Could Huawei smartphone deal fail spell full-blown Sino-US trade war?

Apple and China tech news stories could have wider implications, not just for IT buyers, but the global economy

This week a deal between Huawei and AT&T to sell its smartphones in the US collapsed after pressure from senators worried about unspecified security concerns. It was a major blow to the world’s third largest device maker and could result in tit-for-tat retaliation by Beijing. In China, Apple announced it would be handing over management of iCloud services to a local government-owned partner — in order to comply with Chinese laws created as a result of escalating tensions and protect its revenue stream in the Middle Kingdom.

These two tech giants are at the center of what could well become a major trade dispute between the world’s pre-eminent superpowers. If it continues to escalate, it could spell disastrous news, not just for IT buyers, but the global economy.

 

A long time coming

It’s a battle that’s been brewing for years. On the one side, US firms — and technology players in particular — are desperate to access China’s vast market of over one billion internet users. To do so, they’ve been prepared to put up with strict Chinese laws which demand partnering with domestic firms, and technology transfers which can expose IP to the local partner. Along with out-and-out IP theft in the form of cyber espionage — carried out with the blessing or perhaps even backing of the government — this has helped Chinese firms catch up fast in the technology stakes over the past few decades. Censorship of various US platforms — think Twitter, Facebook and Google — also helped to provide a useful vacuum for local players to thrive.

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Now the US is hitting back. The first big move came when lawmakers effectively banned Huawei and ZTE from touting for telecoms infrastructure contracts in the US, citing national security concerns. Then came the NSA leaks and revelations from the portable USB drives of Edward Snowden, describing how US intelligence had been spying on China for years by intercepting and bugging US-made Cisco routers. That was all Beijing needed to escalate its own policy of prioritising homegrown products and putting yet more roadblocks in the way of US firms.

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