Trade War: Bitter times for China's engineering industry

As the US positioned itself at the beginning of 2017 in the trade war against China, the government in Beijing was self-confident and confident – outwardly. But in the building of the Central Planning Ministry NDRC was the alarm, as Chinese business journalists tell today. Because the officials of the technical departments was clear, what each boss of a Chinese technology company could confirm: The own production was and is reliantly on hardware and software from the USA relies.

This not only affects the much-quoted example of Huawei, but the whole industry. China imports 84 percent of its chips. Of the 16 percent coming from within, around half are manufactured locally by foreign companies such as Samsung or Intel. Eight percent remain from unassailable own production, A ridiculous share for the largest electrical location in the world. Even companies like Hikvision, one of the world's market leaders for surveillance cameras, or BBK Electronics (Oneplus, Oppo, Vivo), one of the largest smartphone manufacturers in the world, threatened a total failure, if the Americans stop their deliveries.

The approach of US President Donald Trump is therefore close – at least from the point of view of a tough negotiator from the real estate industry: By depriving Chinese companies of what they urgently need, he could make them docile. As a side effect, he would torpedo the development plans of the Asian riser. Finally, the planning authority has ventured into ambitious goals in recent years.

The National Development and Reform Commission, as the full name of the ministry, had originally targeted for 2049 as the yearwhere China is essentially the same as western countries. An important milestone would be 2025, if concrete results of the revaluation should already show up. The Program named Made in China 2025 had to for the proponents of "America First" Trump sound like a threat. They are not alone. The German industry also vehemently discusses what technical independence of the Chinese would mean for their position in global competition.

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But Trump did not expect the Chinese companies in his attack plan in many ways. On the one hand, a good part of the technology industry continues to shine, as it relies on a huge domestic market with wealthy, loyal customers. On the other hand, the pressure from the US could accelerate the Chinese's technological catching up instead of stopping it. President Xi Jinping already has a billion-dollar program for "more autonomy" announced, Although no one in the foreseeable future will overtake the US. But first, it's all about developing the functional skills necessary for a majority of products.

The USA dominate in technology

The technical dominance of the USA is as clearly visible as firmly anchored. Among the 100 most important companies in the IT industry come 65 from the US, The most advanced processors are from Intel, AMD and Nvidia, special chips from Qualcomm; Software comes from Microsoft, Oracle or Google; Facebook and Twitter are the globally dominant social networks; Apple has long been an excellent vertical integration implemented – say hardware and software from a single source.

Although China today certainly has an emerging semiconductor manufacturing by foundries such as SMIC and HLMC, but the focus is on cheaper mass-produced goods such as memory chips in relatively small quantities. It is no wonder that the country lags behind here. As with Texas Instruments and Intel in the 60s the first chips based on silicon semiconductors were created, China worked on the Cultural Revolution and drove the remaining mathematics professors as enemies of the people through the street.

After the end of the ideological period in the late 1970s, science education at China's universities was at the German upper level. Computer science practically did not exist as a subject. It is rather a miracle how quickly China's inventors have caught up after these political setbacks.

Not only China lags behind

Even countries that did not have such disadvantages are now far from the US level. Even Japan, home to world leaders such as Renesas, Toshiba or Sony, can not do it all by itself, using Intel processors and Qualcomm mobile phone chips. The proud technology land of Germany hardly has its own semiconductor production any more. Bosch is one of the few exceptions with the new RB300-Fab, because Globalfoundries in Dresden is not a German company. A delivery stop by China or the USA in this country would bring a substantial part of the factories to a standstill, after all, there is no more sophisticated product without logical control.

So China is under tremendous pressure to upgrade its own semiconductor industry from the middle class to the lower upper class in as short a time as possible. That's hard – really hard, because the technique is really hairy. But if a country does such a job, then China. The instruments of state support and management as well as private entrepreneurial spirit and the mobilization of skilled workers have long been tested.