Korea Business Herald

Why America Is Losing the High-Tech War with China

(Getty Images)
(Getty Images)

I will never forget my first visit to SK Telecoms exhibition in Soeul when I was invited to speak at the National Assembly on launching the Quantum Information Communication Forum. What I saw was a dazzling vision of how technologies like 5G, AR/VR, and AI can change our world and make it better and more secure.

For the past decade the United States and China have been waging a high-tech “cold war” to determine the future not only of the world‘s economy, but humanity. Who wins, and who loses, will set the future of East Asia, as well.

China has a well thought out plan to win this contest. The United States does not. It‘s going to be up to the other advanced tech democracies like the Republic of Korea, Japan, and the members of the EU to help the U.S. find that winning strategy, so that we don’t all end up becoming mere tributaries to the Communist masters of the Middle Kingdom.

The recent furor in the U.S. over banning the Chinese social media platform TikTok is a part of this story, and not a small part. Indeed, the rise of TikTok has been a transformational moment in the evolution of social media. Now that Americans have finally taken TikTok seriously almost four years after I and others first sounded the alarm; and recognized the threat that TikTok poses in terms of gathering data on Americans that can be used by the Chinese military and intelligence services (despite the company‘s denials), the president and Congress have put together a law to ban the social media platform unless it sells itself to an American company.

Yet as has happened in this high-tech again and again, Americans have missed the real issue, or rather two issues.

The first is that even more alarming than the data TikTok gathers from its 170 million American users (and over 1.5 billion users worldwide) is the algorithm TikTok uses to screen its users‘ preferences―an algorithm designed by its Chinese parent company ByteDance. The algorithm can use a few visual clues based on how long a user looks at a video to identify the piece of content a user is interested in. It then can give that user more and more of the same until their appetite is sated―if it ever is.

This is the algorithm that makes TikTok so addictive―and possibly dangerous. Even if TikTok does wind up being sold to an American buyer like Microsoft or Oracle or even Shark Tank celebrity Kevin O‘Leary, the platform will be useless without the algorithms, which ByteDance will be sure to hang on to.

As reporters for Forbes magazine found out, TikTok also has a so-called “heating button” its staff can use to boost specific posts and videos they want to appear viral― including propaganda supporting the Chinese Communist Party.

Yet the scandal surrounding TikTok is even bigger than that.

The fact that a Chinese-engineered app could sweep in and dominate the American tech space is not a good sign for the health of our vaunted high-tech sector. The real question should be, how did Chinese engineers manage to surge forward like this, while making Facebook and X and Instagram look like rank amateurs―even Google and Amazon.

There‘s a broader lesson here. Americans don’t have a plan to win the high-tech war with China because they‘ve been used to dominating the high-tech horizon for more than half a century, since World War Two in fact. Nuclear weapons and nuclear power; computers and semiconducting microchips; telecommunications and the Internet; even AI and the quantum computer; America has been the traditional leader in all these areas.

History shows that success can breed complacency. In the past decade China has surging ahead in high-tech production and innovation, of which the TikTok phenomenon is only part. Before that, China‘s effort in the high-tech arena was largely limited to cyber theft. Thanks to IP appropriated or stolen from foreign companies doing business in China, Beijing has the technical expertise to focus on developing their own platforms and algorithms, which are aimed directly at displacing the US as the world’s tech giant.From that perspective, the TikTok story is a narrative all too familiar in other realms of the high-tech universe.

In supercomputers, for example, the digital wonders whose amazing speed of computation are essential in industry, scientific research, and for the military, China has been surging ahead in development and deployment. In fact, from November 2017 until November 2022, China replaced the US as owner of the two best supercomputers in the world.

As of June 2023, however, the US had resumed its top position, and since then the number of US supercomputers has grown from 150 to 161, while China held a firm second spot at 104. But in fact, China has stopped sharing information about its supercomputing systems with the rest of the world. It may be because it has lost interest in the technology. Or it may be because China has big plans in these powerful workhorses of the digital age, that they prefer to keep secret―even while the US still thinks it has regained a comfortable lead.

