I find it interesting that two of the biggest themes happening in the tech world in 2019, which will carry well beyond 2019, have to do with government involvement and politics. The themes I’m referencing are trade and regulation. I’ve talked about regulation and will continue to cover that through the year, but I want to go deeper on the trade issue and how I see a broader technology schism emerging.
In my article on the China-US 5G space race, I alluded to the potential of two very different Internet ecosystems in the West and East. Having spoken with more technology executives and investors since that article, I think what is happening is more a broad technology schism that goes beyond the Internet.
The US and China trade war is accelerating China’s efforts for complete verticalization and thus control of their technology future. This, however, at least for the moment, is a strategy that largely works in China. There has been some interesting debate around the potential for a third operating system, and one Huawei will need to make, that is a fork of Android, that could succeed in many parts of the developing world as a billion or more humans still get their first computer (a.k.a smartphone).
China has always been a unique technology ecosystem with the exception of Apple. Most US companies, especially software companies, don’t have much a chance to compete in China, and that trend seems likely to continue. An underlying trend to watch is the degree that China doubles down on all things China made and uses that as a new base to grow their expertise and then expand globally. I found this chart in a financial report I read, which highlights a few core buckets China is focusing on homegrown technology.
As China’s economic stimulus extends deeper into all areas of technology, with a focus on verticalization, it seems likely it will become even more difficult for foreign companies to compete in China. This potential for China to essentially pull off complete vertical technological implementation would be the first time we see this business strategy applied to a nation and its proprietary tech at scale. China can use 5G, its network infrastructure, its proprietary software, and custom China built silicon, to truly wall off the rest of the world.
Carrying this scenario out logically, China will then want to continue taking this technology to other parts of the world. This is where the effort of Huawei to take an Android fork globally will be interesting to watch. There are markets where this product will be dead on arrival, and most of Europe and India are key ones. But the African continent is a wide open field, and one Huawei has had its eye on both from network infrastructure and smartphones.
Developing countries in Africa, and perhaps some of the surrounding countries in East Asia, are the only ones I can see an Android fork potentially working. What I think is interesting is the potential is for an integrated solution of aa China created 5G network technology, China Android Fork, and China smartphone hardware as a strategy for global expansion. This brings up some interesting questions globally when we consider technology creating becoming more easily accessible and countries national security.
The Technological Game of RISK
The last point I want to make here and consider this more food for thought, is what happens if more countries catch onto China’s trend of full stack technological verticalization. For example, India is among one of the fastest growing technology markets. Will India want a full stack Chinese solution to start to take a share of their local market? Or will India want to start to verticalize on their own? There is a global game of RISK happening around technology, and some forward-thinking politicians and policymakers need to understand how the decisions being made today will impact their future.
The bigger question countries have to start considering seriously is their technology policy as it relates to national security. At the moment, we have no real evidence, only insinuation, that Huawei is a national security risk. However, whether they are or not, does not discount the concern they could, at some point, become more a risk. Does India want China solutions so profoundly integrated into their countries technological ecosystem that at some point, it’s too late from a national security standpoint?
While I’m just brainstorming out loud, you have to wonder the implications of countries starting to invest more in their own vertical solutions and how that creates more walls and not less from a technology standpoint. Foreign countries cannot just build military bases at will in other countries backyards, and as technology can be seen as potential for cyberwar, you have to wonder if more governments will form stronger foreign policy when it comes to IP and core technology entering their country.
Again, I’m just talking out loud, but I think the tech industry needs to start thinking long and hard about all the potential scenarios, both good and bad, that may come from the US-China trade war.