The US-China tech war is getting worse. Apple is paying the price

Wall Street is still buzzing from Apple’s announcement last week that sales of iPhones in China weakened sharply during the three months ending in December. Explaining the dip, Apple said the US-China trade war had weighed on consumers in the world’s second-largest economy. Some pundits pointed to a broader economic slowdown in the country, while others highlighted the growing domestic competition that Apple faces in China from increasingly capable domestic suppliers like Huawei and Xiaomi. None of this is wrong, but it misses the deeper issue: US companies face a growing risk of being boxed out of the next wave of innovation in China.
It starts with competition — not just in handsets, but in the semiconductors that power them. Unlike its major European rivals Ericsson and Nokia, Huawei has chosen to compete in the lucrative high-end smartphone market in China, devoting considerable effort to R&D and marketing. Huawei’s secret weapon, HiSilicon — its semiconductor design arm — has begun designing dedicated smartphone chipsets that now give Huawei phones capabilities near or on par with the iPhone. Fabricated by Taiwan Semiconductor Manufacturing Corporation (TSMC), Huawei’s neural network processors and other custom chips have given the Chinese firm the ability to compete in terms of cost and features in a way that was unimaginable even two years ago.
Then there is another critical factor: Chinese consumers slowing their purchases of the newest and greatest smartphones.
Consumer taste is hard to measure, but arguably the biggest factor in slower upgrades for Apple is the advent of next-generation 5G mobile networks. Chinese handset makers — led by Huawei, but including second-tier players OnePlus, Xiaomi and OPPO — are all planning a 5G handset rollout in 2019. Apple, by contrast, is not likely to have a 5G handset until 2020.
If you are a Chinese consumer, particularly on the high end, the last thing you want is to be left behind in 5G, which will offer data speeds of up to 100 times faster than current networks. Chinese Internet users basically live on their mobile devices and apps like WeChat. For these consumers, higher data rates and the cachet of 5G will increasingly drive decisions about which phone to purchase.
Then there’s the geopolitics: trade tensions, and more importantly, the broader US-China technology cold war. Last month’s arrest of Huawei’s CFO Meng Wanzhou in Canada at the behest of US authorities generated a flurry of headlines about Chinese companies urging employees to switch to Huawei from Apple or fining them if they refused. So far, the impact has been modest, but the blowback could intensify if Meng is taken to the United States in handcuffs, incarcerated, paraded in front of cameras or otherwise humiliated.

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Huawei will also likely be the target of further US government action, formally restricting the firm from selling its telecommunications equipment in the United States. Washington is pushing key US allies to do the same, raising new ire in Shenzhen and Beijing. Huawei has already been denied a deal with US carriers to promote its handsets in the United States. It would not be surpsing to see questions surface on Chinese social media about why Apple should have a a deal with China Mobile to sell handsets while Chinese national champion Huawei is shut out of the US market and its CFO is humiliated by being placed under arrest.
      It’s not all bad news. Western tech brands will continue to hold considerable cachet among China’s increasingly internationally mobile elite. But the optimism Tim Cook and other global tech CEOs exhibited at the World Internet Conference in Wuzhen in December 2017 looks pretty misplaced right now. A heady mix of technology, political and market forces means Apple and other high-profile Western tech companies in China, such as Tesla, will need to protect their market niches while navigating increasingly complex geopolitical headwinds. It will not be easy.

      Original Article : HERE ; This post was curated & posted using : RealSpecific

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