By Asa Fitch and Stu Woo
In a world where geopolitical power is increasingly linked to
technological advancement, the U.S. has long led its rivals.
American companies make some of the world's fastest computers,
deadliest jet fighters and most capable robots.
But China's growing economy -- now the world's second largest --
and huge government investments in technologies are eating away at
that edge like never before.
Such progress has spurred President Trump's all-out trade and
economic battle with Beijing, encompassing tariffs, export controls
and a crackdown on Chinese scientists allegedly stealing American
It's not clear yet how the economic devastation wrought by the
coronavirus will change the rivalry, but one thing is certain: The
disease hasn't done much to cool tensions. The Trump administration
is weighing new curbs designed to hamper China's ability to make
leading-edge semiconductors, according to people familiar with the
matter. The chairman of Chinese telecom giant Huawei Technologies
Co. warned last month that Beijing would impose its own
restrictions if the U.S. moves forward with that plan.
The most visible technological battle has been over 5G, the
superfast cellular networks that promise to be the foundation for
tomorrow's technologies. The U.S. government has taken
extraordinary measures to try to thwart Huawei, the
cellular-technology leader that Washington considers a
The battle has also extended to other technologies that, like
5G, are not life-altering today but could transform how we live,
work and fight wars in the not-so-distant future. Artificial
intelligence is often touted as the linchpin of a new industrial
revolution, with applications such as augmented reality and remote
surgery. Quantum computing could help discover new drugs and
decipher encrypted data once thought uncrackable. Autonomous
vehicles could fundamentally revamp our transportation systems and
infrastructure and the way we all get around. Advanced computer
chips act as digital brains that orchestrate it all.
Here is how the technology battle between the U.S. and China is
shaping up in some of the most important areas of innovation.
Attorney General William Barr made it clear where the U.S. stood
in 5G in February by suggesting that Washington and its allies
should consider taking a financial interest in Huawei rivals Nokia
Corp. and Ericsson AB. Both are based in Europe.
The White House later dismissed the idea of buying either
company, but Mr. Barr's remarks still emphasized how there is no
American giant to challenge Huawei, the world's biggest maker of
telecom equipment, such as the radio hardware that hangs on
After bad bets, what remained of onetime American champions
Lucent and Motorola were acquired by Finland's Nokia and Sweden's
Ericsson. They in turn have gone through layoffs and
unprofitability while competing with Huawei, which gained nearly
the combined market share of its European rivals via its
cutting-edge products and low prices.
The U.S. has some 5G players. Cisco Systems Inc. is the largest
maker of the behind-the-scenes routers and switches that connect to
cellular equipment. Qualcomm Inc. and InterDigital Inc. are leading
intellectual-property companies earning royalties for
But those markets are comparatively small, and Huawei is a
player in both. And more than 60% of a wireless carrier's 5G
capital expenditures could go to cellular equipment, such as
radios, a market Huawei leads. "All the money is in radio," says
Dimitris Mavrakis, 5G research director at market-advisory firm ABI
Huawei's technologically advanced cellular equipment, and its
ability to churn it out quickly, helped China quickly roll out 5G,
turning much of the nation into a potential lab for 5G-dependent
technology, such as self-driving cars. Meanwhile, airwave
restrictions have slowed the construction of U.S. 5G networks.
Still, it would be premature to declare China the winner in the
5G race, especially since Washington has further tools to slow
Huawei's dominance in both the cellular-equipment industry and
smartphone business, in which it is also a global leader.
"Federal agencies in Washington are currently debating whether
and how to tighten sanctions on Huawei," says Dan Wang, a
Beijing-based technology analyst at research firm Gavekal
Dragonomics. "If they do, then Huawei's operations will be
disrupted in major ways, such that it may have difficulty making
smartphones and 5G equipment."
Edge goes to: China
Three years ago, Beijing declared its intention to be the world
leader in AI by 2030, envisioning a domestic industry alone worth
some $150 billion.
