China vs. US: Lost in Translation?

Article By : Junko Yoshida

Is the US-China trade war a case where people in two different cultures are totally misunderstanding each other's interpretation of the ground rules?

“I wonder if this is a case where people in two different cultures are totally misunderstanding each other’s interpretation of the ground rules, which has led both to feel the other has cheated them.”  

– Ron Wilson, former EE Times Editor

The minds of the United States and China do not meet when it comes to understanding how in the world we’ve arrived at our current trade relationship. They clash.

Both sides blame each other for what they perceive as injustices committed against their country, economy and people.

In a few short weeks, tensions have ratcheted up remarkably fast. The result is two vastly divergent narratives articulated by the two nations’ leaders. In China, Xi Jinping describes this economic war as China’s new Long March, a deeply resonant political reference signifying the willingness of the seemingly defeated to endure hardship and deprivation in the service of achieving future victory. In the United States, the President embarked on this trade war over economic matters; he now frames the dispute as an issue of national security.

Such claims inevitably shape the way people in the two nations see one another. What we say matters, inescapably determining who we are. No one can afford to ignore the quickly widening perception gap between America and China.

Patriotic tax

Earlier this week, we asked colleagues at EE Times China in Shenzhen for their views on the trade war with the United States, and what they perceive as the mood of the country today.

Understandably, our colleagues referenced to some China's WeMedia [social media] or key opinion leaders “inciting national sentiment.” One pointed out that to buy a Huawei phone is now seen as “paying a patriot tax.”

Meanwhile, sales of Apple's iPhone in China dropped 30% in the first quarter.

No surprises there. I expect no less from China.

But on the electronics industry level, rhetoric against the United States appears surprisingly restrained.

According to EE Times China, leaders of China’s electronics industry – including Ren Zhengfei and Huawei – “remain very calm and pragmatic.” Instead of appealing to populist nationalism, Huawei founder “Ren thanks all US suppliers publicly for their support in the past. And he said he hopes to compete in a fair environment.” He also denounced the idea that “using Huawei products is patriotic,” our colleagues explained. “He even said that he bought his family Apple iPads.”

Aspire to become a ‘spare tire’

Fueling the Chinese electronics industry today, however, is the resolution, led by domestic chip vendors, to turn this adversarial environment into opportunity. They are fired up.

At a time when many global tech companies have stopped trading with China at the request of the U.S. Commerce Department, the Chinese are framing the moment as a once-in-a-lifetime chance to become an alternative — or “plan B” — supplier to Huawei. In China, they call this second-source supplier a “spare tire.” Even if they don’t have the right parts and components today to meet Huawei’s quality standards, China’s aspiring spare tires are striving to upgrade their technologies.

One of our analysts at EE Times China told us that she talked to several “plan B” suppliers, who confirmed that Huawei had already reached out to them. “Huawei gave them very stringent inspection clause and presented the clause that is much stricter than what’s given to U.S. suppliers.”

In short, what looks like a big blow to Huawei today, and a victory for U.S. protectionism, may not last. In a country whose economy is built on five-year or 10-year plans, the Chinese electronics industry is accustomed to playing the long game.

The Trade War’s Impact on the Supply Chain

In contrast, the U.S. is all about quarterly financial results. Most Americans have no idea what the nation’s long-term strategy is. Does the government even have a plan to revive the U.S. electronics industry, other than cutting off Huawei from the global electronics supply chain?

Lost credibility

Our colleagues in China are reluctant to discuss their nation’s politics, lest Big Brother overhears. Asked about the ongoing conflict with the United States, the answer was not controversial: “Everyone needs to survive. If we cannot change the political situation, then we adapt to it.”

I have a feeling that our colleagues in China were too polite to state flatly that the United States today has lost credibility as a bastion of democracy and free speech.

I was born and raised in Japan. There people have long revered not only American products, but the very ideas that the United States stands for. The Japanese look up to the U.S. because of its Constitution and institutions, but even more so for the goodwill and generosity that America has spread throughout the world over decades. Now, visiting back home and elsewhere, I see clearly that faith in the United States is fast fading away.

us china

As we discussed the trade war, one Chinese colleague wondered: If there are companies in the U.S. electronics industry who don’t agree with the trade policies of the current administration, why aren’t they speaking up?

