December 8, 2023

In 2019, the White House said phone and internet equipment from Chinese tech companies should be removed from every corner of the US because it posed an unacceptable risk of espionage or sabotage by the Chinese government.

More than three years later, most of that equipment remains.

Today I will look at how the US has handled the equipment of two Chinese companies, Huawei and ZTE. I will explore what this might tell us about America’s ability to effectively address concerns about other Chinese technologies, such as apps like TikTok, and its efforts to become more self-sufficient in computer chip manufacturing and design.

Technology will no longer be a near-monopoly of America, as it has been for the past half century, and the US must understand and execute plans to help it benefit from global technological advances while maintaining America’s security and innovation. But the history of Chinese equipment shows that we have a long way to go.

Some US officials believe Huawei and ZTE’s continued use of tools is heavy handed threatening to America’s national security. Other policy experts I spoke to said it presents negligible risk and that it might not be worth trying to remove all the equipment right away.

What is clear is that the US said the ban on Chinese technology was urgent and then failed to follow through.

Removing Huawei and ZTE equipment, which is mostly used in rural areas of the US, was never going to be simple, and complications related to the pandemic made matters worse. But critics of the U.S. approach also said the way officials handled it hurt American businesses and consumers without making the country much safer.

Let me go back to how this all started. For about a decade, U.S. officials have repeatedly said phone and Internet equipment from Huawei and ZTE could be used as gateways for Chinese government espionage or to disrupt essential U.S. communications. Those warnings have convinced major US phone and internet companies such as AT&T and Verizon to stay away from buying such equipment.

Almost everyone in the US government and business community working on this issue says it was the right thing to do. (There is less consensus about the wisdom of restrictions on Huawei smartphones.) Huawei and ZTE have repeatedly said these security concerns were unfounded, and that the US government has never provided public proof of its claims.

Smaller companies, mostly in rural areas, were not as strongly discouraged from buying Huawei and ZTE equipment. A significant minority of them went on to buy items from the companies, such as devices similar to home Internet modems and equipment to bounce cell phone signals.

The US government said it was too much of a risk. Starting in 2019, the US ordered virtually all companies with Huawei and ZTE equipment to replace it all. The government promised taxpayer money to help pay for comparable equipment from American or European companies.

The Federal Communications Commission once estimated the cost of replacing Chinese equipment to be about 2 billion dollars. An updated estimate show up last month showed that it was coming 5 billion dollars. It will take time for the FCC and Congress to figure out how to pay the amounts they say small carriers need. Meanwhile, many such providers haven’t even begun to replace Huawei and ZTE equipment, according to Politico mentionted last month.

There are many fingers crossed as to how this happened. Congress mandated small companies and then didn’t follow the money. US officials have questioned what types of Huawei and ZTE equipment should be replaced. Delay and confusing official messages slowed down the process.

Naomi Wilson, Asia policy specialist at ITI, a trade group of US technology and telecommunications companies, told me that early estimates of equipment replacement were best guesses that turned out to be too low. Inflation, supply chain problems and the trade war between the US and China have pushed up the price.

A big question is whether this drama could have been avoided. I asked Paul Triolo, senior vice president for China at the Albright Stonebridge Group, a strategy firm, whether the US had a good plan with shaky execution or whether the strategy was wrong in the first place. He said it was a bit of both.

Triolo said the US government could have phased out Huawei and ZTE equipment over many years – similar to Britain’s approach – and quickly withdrawn certain types of Chinese equipment or equipment near sensitive locations, such as near military facilities. While the U.S. said it had to quickly de-risk the equipment, all those things remain in place anyway, he said.

Triolo and some other China policy experts I spoke with worry that America’s approaches to Chinese technology aren’t always effective or focused on the right things.

The US is also concerned that TikTok or other apps from Chinese companies could collect sensitive data about Americans or spread Chinese government propaganda. Policymakers have yet to figure out how to address these concerns or make much headway in relentless Chinese cyberattacks on US government agencies and companies.

Officials have not always had coherent messages about building a domestic computer chip industry to counter China. And if the US wants to keep American technology strong, it could do more to support the immigration of tech experts or eliminate Chinese tariffs that hurt Americans.

The US could, in theory, do it all. Officials could insulate the country from potential foreign dangers and devote the time, money and brains necessary to support the best policies for American innovation. Instead, we have bits and pieces that don’t have much yet.

Read previous On Tech newsletters about how the US is responding to Chinese technology:

  • Taiwan produces the most important electronic devices on Earth: My colleagues Paul Mozur and Raymond Zhong explained why advanced computer chips were part of the backdrop for Speaker Nancy Pelosi’s controversial visit to Taiwan this week.

  • There is no simple blueprint for internet fame and fortune: The tutorials show that people can become Internet famous by paying freelancers to make YouTube videos with similar ingredients, such as an unseen narrator, a catchy headline, or a Top 10 list of celebrities. My colleague Nico Grant mentioned that this proposal can’t lose it can definitely lose.

  • He makes a living roasting dudes online. Drew Afualo makes some of TikTok’s most popular videos by verbally attacking people for acts of racism, lipophobia and misogyny, Bloomberg News mentionted. (Subscription may be required.)

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