TECHNOLOGY Bloomberg Businessweek June 17, 201925ILLUSTRATION
BY
HUNTER
FRENCH
THEBOTTOMLINE TheU.S.-Chinaracefortechdominance
maylooklikea newcoldwar,butalmostnocountrieshavebeen
persuadedtocutoffonesideortheother.well as the radar, guidance, and sonar systems in
high-end military hardware. That’s an area where
China “won a war over the last 15 years before any-
body else knew they were fighting,” says Brian
Menell, chief executive officer of TechMet Ltd.,
which mines niche metals in Burundi and pro-
cesses them. China either produces or controls
95% of the world’s rare-earth metals, Menell esti-
mates, including the neodymium and praseo-
dymium used to make critical magnets in electric
vehicles. It also controls an estimated 60% to 65%
of the cobalt and lithium needed for their batteries
and 75% of all tungsten, a high-density metal used
for penetrative missiles. TechMet recently hired
Admiral Mike Mullen, former chairman of the U.S.
Joint Chiefs of Staff, to chair its advisory board.
“You will not be the leading 5G or chip provider
in both the U.S. and China, that much is becom-
ing clear,” says Andrew Gilholm, who directs anal-
ysis for greater China and North Asia at Control
Risks, a consulting firm. Yet there are limits to
how far this enforced separation can go. “How do
you restrict exports of AI? These are intangible
things that are not developed by one company or
country but are developed globally on open plat-
forms,” he says.
Similarly, when it comes to driverless cars,
China is as unlikely to succeed without access to
American technology as the U.S. is without rare-
earth metals. China’s autonomous-vehicle sys-
tems are still several years behind those in the
U.S., according to Patrick Lozada, China director
at Albright Stonebridge Group, a global advisory
firm. Proposed U.S. Department of Commerce
export controls on the transfer of “emerging” and
“foundational” technologies, including geospa-
tial positioning and computer chips, could crush
China’s program.
“Things were much clearer when trains ran on
two different gauges of track,” Lozada says, refer-
ring to the different rail widths that hindered
trains from crossing between the Soviet Union and
the West. “The world is so much more intercon-
nected and complex than 50 years ago.”
The case of Vietnam also suggests that con-
cerns about the emergence of internet gover-
nance blocs may be oversimplified. This year, the
authoritarian government in Hanoi became one
of the latest to adopt tough cybersecurity laws
modeled on China’s, attracted by the promise of
heightened domestic control. Yet Vietnam, which
sees Beijing as its primary security threat, isn’t
joining any Chinese camp. When it announced the
first steps in a 5G rollout last month, Vietnam’s
biggest mobile operator, Viettel Group, said it wasbuilding its own technology, not using Huawei’s.
The U.S. isn’t having an easy time getting allies
to close ranks, either. It has so far persuaded only
a handful of countries to ban Huawei, notably
Australia and Japan. If Britain does decide to fall in
line, it would be the first country in Europe to do
so. Most countries will, like the U.K., try to strad-
dle the two superpowers, says Samm Sacks, cyber-
security policy and China digital economy fellow
at New America, a Washington think tank.
Britain’s final decision on Huawei is still to
be made, and Prime Minister Theresa May, who
stepped down as leader of the Conservative
Party on June 7 to clear the way for a race to suc-
ceed her, probably won’t be making it. Some of
her potential replacements have warned against
being naive on the security threat the Chinese
company poses.Back in Oxfordshire, a slightly alarmed
employee recently denied a reporter access to
the Huawei cybersecurity center. It’s overseen
by a board chaired by an official from GCHQ,
the U.K. equivalent of the U.S. National Security
Agency. The board’s latest annual report on the
center’s work acknowledges that Huawei prod-
ucts expose U.K. mobile networks to security risks
but says that’s a result of sloppy coding practices,
not state sabotage. As long as those failures per-
sist, the report says in language that’s both dip-
lomatically vague and loaded, “it will be difficult
to appropriately risk-manage future products.”
—Marc Champion