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Chinese tech companies are turning to European suppliers and collaborative projects to cut their reliance on US suppliers. Caroline Meinhardt says Europe faces some tough choices.

Huawei's very own open-source operating system, HarmonyOS, which the company hopes will allow it to substitute Android permanently.

When the United States and China signed their “phase one” trade agreement in January, many hoped it signaled a thaw in the US-China trade relationship. But having experienced the devastating effect of US export controls, Chinese companies are now more determined than ever to end their dependency on American technology. Huawei’s Mate 30 is one shiny example: Unveiled four months after the Chinese telecoms giant landed on the US’ “Entity List,” the smartphone producer replaced US audio chips and power amplifiers with Dutch and Chinese-made alternatives.

Open-source research collaborations could make up for export controls

Ideally, of course, Beijing would like to decouple completely from foreign technology. So, while European companies are benefitting for now as China turns its back on US suppliers, this advantage will likely be short-lived. European interests are also at stake in the global open-source projects that China sees as an opportunity to move towards technological self-sufficiency. As China’s decoupling accelerates, Europe will have to assess its position within the triangle it forms with the US and China and find a way to evaluate commercial and academic technology relationships with China.

Open-source research collaborations, in particular, are seen by China’s tech industry as a promising way to make up for US export controls. Open-source projects are communities in which hardware design or software code are made freely available for anyone to use, modify and redistribute – an alternative to commercial licenses sold by large technology companies. Amid fears that the US might permanently bar Chinese companies from access to its hard- and software, Chinese IT-industry officials think open-source projects will give them secure access to technologies because they are not controlled by any one foreign country.

One example is the open-source chip project RISC-V (pronounced “risk-five”). The project’s collaborative community includes global technology giants like Google, Alibaba and Huawei, and Dutch chipmaker NXP. Since 2015, they have jointly developed chip-design standards that companies and researchers can use free-of-charge to develop their own processors. China has fully embraced RISC-V: In 2018, several government entities helped found the “China RISC-V Alliance.” Made up of leading academic research institutes and private companies, the alliance aims to spur the development of China’s own open-source chip ecosystem.

And, indeed, initial Chinese RISC-V success stories hint at a future where Chinese chip companies no longer depend on foreign chip-design licenses from the likes of Intel or ARM. Last year, Alibaba’s chip subsidiary Pingtouge and wearable device company Huami garnered attention for their Xuantie 910 and Huangshan No.1 chips, their first artificial intelligence (AI) chips designed entirely with RISC-V instruction-set architecture.

An open-source software ecosystem is key to technological self-sufficiency

China is also pursuing open-source software projects. Cut off from Google’s Android software, Huawei is relying on the open-source version of Android for its smartphones while rolling out its very own open-source operating system, HarmonyOS, which the company hopes will allow it to substitute Android permanently. Huawei is also planning to build China’s first open-source software community, by partnering with companies and software developers around the world. A competitive software ecosystem built on open source rather than commercial licenses would be a key step towards technological self-sufficiency.

But this also makes it likely that international open-source collaborations with strong participation from Chinese entities will encounter more and more political resistance from the US. Though RISC-V has not fallen within the scope of US export controls, American lawmakers have already expressed concern that the project advances China’s chip industry. RISC-V last year announced that its foundation would relocate from the US to Switzerland due to members’ concerns that US trade restrictions might jeopardize their work.

A US crackdown on open-source research cooperation would present Europe with yet another area in which it could find itself squeezed between the US and China  – especially if more open-source collaborations are based in Europe and heavily involve European researchers and companies. The US is already pressuring Europe to stop supplying Chinese companies with core technologies. Dutch chip equipment manufacturer ASML, for example, reportedly had its export license for the sale of chip machinery to China revoked after US Secretary of State Mike Pompeo lobbied the Dutch government. Europe’s commercial and academic research cooperation with Chinese entities could easily become the focus of a wider US pushback.

Europe must brace for some tough choices. Its technology supply-chains are deeply intertwined with China, and EU-China collaborations have significant commercial and academic value, particularly in the area of emerging technologies. Decoupling from China on the scale envisaged by the US would be highly costly to Europe’s companies and citizens. Europe will have to balance its economic imperatives and political concerns.

Europe must prepare better for more “Huawei moments”

This year will be key in determining the scale and global impact of US and Chinese efforts to decouple in high-tech. The US government is poised to decide regarding regulatory changes that would significantly expand the scope of US export restrictions – possibly requiring European companies still able to do business with Huawei to apply for export licenses. An overall tightening of export controls and heightened attention to their enforcement could also throw the spotlight on China’s ability to use open-source technology cooperation to circumvent export controls, and initiate discussions about the risks of public and private European research cooperation with China.

Europe must define its own position as these new dangers loom. It needs a robust mechanism for balancing the risks of research cooperation with Chinese institutions against their commercial and academic opportunities – open source included. The tumultuous debate about Huawei’s participation in European 5G networks foreshadows many more debates about the Europe-China technology relationship. Without a strategy, Europe risks falling prey to US and Chinese pressure and losing control over critical decisions that will determine its technological future. Europe must prepare better for more “Huawei moments”.