China's publicly traded tech giants, including Alibaba Group
Holding Ltd. and Baidu Inc., have plowed billions of dollars into
AI research and set up labs in China and Silicon Valley, taking
advantage of the latter's openness. That has made them juggernauts,
outshining global rivals in areas including e-commerce algorithms
and facial recognition. China's huge population, surveillance
infrastructure and more lax attitude on privacy rights generate
huge volumes of data, which produces ever-smarter AI.
But while China may contribute more AI research and be ahead in
some important subsets of AI, like facial recognition, it's not
ahead in all of them. And when it comes to research into artificial
general intelligence, or AI with broader, humanlike thinking
abilities, the large U.S. companies -- Microsoft Corp., Alphabet
Inc.'s Google and others -- are clearly leading, says Paul Triolo,
an analyst at political-risk consulting firm Eurasia Group.
American tech giants have untold amounts of money to spend on AI,
which they're using in recommendation engines, targeted advertising
and automatic filtering of obscene or otherwise banned pictures and
videos, among other areas. Some also sell AI services, letting
companies, governments and police departments tap into the power of
The U.S. produces some of the world's best AI research and
talent because of its combination of leading universities,
deep-pocketed tech companies and an openness to ideas and people
from across the globe -- areas where the U.S. has a sustainable
advantage, at least in the medium term. Not shutting down academic
and commercial exchanges with Canadian, European, Israeli and even
Chinese experts is crucial for the U.S. to maintain the advantages
it has, Mr. Triolo says.
"In some sense the AI industry is still in its infancy, and many
are contributing to its growth and maturity," he says. "This may be
more important than the level of funding in determining the success
of U.S. companies in leveraging AI in new and important sectors
like autonomous driving and health care."
Edge goes to: U.S., but it's close.
Unlike today's computers, which use streams of ones and zeros to
encode data, quantum computers use atom-scale quirks that allow
particles to exist in more than two states. That added complexity
gives them the ability to process more information more quickly,
potentially far exceeding the power of supercomputers.
Harnessing that potential will probably take a decade or more.
Today's quantum computers have a relatively small number of quantum
bits, or qubits, with which to make calculations. It will not be
easy to get to the point where there's enough of them to perform
hard calculations quickly.
Because quantum computers eventually could be powerful enough to
defeat current methods of encryption and run complex simulations to
discover new drugs, the field has attracted a groundswell of
investment from private capital sources and governments.
The U.S. is the clear world leader in the construction of
quantum computers. Google last year claimed its 54-qubit machine,
which excels at measuring probabilities in randomly outputted
numbers, achieved "quantum supremacy," making a calculation that
wasn't possible -- or, at least, not practical -- on a classical
computer. International Business Machines Corp., another American
company that has a quantum computer rivaling Google's, disputed
that result, saying the calculation actually could be performed
with a supercomputer in a reasonable amount of time. Chinese
scientists have built quantum computers, but analysts say they're
years behind the U.S.
Quantum technology, however, goes beyond computers and extends
into using quantum properties to communicate quickly and securely.
That's where China may have the advantage. Led by Pan Jian-Wei,
dubbed China's "father of quantum," the country has pushed the
envelope in quantum communications, sensors and radar -- all areas
with possible military applications. The country in 2016 launched a
satellite, called Micius, that uses photon beams in a quantum state
that makes transmissions impervious to interception. It's building
a huge quantum-information-sciences lab in east China, a project
with a $10 billion price tag.
So the scorecard is split: The U.S. leads in quantum computing,
and China leads in quantum communications and encryption. The
future is hard to forecast because advances that will shape the
field are likely still decades off, says Elsa Kania, a researcher
at the Center for a New American Security, a think tank based in
"We're at a relatively early stage of what I think can be more
accurately characterized as a marathon," she says.
Edge goes to: U.S. in quantum computing, China in quantum
China has spent tens of billions of dollars over decades trying
to get a leg up in semiconductors, essential ingredients in the
race for faster computers and smartphones and more-sophisticated
weaponry. Statistics from the Semiconductor Industry Association,
based in Washington, D.C., suggest U.S. exports of chips to China
have stayed around the same level for years, and that Chinese
companies haven't gained tremendous market share, even
domestically. About 47.5% of chips sold in China were American as
of 2018, according to SIA figures.