A similar pattern exists in AI. The US is the founder of AI research and development, and still the global leader, especially in terms of numbers of start-ups. For the past seven years, however, China has been moving ahead with its plans to become the world‘s AI superpower. China’s generative AI spending is set to reach 33 percent of the world‘s AI investment by 2027, up from 4.6 percent in 2022 with the generative AI investments probably reaching $13 billion, according to a new report from Research firm IDC.

On AI research, for example, China produced about one-third of both AI journal papers and AI citations worldwide in 2021. In economic investment, China accounted for nearly one-fifth of global private investment funding in 2021, attracting $17 billion for AI start-ups. The gap with the US is still significant, but it‘s closing. And while Americans fret about whether AI will allow college students to cheat on their term papers, the Chinese are using AI applications to transform their industrial base and scale new heights of economic productivity.

Turning to 5G communication, for a time under the Obama administration it looked like Chinese tech equipment giant Huawei was running away with building the global networks that would support 5G use, including with NATO allies. Then some of us sounded the alarm about Huawei‘s access to the most important strategic commodity of all, data, which meant access for China’s military and intelligence establishment.

During the Trump administration there was considerable push back against Huawei, including banning use of Huawei phones and equipment and convincing allies not to opt for Huawei‘s attractive contracts. Then the effort slowed and stalled under the Biden White House.

For despite increasing success in pushing Huawei out of telecom systems internationally, the U.S. still faces many obstacles to removing Huawei‘s influence from 5G: including the fact to this date there is no American-led alternative. Indeed, small carriers in the U.S. continue to use Huawei equipment.

Nor has the anti-Huawei campaign stopped Huawei‘s growth. As of 2023, Huawei is still the world’s leading 5G equipment manufacturer. It controls more of the market share of 5G equipment than anyone else, and has built approximately 70% of worldwide 5G networks. Only 10 EU countries have so far joined the US-led Huawei ban, with Germany still weighing its options.

Meanwhile, the effort to keep advanced chips out of Huawei‘s hands also backfired. The U.S. has restricted exports of high-performance chips, including the latest AI chips ― including cutting-edge NVIDIA GPUs ― to China. The goal is to cripple China’s advances in AI, which require the latest chips. Washington also banned the export to China of chip-making equipment that can be used to make advanced mobile, AI, PC and server chips. But China‘s Huawei recently released a smartphone with its own 7-nanometer chip, which was thought impossible given the U.S. restrictions. It’s another example of how high-tech development in one area, flows into another.

This is also true of quantum technology, which promises an entirely new dawn for the high-tech era. For now, the US still has the lead in the quantum computer race thanks to private sector companies like IBM, Microsoft, Google, and Intel. But China dominates in terms of quantum communications, i.e. using entanglement-based quantum technology to create hack-proof messaging and networks, including operating two quantum satellites in space.

All this raises the obvious question: why is the US losing this all-important high-tech contest?

One reason is that decision-makers in Washington simply don‘t understand the technologies they are passing laws about, including AI and quantum. They also do not understand how to attract and incentivize America’s biggest and best tech companies to tackle our most pressing national security problems together, instead of just seeing 5G, AI, and space as another zone for competition with their commercial rivals. Chinese companies have no choice; they must obey Beijing‘s dictates to support China’s military and China‘s larger geopolitical strategy. The US government has to work to change the mindset of America’s companies first, in order to get their full-fledged cooperation and support. That‘s hard in an decision ecosystem dominated b lawyers and businessmen, instead of business leaders and tech experts.

The other problem is that the U.S. needs to realize that allies like ROK and Japan, can help to solve these challenges. This is why the current flap over the Line social media app is so unnecessary and misguided: it detracts from where attention should be really focused, on how we can all work together to build a democratic high-tech future.

Indeed, what I see on display in places like and in companies like SK Telecom, LG, Samsung, and their Japanese counterparts is the kind of broad confident vision we all need today, in order to retake the lead in the high-tech war, not just for America‘s sake for the sake of freedom and democracy and security everywhere.

Read in Korea Business Herald.