Generals always fight the last war. The befuddled strategists of the Donald Trump administration provide a sad illustration of this adage. After four years of a trade war and then a tech war against China, senior American diplomats last week went above the heads of European governments to exhort European corporate executives to cancel their cloud business with Huawei, China’s national champion in telecommunications equipment. It has belatedly dawned on Washington’s wolf warriors that the battle is not about territory, or the South China Sea, or any of the other obsolete fixed ideas of the geopolitics taught at the Naval College, but rather about a new raw material whose 21st-century role overshadows oil, rare earths, minerals and the other “control points” of
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Generals always fight the last war. The befuddled strategists of the Donald Trump administration provide a sad illustration of this adage.

After four years of a trade war and then a tech war against China, senior American diplomats last week went above the heads of European governments to exhort European corporate executives to cancel their cloud business with Huawei, China’s national champion in telecommunications equipment.

It has belatedly dawned on Washington’s wolf warriors that the battle is not about territory, or the South China Sea, or any of the other obsolete fixed ideas of the geopolitics taught at the Naval College, but rather about a new raw material whose 21st-century role overshadows oil, rare earths, minerals and the other “control points” of the past century.

The engine of the Fourth Industrial Revolution is artificial intelligence (AI), and the fuel that powers AI is data. Huawei may be the world’s biggest telecommunications equipment company, with a 31% global market share during the first half of 2020, but its decisive business is the gathering and porting of data.

That is the “control point” in the world economy, as Huawei’s Chief Technology Officer Paul Scanlon explained in an interview found in my book, You Will Be Assimilated: China’s Plan to Sino-Form the World.

Scanlan told me, “This is what we mean by the control point. We don’t want to do everything ourselves. If you are a pharmaceutical company, you won’t have to duplicate our investment in AI. You simply rent time on the Cloud, using our AI servers, and obtain access to our data. The key is gathering and porting the data to servers where it can be put into usable form. That’s our contribution. We don’t want to control everything. We want partners who are best in class in every field.”

Anyone with access to Youtube could listen to Huawei conference presentations on streaming video, explaining that fast, zero-latency mobile broadband was simply a springboard for an array of new Big Data-AI applications that promise to transform manufacturing, finance, health care and transportation in ways we barely can envision.

For the past two years, the Trump administration has hammered at Huawei’s mobile handset business, a major source of revenue but an insignificant source of profits.

US President Donald Trump is pressing allies and others to ditch Huawei-made 5G equipment. Image: Facebook

Commerce Department rules announced last May and put into effect in September prevent Huawei from fabricating high-end chips at Taiwanese and South Korean foundries that use American equipment, hampering the company’s high-end smartphone business, which briefly took the number one spot globally during early 2020.

Huawei is reportedly in talks to sell its low-end Honor smartphone business and as a result will probably see a significant dip in top-of-the-line smartphone sales.

Meanwhile, American officials have twisted the arms of allies to exclude Huawei from the buildout of their 5G networks. Britain acceded to American demands after a year of pressure, although Huawei executives point out that London has set a 2027 deadline for the replacement of Huawei equipment, and that a great deal can change between now and then.

Germany is prevaricating and playing for time, as reported by Asia Times on October 7, hoping that Trump will lose the November 3 election and that the issue will be moot. South Korea, according to the local press, explicitly rejected American demands to exclude Huawei; the country exports more than twice as much to China as it does to the US, and depends on good relations with Beijing to control its rowdy northern kinsmen.

Steve Bannon, long since exiled from Trump’s circle but nonetheless one of the original architects of his China policy, told me in a June 12 interview that China is “doing [Halford] MacKinder’s control, the Eurasian landmass, the One Belt, One Road. They’re doing [Alfred Thayer] Mahan’s naval strategy that the Royal Navy and the British Empire and the Americans inherited by cutting off, taking all trying to get control of all the naval chokepoints, of all the maritime chokepoints in the world. And they’re even doing [Nicholas John Spykman’s] rimland strategy by forcing the West, forcing the democracies, to a thousand miles off the rimland of Asia.”

That’s so 1970’s. Bannon hadn’t a clue about China’s real intentions. Yes, once upon a time, the British Admiralty built Dreadnoughts to ensure the supply of Persian Gulf oil to the home islands, and Hitler diverted his Army Group A away from its principal objective in Moscow to the Russian Caucasus to capture the oil fields.

Western leaders installed tribal chieftains as heads of state in Persian Gulf desert kingdoms and the US Central Intelligence Agency staged coups in Persia because oil was the “control point” of the world economy. And geopolitical theorists spun stories about the “world island” or control of sea lanes.

China thinks forward, not backward. It hasn’t cared about territorial expansion since the Tang Dynasty of the 8th century C.E., when China reached its natural geographic frontiers. It does have a residual concern about oil, and is spending profligately to reduce its exposure to sea lanes that, in a conflict, the American Navy might block.

But Chinese planners understand that data—evanescent, insubstantial, immaterial, and hard to control—is what matters going forward.

Huawei is poised to lead the AI-driven Fourth Industrial Revolution. Image: Twitter

Huawei understands that its carrier business, including its share of the six million 5G ground stations that China will install during the next two years, is a springboard for an entire range of other business, including, for example, a smart-car auto parts business that Huawei unveiled at this year’s Shanghai Auto Fair.

5G matters not because it provides vastly higher speeds for broadband, but because the combination of higher speeds, hugely increased capacity and zero latency (delay in communications) makes possible an entire class of new technologies.

These include self-guided robotic manufacturing, remote-control mining, autonomous vehicles, AI management of urban traffic and package deliveries, and a host of applications and services that haven’t been thought of yet.

Huawei’s Cloud Services division, a standalone business on par with its handset and carrier operations, is the company’s vehicle for launching new technologies on the back of 5G mobile broadband. This has gestated for years, and in 2020 became the fastest-growing business infrastructure enterprise in the world.

Whether Huawei builds out Europe’s 5G infrastructure, or political pressure assigns the task to costlier and less-advanced technology from Ericsson or Nokia, Huawei has a critical advantage in business infrastructure.

Its home market in China accounts for well over half of the world’s total spending on 5G broadband, and China will have a lead of two or more years in building smart cities, autonomous vehicles and other disruptive AI applications that the new broadband makes possible.

That is what I meant by “Sino-forming the world” in my new book. Western governments fume about China’s political influence and global ambitions, but ignore the source of this influence: By seizing the high ground in the Fourth Industrial Revolution, China will require the rest of the world to adopt its Big Data-AI applications.

Semiconductors are at the heart of an escalating US-China tech war. Image: Facebook

That leaves American policy in something of a pickle. The original rationale for Washington’s campaign against Huawei had to do with charges that in some yet unidentified fashion, Huawei might use its buildout of mobile broadband to steal data from the West.

Huawei claims that it can provide airtight safeguards against data theft. In any case, the advent of quantum telecommunications will before long provide end-to-end encryption over all broadband networks that is theoretically unhackable.

The warnings of Western intelligence services never quite stood up to scrutiny. But now the implicit American claim is precisely the opposite: By attacking Huawei’s Cloud business, Washington is saying in so many words that Western companies should shun Huawei so as not to become dependent on Chinese data.