The escalating US-China trade tensions are coming to a head, as Chinese AI firms are exploiting loopholes in the US tech sanctions. Intelligence reports show that Chinese tech giants iFlytek and SenseTime are leveraging their access to third parties and cloud providers for high-end chip technology not available to them due to the sanctions. Even though these companies have been placed on the US Entity List, blocking them from buying components produced by American companies, they have found ways around these restrictions. By using third-party services, they can still gain access to restricted technology while staying off the radar of authorities.
Huawei, one of China’s leading telecom companies, is also taking measures to counter the impact of US sanctions by replacing 13,000 components and devoting 6% more budget towards research & development this year compared to 2020. The company claims that its efforts will enable it to replace all foreign parts within two years and become independent of US suppliers for its products.
Not only are tech firms finding ways around US sanctions, smaller players like Telcos are profiting too by selling offshore phone numbers for registration of non-Chinese services. This means that citizens or organizations wanting to use services blocked by Chinese censors can register for an offshore number and access those services with no restriction. Even though the telcos who provide such service may be at risk of running into trouble with authorities, the revenue potential is too great for people involved in this business segment to ignore completely.
As a result of such practices, analysts worry that more advanced technology will continue to find its way into Chinese hands even while current sanctions remain in effect. They also argue that it further reinforces Beijing’s determination to become technologically self-sufficient without reliance on foreign components and software applications at any cost. The current situation highlights a rift between two leading economic superpowers whose resolution appears unlikely in the near future.
Meanwhile, US tech companies are also taking measures to protect their market share in China. Google and Amazon recently announced that they will open AI research labs in Shanghai and Shenzhen respectively, while Microsoft has opened its first cloud data center in the city of Zhenjiang. These firms hope to gain access to the Chinese AI talent pool and help bolster their presence in the country. Despite these efforts, US tech firms are still facing stiff competition from domestic Chinese companies and may find it difficult to compete against them in the near future.
These developments are further highlighting the gap between two global economic superpowers and suggest that while current sanctions remain in effect, there is little hope of a resolution in the near future. The longer this situation persists, the tougher it will be for US tech companies to keep up with their Chinese competition and maintain their market share in China. It remains to be seen how both sides will maneuver to protect their interests in this ongoing technological race.