China's neighbors have made a prominent place for themselves in
the global semiconductor supply chain, with South Korea's Samsung
Electronics Co. becoming a dominant smartphone and chip supplier
and Taiwan Semiconductor Manufacturing Co. becoming the world's
largest contract chip manufacturer.
That's a model that China could never seem to replicate. The
country's leading chip maker, Semiconductor Manufacturing
International Corp., isn't able to produce the most cutting-edge
chips with the smallest transistors. Some estimates suggest China
is five to seven years behind the U.S. and Taiwan on chip
technology, but it may take longer for China to catch up because
cutting-edge chips are a moving target. By the time China is able
to make chips that compete with the best available today, the rest
of the industry will likely have taken another leap ahead.
That said, China has surprised U.S. officials by replacing
American chips in many of its companies' electronic devices with a
combination of domestic chips and ones sourced from non-U.S.
companies. Huawei's newest phablets, launched last year, didn't
include any U.S. chips, according to a teardown of the devices
commissioned by the investment bank UBS.
For the short term, China's semiconductor strategy is focused on
reducing reliance on the U.S., which often means finding other
non-Chinese substitutes. In the long term, though, many industry
observers think it's a matter of when, not if, China's huge
investments in chip making finally pay off.
"If you're willing to spend billions of dollars for dozens of
years, eventually you'll get there," says Jim Lewis, a senior vice
president at the Center for Strategic and International Studies, a
Washington, D.C., think tank.
Edge goes to: U.S.
Silicon Valley businesses such as Google's Waymo and General
Motors Co.'s Cruise got a head start on testing driverless-car
technology, helping give U.S. companies the early lead in sensor
hardware, such as the cameras and radar needed to detect obstacles
on the road. And the U.S. dominance of the semiconductor industry
gives American companies the edge in making the chips that will
essentially be the brains of such vehicles.
Chinese companies were two to three years behind international
rivals in the important capabilities needed for self-driving cars,
McKinsey & Co. said in a report last year.
But in the long term, China is poised to come out ahead. It is
already the world's biggest car market, and the country's
regulatory environment -- such as restrictions on accessing maps on
national-security grounds, as well as requiring foreign companies
to partner with local ones -- favors domestic champions trying to
win the market there, which include Baidu, Didi Chuxing Technology
Co. and Pony.ai. "It will be difficult for American companies to be
competitive," says Nikolaj Herskind, of Scandinavian consulting
China's huge population will give Chinese companies more data
they can use to refine autonomous-vehicle technology. It also helps
that the Chinese are more willing to try self-driving cars. While
48% of Americans said in a 2020 Deloitte survey that they thought
autonomous vehicles were unsafe, only 35% of Chinese respondents
thought the same thing.
China's lead in 5G infrastructure means its car companies can
test, in real-world conditions, how the wireless technology can be
used to beam map and traffic data to cars, or even remotely control
vehicles in some situations.
But given how governments intensely regulate self-driving car
tests and technology, says Andrey Berdichevskiy, director of
Deloitte's Future of Mobility Solution Center, the most likely
outcome of the autonomous-vehicle technology race is a bifurcated
world -- similar to how the U.S. and China are developing their own
ecosystems for other hardware and software.
"I expect U.S. and Chinese players to first become successful in
their home markets, but regulations and consumer perception makes
it harder for either side to flourish on the other's territory
without a local partner," Mr. Berdichevskiy says.
The edge goes to: U.S., for now.
Mr. Fitch, a Wall Street Journal reporter in San Francisco, can
be reached at firstname.lastname@example.org. Mr. Woo, a Wall Street Journal
reporter formerly based in Beijing, can be reached at
(END) Dow Jones Newswires
April 12, 2020 22:18 ET (02:18 GMT)
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