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View from Taipei: It’s complicated...

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So complicated that this analysis of the trade/cold war between the US and China is going to need three parts. Starting with China’s worries about national security. Yes, China’s.

The usual 'View from Washington' column is on one of its regular breaks in Taipei. It’s a great and timely chance to explore some of the key aspects of current Sino-US tensions and technology’s role in them (and maybe some hot stuff from Computex, but, well, events).

Part One begins by considering one of the less understood aspects: how the US moves against Huawei are being seen as much as a national-security issue on both sides as an economic one, and why that may make them extremely difficult to resolve.

The US position is relatively clear (at face value). It is explicitly targeting Huawei because of concerns over a company it sees as a near-proxy of the Chinese state providing much of the incoming 5G-network infrastructure.

For now, let’s put aside the suggestion that Donald Trump’s administration could retreat if China offers ‘concessions’ (as it did when it targeted ZTE). Those worries – ranging from espionage to malicious network disruption – are shared by many security experts in the US and abroad. They are not going away soon.

Less widely recognised is that China is thought by many to have taken Trump’s attack on Huawei as a direct attack on its own national security.

Here we need to look beyond the ‘pride’ Beijing is often said to feel toward Huawei as a ‘national champion’, beyond the company’s global role and into issues that go beyond dollars, cents and any loss of pride.

The critical point is that while Huawei is primarily associated with its telecoms activities, the company’s research and development work is also fundamental to China’s ambitious plans in artificial intelligence and its wider bid for technological independence under the Made in China 2025 programme.

As venture capitalist and Asian technology leader Kaifu Lee outlines in his excellent book AI Superpowers, Xi Jinping’s administration established its mid-term goal of AI world leadership in the 2017 New Generation Artificial Intelligence Development Plan. That plan was partly as a result of a ‘Sputnik moment’ - the defeat of the leading South Korean Go player the year before by the Google Deep Mind AI.

The Chinese see Go as more than a game. They link proficiency on its board closely to proficiency at military strategy in the real world. If a US-owned, UK-developed machine could achieve such a victory (and AlphaGo would go on to defeat China’s and the world’s best player, Ke Jie, in 2017), something needed to be done.

In that regard, the recent orders restricting how US (and US-related) technology companies work with Huawei, are thought to have been seen as a deliberate attempt to clip the wings of both the company and the government’s policies.

The news that ARM says it must also comply with the US government order even though it is UK-based and Japan-owned (the company has 1,400 staff in the US developing IP) illustrates the problem.

Huawei’s own neural processing units (NPUs) sit side-by-side with Arm’s Cortex-A76 and A55 CPUs and Mali G-76 GPU on the widely lauded Kirin 980 applications processor. All of those IP blocks are fundamental to the device – you can’t have one without the other.

Washington has not yet gone after China’s other nominated AI leaders – the BAT triumvirate of Baidu, Alibaba and Tencent, and machine learning unicorns such as Sensetime and iFlytek. Indeed, Sensetime and another high-profile Chinese AI company, Megvii, featured during Arm’s latest processor launch this week at Computex in Taiwan.

But these are early days.

For now, China is sticking to rhetoric and the possibility that, as has happened before, it might be possible to embarrass the Trump administration in court.

A ‘relevant official’ from China’s National Development and Reform Commission was reported on Tuesday (28 May) as suggesting that the country could disrupt exports of rare earth elements used in many high-technology products (China produces about 40 per cent of the world’s REEs domestically and owns a number of mines elsewhere).

Huawei itself today (29 May) said that it is now seeking an accelerated judgement of its existing suit against the US government over a ban on federal agencies buying its product. The company argues that this is unconstitutional because it has been applied without Huawei being given its due-process right to respond.

Of the two, Huawei may have the earliest results. But the persisting fear is that, even if it does, this genie has some serious travel plans.

And here we do need to return to Trump’s masterful ‘dealmakering’. In the case of ZTE, the US went in fast and hard but later made a substantial reverse. It was classic Trump – ask for something ludicrous and then inch down.

But how is he supposed to do that in the case of Huawei? It is not only a much bigger global player, it is a much more explicit target for many of the defence hawks in Trump’s administration. And then, there is the class-of-civilisations brigade. Even for the Donald, the art of this deal looks like an Edvard Munch.

But if he doesn’t….

Hopefully, you can now see why this might need three parts if it’s going to stay digestible.

Part Two is about supply chains. But please don’t let that put you off. Please.

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