnist for the hawkish news commentary site Chawang, advocates a broader approach to countering America’s Huawei ban in an article originally published on his own public WeChat account. He calls on China to meet force with force, dealing America five blows:
First, impose comprehensive sanctions on core American companies;
Second, in light of the fact that the US has threatened Chinese national security, cease the implementation of the first phase of the trade agreement, and stop buying American agricultural products;
Third, take advantage of divisions between America and its allies to form an international strategic alliance for science and technology;
Fourth, put China’s resources into building a national chip industry, ridding ourselves of dependence on the United States;
Fifth, sell off US Treasury bonds as soon as possible…
Right now, China needs the spirit of the “Two Bombs, One Satellite” Program, it needs the spirit of the Battle of Triangle Hill [trans: a Korean War battle remembered as a Chinese victory over the US], and it needs the spirit of self-reliance!
Li, and some of his vocal fans, think globalization was a mistake, suggesting the country was better off under Mao Zedong’s policy of total self-reliance. “It is unfortunate that the path of self-reliance was betrayed by the traitors to our nation. Now we can only count the losses and start on the path again,” the most upvoted commenter wrote.
Other writers think such a response would play into America’s hands.
Big Brother Flower Cat, anonymous author of the popular WeChat account Cat Brother’s Vision, thinks that Trump is playing three dimensional chess. He argues the semiconductor issue is a bait and switch, along the lines of Ronald Reagan’s “Star Wars” missile defense program.
If America’s aim were really to strangle Huawei, he argues, it would not allow a 120-day buffer period in which Huawei could stockpile two years’ worth of chips, and it would freeze Huawei out of the international banking system as it has some North Korean and Iranian banks.
America is not pursuing such an aggressive course of action, the article says, because it is hoping that China will spend hundreds of billions of dollars on semiconductor research—following the pattern of the Soviet Union, which some argue sped up its own economic demise by responding to US missile defense with a costly rearmament program.
By the time China’s investment begins to pay off, chip demand will plateau due to the introduction of new 5G-enabled technologies. He even suggests, rather unrealistically considering Huawei’s vested interest in fostering the growth of the mainland semiconductor industry, that America could grant permits to other companies to sell chips to Huawei after China has sunk massive investments into its domestic industry.
How should China avoid spending hundreds of billions on useless competition, the author asks? By invading Taiwan and getting control of TSMC:
This is an asymmetrical war. This is also a very painful war for us to fight. How do we break out of the position we find ourselves in? I have thought it over for several days, and concluded that the tried strategies will not be sufficient, our only option is:
Use force to break the situation! Reunify the two sides of the straits and take TSMC! Although this method cannot completely solve the problem, it can save us more than five years of catchup time in 5G technology and save a lot of money we would otherwise need to invest. Now I very much look forward to unification coming soon.
This author is certainly out on the extrmes to propose that China seize TSMC as a near term strategy for dealing with the Huawei ban. But many articles note that Huawei’s problems would disappear if unification occurs without going so far as to argue for unification as a means to that end.
Dai Wenchao is a former private equity fund manager who takes historical perspectives on contemporary economic questions through his pseudo-academic social media account. In “Huawei crosses the path and passes through catastrophe,” he looks at a wide range of historical moments, from the Mongol defeat of the Abbasids to the fall of Constantinople, that are used on Chinese social media and in Chinese classrooms to advocate confrontation with the West. The title specifically references two ancient ideas that are popular guides to present day issues.
The first, “crossing the pass,” refers the moment four hundred years ago when a rising Central Asian power crossed a pass near the Great Wall to topple China’s Ming Dynasty and establish the Qing Empire. The Ming Dynasty in this story is, of course, the US, and the idea of crossing the pass suggests that Huawei is coming to a Rubicon moment.
The latter, “passing through catastrophe,” is a Daoist concept that calls on an upstart to grab unprecedented power, even if it means incurring conflict with heaven. Both ideas suggest that Huawei cannot kneel in the face of foreign resistance to its expansion. But the author dismisses attempts to find easy answers to Huawei’s predicament, which he argues is China’s predicament, in earlier cases of rising powers challenging incumbent ones.
Just as Huawei’s rise was enabled by a unique blend of American-inspired management techniques, Chinese values, and a cut-throat growth-oriented “wolf culture” all its own, its continued rise on the world stage will require an entirely fresh approach to making oneself amenable to others’ needs while sticking to one’s guns:
Against the background of its rise, Huawei’s problems are also those that other Chinese companies will face, which will only come into greater clarity over the next twenty years. In the history of Chinese business, no company has walked this difficult tightrope set up by global governance. How should they cross it? The answer will not be found in our twenty-four centuries of history, Daoist magical arts, or in Confucian philosophy.
Although it is insufficient to find the answer to China’s rise vis-à-vis America in the Jurchen Army’s crossing the pass to conquer China, the name “crossing the pass” is notable—Huawei certainly has a “pass” it must cross, and China, too, has a “pass” it must cross. This is what will allow the world to understand us and treat us as we hope. As to how we cross the pass, history does not give us a silver bullet. We need a new generation of Chinese to rise to the occasion.
The problem that Huawei faces is a problem that China faces, and the answer for Huawei is the answer for China.
The debate about how China should respond to the Huawei ban is a microcosm of the broader debate raging about how China should deal with the US. Not all online commentaries are equally bombastic in their approach to the “Huawei problem,” as it is often called. Dai encourages Chinese companies to be more responsive and responsible when dealing with foreign rules. Ning concerns himself more with redoubled industrial policies than punitive sanctions.
But against the backdrop of a fiercely nationalistic discourse, even the most measured voices must reckon with the widespread view that the Huawei ban is just one stage in the same global struggle as the Korean War. Those who believe confrontation can be avoided are on the backfoot.