As US-China Tensions
Build, Silicon Valley Rethinks Bonds
December 19, 2018
In recent years, the tech industry
has looked to China as a key partner to help build and sell cutting-edge
devices and services.
But rising tensions between Washington and Beijing have Silicon Valley
worried it will be caught in the middle of a growing trade war.
you want to do business in China, if you're doing consumer products, I
say, that's probably fine,” he said. “But let's presume you're doing AI.
You better find out exactly what you're doing. You can have AI in a
coffee machine, and I don't think that's much to do with defense. If
you're doing facial recognition that may be something that's going to
have a major problem.”
Over the summer, President Donald Trump slapped $250 million of tariffs
on Chinese goods sold in the U.S. and claimed that China offers U.S.
businesses an uneven playing field as Beijing seeks to make China into a
tech super power.
The detention in Canada earlier this month of a Huawei executive for
allegedly breaking U.S. sanctions on Iran has made tech executives feel
even more vulnerable.
China, for its part, denies the U.S. claims and has taken steps to
pursue a formal inquiry about the tariffs at the World Trade
A delicate line
For the tech industry, the increasing tensions come as it was already
walking a delicate line. Tech executives complain about intellectual
property theft in China and what they see as unfair conditions for doing
business. But the two regions have strengthened their bonds through
investment, trade and partnerships in areas such as artificial
intelligence, robotics and autonomous cars.
The tensions have left tech executives questioning what they can share
about their work, said Stanley Kwong, adjunct professor at the
University of San Francisco.
“All of these people are worried if they traveled back and forth, they
might be arrested because of the IP, something they know and they talk
about in both China, and in the USA,” he said.
Silicon Valley firms have complained the relationship “isn’t as
reciprocal as it needs to be,” said Sean Randolph, senior director of
the Bay Area Council Economic Institute.
The relationship, from some tech firms’ point of view, is about “the
extraction of technologies involuntarily from foreign companies to
accelerate China's technology leadership,” he said.
Chinese money that has helped fuel the current tech boom in Silicon
Valley may start drying up. One reason — a new U.S. law, the Foreign
Investment Risk Review Modernization Act (FIRRMA), beefed up oversight
of foreign investment and acquisitions of critical technology that are
deemed strategically important. The Committee on Foreign Investment in
the U.S. has expanded powers to block foreign purchases of U.S. firms.
“Silicon Valley people have been optimistic for a long time,” said
Xiaohua Yang, professor of international business at the University of
San Francisco. “But now, they have begun to worry … about the lack of
Chinese investment coming to support Silicon Valley technology
Lawmakers are concerned that U.S. tech companies, as they pursue the
Chinese market or seek Chinese investment, might hand over core
technology to the Chinese government, a competitor and sometime
adversary on the global stage. The tech industry waits, as what
constitutes “critical technologies” under FIRRMA is still being
For U.S. entrepreneurs, the changing climate may mean they will become
more cautious, said Kwong, who advises startups.
Randolph said that the tech industry has long had an “open market, open
platform” approach, with the idea that anyone can come and “we're moving
innovation forward globally.”
But if tensions between Washington and Beijing continue to escalate,
experts say, the very openness of Silicon Valley may be a casualty —
even if tech firms stand to benefit if China becomes more open for doing