Huawei and The Long Competition
Alan Pentz, CEO
Washington DC
February 27, 2020 - Britain’s recent decision to allow Huawei limited access to its telecommunications market reveals much about how our Long Competition with China will play out. For background purposes, Huawei makes the equipment you need to run a cellular network. With the deployment of 5G worldwide, that equipment is really important now. Huawei and to a lesser extent ZTE have been gaining ground through subsidies, cheap engineers, and sheer will against established western incumbents like Nokia and Ericsson. This makes the US government in particular uncomfortable. If the Chinese own the pipes, then they can put all sorts of backdoors into the code to spy on us and steal our secrets. So you have companies that say, “I want good and cheap equipment to keep up with the 5G wave,” and you have governments, particularly in the US, saying, “We don’t want to accelerate China’s spying and IP theft capabilities.”
This situation encapsulates many of the dynamics I think we are likely to see as the Long Competition plays out. First, unlike in the Cold War, there will be a great deal of trade and exchange with China, the Belt and Road countries, the West, and everyone else. China will have technology and capabilities that countries and companies will benefit from accessing and vice versa. It’s unrealistic to think we are going to create two autarkic world blocks.
What I see is more of a continuum where countries and companies trade and associate with the West and China to varying degrees depending on their situation. Some countries like Australia might hue closer to the US line with a real Chinese threat relatively close by while Germany will see China as a more distant threat and thus be less likely to need US military protection. Each county will be constantly calculating its economic, political, and military interests as it tacks back and forth between the US/China Scylla and Charybdis. Call it a Spectrum of Allegiance. The battle lines will be much more porous than they were during the Cold War.
Another theme emerging from the the Huawei War is that maximalist demands to ban China and its companies from aligned countries won’t work. This isn’t the Cold War and the Soviets aren’t sitting a few hundred miles away massing tanks at the border. Again, if you are Japan you are more inclined to listen, but if you are France you don’t really care. What the US needs to focus on is not so much seeking to ban Chinese technologies but to produce others that move higher up the value chain. We need to focus more on out-innovating than out-protecting. In the Huawei case, we can and should recognize that certain layers of the network are compromised and focus on securing other layers with better cyber security solutions. In fact, Britain tried to thread the needle here by restricting Huawei equipment from the core network where most of the intelligence lies. This seems to me like the kind of compromise we’ll see going forward between economic and security concerns. But more importantly, we should move higher up the value chain which leads us to...
Third, let’s not get caught up in winning phyrric technology battles. Cellular network equipment is a crappy business. That’s why there aren’t any dominant US companies in the industry. We are focused on higher value applications. Let’s win the 5G application race where all the value is and forget about the equipment. Even if we eliminated Huawei and ZTE tomorrow all the revenue would go to Scandinavia. Our position is effectively that we don’t want to be in this crappy business, we just want one of our allies to subsidize it for us. I’d rather invest more in artificial intelligence than Radio Access Network engineers. We have to resist the urge to get bogged down in every fight.
So I see Britain’s recent decision as par for the course on what we are going to get going forward. In the Long Competition we need to first innovate and capture the highest value positions, second engage widely to nudge countries toward our position on the Spectrum of Allegiance, and third recognize that all out victory is not the goal. Rather, we should focus on positioning the US as the leader in technology innovation and economic and military power, but recognize that others will compete. Our job is to stay ahead.
Author
Alan Pentz, CEO and Founder of Corner Alliance, has worked with government leaders in the R&D and innovation communities across DHS, Commerce, NIH, state and local government, and the non-profit sector among others. He has worked in the consulting industry for over ten years with Corner Alliance, SRA, Touchstone Consulting, and Witt O'Brien's. Before consulting, Alan served as a speechwriter and press secretary for former U.S. Senator Max Baucus and as a legislative assistant for former U.S. Representative Paul Kanjorski. He holds an MBA from the University of Texas at Austin.
