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Opinion
In the Face of Adversity
Editorial | NO. 18 MAY 3, 2018

The U.S. Department of Commerce's seven-year export restrictions on ZTE Corp. have dealt a fatal blow to the Chinese telecoms equipment giant. At a press conference on April 20, ZTE Chairman Yin Yimin said the ban may put the Shenzhen-based company "in shock."

The consequences for ZTE of being unable to acquire hi-tech components made in the United States have awakened China to a harsh reality. Despite revolutionary advances in areas such as high-speed railways and mobile payment, Chinese companies still rely heavily on foreign suppliers for chips, vital parts of almost everything in the information age from smartphones to artificial intelligence.

The Chinese Government is encouraging research institutes and businesses to invest more in the development of chips with a series of policies, including the Made in China 2025 initiative. According to the plan, the government hopes to see breakthroughs in key technology that help make manufacturing more digitalized, network-based and intelligent. The need to cultivate high-performance chips is particularly pressing.

Home to a number of chip developers and manufacturers, China owns the intellectual property rights for certain chips. These products, however, are mostly at the medium and low end of the global market. When it comes to high-end goods, Chinese chip companies lag far behind their U.S. and European peers.

Though targeting China, the U.S. export ban will undermine the United States, according to Gao Feng, spokesperson for the Chinese Ministry of Commerce. The United States will lose tens of thousands of job opportunities, while hundreds of related U.S. enterprises will be affected, he added.

The U.S. Government's move to impose sanctions on ZTE in disregard of the negative implications for U.S. businesses such as chipmaker Qualcomm has taught China a lesson: Inventing new applications without mastering the core technology behind them is tantamount to planting vegetables in someone else's garden.

At a meeting of the Political Bureau of the Communist Party of China Central Committee on April 23, redoubling efforts to develop key technology was one of the issues discussed by senior Party leaders. Average Chinese, for their part, have called for more indigenous research in online forums, while scientists have voiced their support for creating high-end chips. The U.S. Government's sanctions may serve as a catalyst for the development of China's own cutting-edge chip technology.

Over the years, Chinese scientists have overcome technological hurdles to score world-leading achievements on many fronts ranging from space exploration to quantum technology. If their talent is brought into full play, China will make great headway in building high-end chips in the foreseeable future.

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