This ain’t China, after all.

In other words, whatever became of profiles in courage? Chinese people are asking why U.S. citizens aren’t allowed to say in public what they believe is right?

She wrote, “I’m curious [to know] why no IC vendors in the United States gather together, looking for justice to protect their own benefit?”

America’s free-wheeling style seems to have gone into hibernation. Today, the norm is closer to mutual distrust, sometimes sinking to open hostility. Most people simply prefer to keep mum on policy matters that impinge on everyone’s life and future. Nobody appears anxious over the fact that a wholesome exchange of ideas, people, and technologies with China has ground to a halt.

As Dieter Ernst, a senior fellow at the Centre for International Governance Innovation (Waterloo, Canada) and the East-West Center (Honolulu), pointed out, “Much damage has already been done to America’s once seemingly invincible ‘soft power’ image.”

China vs. US: Tech Warfare Hurts All

Ernst just returned from field research in China’s AI industry. He studied key players: The BATs (Baidu, Alibaba, Tencent), Huawei, some AI unicorns, AI chip companies, and leading AI research institutes. Ernst said:

Without exception, all interviewees were very concerned whether secure access to core components and support services might be disrupted through a progressive ‘decoupling’ of existing U.S.-China IT value chains. An equally important concern is the growing incidence of visa restrictions imposed on Chinese students, on the engineers and managers of these companies, and on members of Chinese research institutes.

Noting that most of his interview partners were “visibly hurt by the aggressive language used in the U.S. policy announcements,” Ernst said, “This deep sense of disappointment was even more palpable among students when I gave talks at China’s leading universities.”

Noting that most of his interview partners were “visibly hurt by the aggressive language used in the U.S. policy announcements,” Ernst said, “This deep sense of disappointment was even more palpable among students when I gave talks at China’s leading universities.”

Why the U.S. feels wronged by China

I think I’ve made clear how China perceives the United States. But any conflict has two sides.

Many EE Times readers, for example, have highlighted IP thefts by the Chinese as a prime reason driving the United States to punish China.

Ron Wilson, a former editor of EE Times, recently wrote to Ernst, in response to Ernst’s piece on EE Times, “You mentioned speaking with a number of people in the Chinese fabless companies, and their sense of betrayal by the United States. I wonder if they are aware of the equal sense of betrayal here, where US executives and engineers feel that their openness and trust has simply been used as a source of free IP.”

Wilson wonders if this is a case of people in two different cultures totally misunderstanding each other’s interpretation of the ground rules, thus leading both to feel cheated.

Any mention of IP theft issues is usually absent in speeches by either the Chinese government or Huawei. This seems to support Wilson’s theory. In the Chinese narrative, IP thefts have never happened.

But Wilson’s most astute observation was this question: “What happened to the sense of healthy, collaborative competition that used to pervade the US semiconductor industry?”

Undoubtedly, the current animosity – or a glaring perception gap between the two nations – threatens the future of the global electronics industry. Do we ever work together again?

Wilson explained that in the past, “Certainly everyone protected their vital trade secrets, but there used to be a sense of a vast area of pre-competitive R&D that should be pursued by international collaboration.” He noted that U.S. companies supported this, “believing that they would always have at least an equal chance of taking the results and turning them into successful products.”

He wonders if that confidence “just ebbed away in the wake of the successes of TSMC and Samsung under that model.” Or, he added, “Maybe the overt Chinese attempts to subvert the process through espionage, protected domestic markets, and state subsidies convinced the US that collaboration would no longer work.”

I wonder how many of us in the engineering community believe that today.

Wilson recalled talking to a network equipment executive several years ago, who told him that as a U.S. company, he stood alone without state support. He said he competed in a market not against other companies, but against governments.

“Perhaps years of that feeling are finally causing a reaction,” said Wilson. “If that is the case, perhaps what we are seeing is the result not of China’s aggressive industrial policy, but of the US’s lack of one.”

Wilson isn’t hopeful.

He concluded: “If so, I have a feeling that the cost of the resulting, perhaps irreconcilable rift is going to be far higher than would have been the cost of aggressive US support for its key industries.”

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