Export Bans & Restrictions on China Have Seen Desperation Turn Into Strength

While the US and its allies continue to place trade restrictions against China in an effort to impede its ability to develop next-generation technologies, Chinese manufacturers have been pushed to the limits of creativity to find alternative solutions and workarounds. What challenges has China faced, how has Huawei demonstrated resilience against these restrictions, and are these restrictions just making China stronger?

What challenges has China faced?

Over the past decade, China has faced increasing technological pressure from the US and its allies through the use of trade restrictions, export bans, and limited access to critical resources. One such example was when China planned to purchase an ASML Deep UV system for creating next-generation semiconductors two years ago, but the US stepped in and did everything it could to prevent the Dutch company from providing the system. Another more recent example is the halting of high-tech ARM CPUs by the UK on the grounds of national security.

By denying China access to the latest technologies, the West hopes that China’s military power will be crippled, and this will, in turn, make the concept of war an unthinkable prospect. At the same time, by retaining technological dominance, the West can ensure its economic dominance over nations that it considers unfriendly and ideologically at odds with Western living (i.e., capitalism and creativity against communism and conformity).

Whether these actions by the West are justified or not makes little difference to the challenges China faces; the restrictions are there, and thus China must find methods for coping. With limited access to semiconductor technologies, IP, and equipment, China is now looking towards a Chinese future that operates independently from Western supplies. One solution has been to kick-start China’s semiconductor capabilities, and new reports suggest that China has achieved 7nm devices. 

But large amounts of corruption and poor understanding of the semiconductor industry from high-up executives (i.e., those who qualified by being loyal to the Chinese government) have seen billions of dollars invested in companies that have failed or have failed to meet manufacturing targets. At the same time, the restriction of access to technologies has also seen domestic Chinese products falter, especially from companies such as Huawei. Foreign products from manufacturers in South Korea and Taiwan have seen much more success, as they are not covered by the trade restrictions.

Huawei to relaunch 5G capable devices

Despite the efforts by the US and its allies, Huawei has recently announced that it is getting ready to re-release its hardware with 5G capabilities. It is hoped that new solutions being explored will be ready by next year, allowing Huawei to regain market territory that it has lost to competitors. 

One solution to avoid the technology sanctions is to utilise less advanced chips designed by Chinese manufacturers. However, the capabilities of these chips pale compared to those used by previous Huawei models (before the bans) and those found in the iPhone 14, meaning that user experience will suffer. However, another more attractive solution is to move the 5G electronics into an external phone case which is then connected to a phone via a USB link. By doing so, the Huawei phone doesn’t need the 5G chips and therefore faces no restrictions, but 5G capabilities can be introduced with an external device. These phone cases are already in production and come with e-SIMS, making installation simple. 

While Huawei has a long way to go, it is determined to regain the market share it has lost and is looking into creative solutions to avoid trade restrictions. But unless the sanctions placed by the US are removed, Huawei remains at a severe disadvantage against manufacturers in the US, Europe, and other South-East Asian nations. 

Are these restrictions just making China stronger?

Even though the numerous trade sanctions against China are undoubtedly hurting their economy, military, and ability to develop new technologies, it also introduces a very serious risk of making China desperate. Those who are desperate will often go to extremes to survive, and all of these restrictions may see China become self-reliant on semiconductors and spark an entire industry that is isolated from outside influence.

One issue China faces is that creativity and individuality are rarely encouraged, both of which are essential for invention and technological development. However, if China decides to change its attitude in this area (through desperation), it could very quickly lead to numerous technological breakthroughs, and as these breakthroughs would be internal to China, it would make technological sanctions by the West redundant.

It is clear that China is starting to look towards itself for future technological solutions, and increasing pressure from the West is fuelling this drive. If the West pushes too hard, it could force China to become creative and find methods that avoid western influence entirely.