In Stratfor’s 2018 Annual Forecast, we said that China’s overseas moves into strategic sectors of high technology, such as semiconductors, will cause concern in developed markets like the European Union and the United States. That analysis has proven accurate, as Chinese company Huawei's failure to seal a deal to sell its flagship smartphone through a U.S. carrier highlights how politicized investments in the high-tech sector have become.
Sometimes the biggest announcements are the ones that never happen. Even before the world's largest consumer electronics trade show, CES, formally kicked off in Las Vegas on Jan. 9, companies began making announcements showcasing their new concepts and products. But as the news has come rolling in, the absence of one hotly anticipated reveal demonstrates how the high-tech sector has increasingly become a geopolitical battlefield.
In December, Chinese electronics company Huawei announced it had reached a deal with a U.S. carrier to sell their flagship smartphone, the Mate 10 Pro. But on Jan. 8, news began to surface that the deal, widely expected to be with AT&T, had fallen through. Huawei confirmed the news Jan. 9 and, although no official reason has been given for why the deal dissolved, it is widely suspected that AT&T walked away because of political pressure.
That political influence should come as no surprise, as U.S. President Donald Trump's administration has sought to increase economic pressure against China on all fronts. When the U.S. government released its newest national security strategy in December, it highlighted the economic dimensions of national security; more specifically, the document mentioned China as a potential threat to U.S. technological leadership in key areas such as artificial intelligence and semiconductors. This concern has led the United States to strengthen its review process for foreign investments through the Committee on Foreign Investment in the United States. Washington even effectively blocked the sale of MoneyGram, a payment processing firm, to Ant Financial, a Chinese company owned by Alibaba and its executives. Among those executives is Jack Ma, who ironically promised to bring investment and jobs to the United States in a high-profile public meeting with then president-elect Trump in January 2017.
Huawei is a potentially menacing Chinese competitor to current industry leaders, such as Apple and Samsung. Technically a private company, it has become one of the most capable and efficient Chinese technology firms. The fast cash flow generated by China's large domestic market has given Huawei the funds to acquire talent and invest globally in research and development. Hoping to use a deal with AT&T to further its goals, the company has clearly set the global smartphone and electronics industry in its crosshairs. The Mate 10 Pro, launched in October, is Huawei's most advanced phone, designed to compete with the latest and greatest offerings of technology giants such as Samsung, Apple and Google. Without the deal, Huawei will have to continue selling its phones independent of carriers, a stumbling block on the path toward achieving a major share of the U.S. market.
More geopolitically important announcements related to fields such as autonomous vehicles, artificial intelligence and other emerging technologies will likely come from CES. Consumer electronics are the most high-profile products in what is arguably the world’s most geopolitically important economic sector. But the announcement that never happened holds significance as well — as another example of U.S. efforts to push back against emerging technology powers in China. As Chinese technology giants continue to grow, they will only bring more competition between the leading economies in Asia, Europe and North America.
