Wednesday, October 4, 2023
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The Empire strikes back

by Busines Newswire
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The moon waxes and wanes, the tide ebbs and flows, empires come and go but some empires come more than once. This is, once again, China’s time. While there have been moves to prevent this from continuing one recent event proves they are unsuccessful.

In August 2022, Executive order 14080 ostensibly aimed to boost USA’s domestic Semiconductor industry was nothing of the sort, it was aimed to stop China from developing. Just a month later Executive Order 14083 was designed to prevent China obtaining the technology which Could be used in military applications but is also used in smartphones, smart cars and pretty much everything else that might be considered smart.

These executive orders along with other Bills passing through Congress are not designed to protect and help US industry, they are, by the admission of the White House designed to slow China.

Even the White house admits, this is to counter China

However, it isn’t working. China is emerging as the global leader in economy, with a Price Purchasing Parity which overtook USA several years ago, a nominal GDP which is growing faster and stronger than the USA and could land China in the No1 slot as early as 2028. China is also way ahead in agricultural and manufacturing output while the US is by far ahead on services.

In a tweet last October it was clear that at least some tech experts and China watchers were confident, as a result of these Executive Orders and Congressional Bills, that the Chinese tech industry was finished. The tweet’s associated thread gathered over 81,500 “likes” and almost 27,000 reposts. Those that were commentating were very much in agreement; China was done!

While some pro-China accounts pronounced it would make China stronger, there were some interesting takes from people who obviously have no love for China questioning the possibility of something that most people who know China, knew would happen; a future event that, to many at the time, seemed unlikely; China would emerge stronger.

Less than one year later that moment arrived. Huawei, a company that has been targeted with sanction after sanction just for being good at what they do, without much fanfare, delivered the fully “made in China” Mate 60 Pro Mobile Phone. In doing so they achieved several goals; they proved the tech world wrong; they produced a sell-out phone; they have regained their place among the top brands in mobile phones globally after losing it due to US sanctions and have given a much-needed boost to Chinese pride.

The timing of the release was hardly a coincidence, US Commerce Secretary, Gina Raimondo was in Beijing and would undoubtedly have been made aware of her department’s failure to contain China and in particular, Huawei.

Without getting too technical, the phone is a 5G smartphone using Huawei’s own Harmony 4.0 operating system. People in the West have become used to a choice of iOS and Android, people in China have a third option, the Harmony system which has the ability to access another Huawei innovation, the PanGu Artificial Intelligence system. Oh, and as an additional extra, it will make satellite calls for only 8RMB per minute, that’s about US$1:20.

What fully “made in China” represents to the people of China is hugely important, 10,000 parts, all domestically made including the 7nm, Kirin 9000 Chip. This is as important a moment in Chinese history as the Macartney Embassy to China of 1792/93. That mission showcased all that was good from the British Industrial Revolution but was rejected by the Qianglong Emperor. Perhaps, in retrospect, a poor decision by China because that rejection ultimately created the conditions leading to the Opium Wars and China’s “Century of Humiliation”.

Huawei’s success in creating a mobile phone is seen as the moment China reverses this. In 2019, Trump signed an Executive Order which banned Huawei from using Android, That should have effectively destroyed Huawei’s mobile phone business. But it didn’t.

Huawei came back with its own “Harmony” operating system. Then, under Biden, suppliers of chips globally were forbidden to sell to Huawei, so, China’s SMIC manufactured its own. Huawei put them into the Mate 60 Pro and launched it that day, it sold out, within an hour in the stores and minutes online all 800,000 of them were sold. Huawei had more good news to announce, the same week they had shipped 100 million cumulative phones.

Huawei entered the smartphone market in Q4 2011 and captured 3.5% of total sales; in Q2 of 2020 the brand overtook Samsung to be the world’s most popular phone but then the US stepped in with sanctions. So, after capturing 20% of the entire smartphone market in that quarter, they were out of the running completely by Q1 2022. For many companies that would have been the end of the road. But Huawei is not like many other companies, it’s a very different and very resilient organisation.

Huawei employees are the owners of the company, that in itself, while unusual is not unique, some of the rules in “Huawei’s Basic Law” are interesting. An employee may retire at 45 years of age if they have worked for the company for 8 years and they may keep their shares. If they want to leave and go to another company, they return their shares. And, according to academic reports from inside the organisation, they attract the best, retain the best and many employees consider themselves to work as hard as the top level athletes, in order to remain as the best.

This is a success story for Huawei, but it is a huge success for China. When excluded from the Space Station by the Wolf Amendment, which even US think tanks decry as a poor decision, China built their own. When threatened by the world’s largest and most expensive military, China built a bigger, defensive military, when a stellar product of China is denied business opportunities on the global stage, China creates the environment whereby it can still outperform US products both internationally and domestically.

This isn’t just a commercial success; this is evidence, the empire can strike back and the empire is returning.


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