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CHINA’sS&TCATCH-UPANDSINO-U.S.TECHNOLOGICALDECOUPLING:

THECASEFOR5G

GuilhemFabre*

UniversitéPaulValéry,Montpellier3/BRICSSeminar,FMSH-INALCO

Underlyingthetradewar,technologicalcompetitionhasmovedtothecenteroftheU.S.-Chinarelationship.TheU.S.leadershipinworldinnovation,researchandtechnologydevelopmentsinceWorldWarIIhasallowedittowintheColdWar,andtogaineconomicandmilitaryadvantagesoverpotentialrivals.Butthatleadershipisnowatrisk.Ononeside, there is awidespread belief in theU.S. that the post-warworld order no longerbenefitsthecountryasmuchasitusedto,andthatthebestwaytoregainitsfreedomandcompetitionistomoveawayfrommultilateralisminfavorofaninternationalorderbasedon bilateral relations1. U.S. leadership on S&T is nowmainly based on private sectorinvestmentandmultinational corporations,while there is adecade-long stagnation infederalsupportandfundingforR&D,directedatnationaleconomic,strategicandsocialconcerns2. On the other side, the rise of Chinese power and influence felt on the fivecontinentsandtheU.N.,sincethe2008globalcrisisandtheascentofXiJinpingin2013,iscoupledwithanunprecedentednationalsupportinS&T,R&D,atatimewherethenextwaveofbreakthroughinnovationwillgenerateeconomicandmilitaryadvantagesforthecountries that develop and deploy these technologies first3 . This explains the actualtechnologicaldecoupling,ofwhichbestexampleistherivalryover5G.

AfteranevaluationofChina’sR&Dcatchingupinfrontiertechnologiesrelativeto

the USA and Europe, this paper will focus on the 5G implementation, its geopoliticaldimensionsanditsconsequencesintermsoftechnologicaldecoupling.

I.CHINA’sR&DCATCHINGUPTo “catch up and surpass”(赶超) the USA has been in the gene of the Chinese

communistleadershipofMaoZedonginthe1950s,whotookoverthissloganfromtheSovietgrandbrother,toXiJinping4.But,in2018forthefirsttime,amajorityofEuropeanfirmsrespondingtoasurvey,reportthatChinesefirmswereequallyormoreinnovativethanthemdespiteInternetrestrictionswhichcastdoubtonChina’sambitionstobecomeaglobalR&Dcenter5.ThisnewperceptionshowsthatinnovationhasbecomeakeyresortofthecompetitionbetweenChineseandforeignMNCs.Thisistheresultofalong-term

1FrancoisDelattre,France’sAmbassadortotheU.N.,NewYorkTimes,June13,2019.Inafewyearstime,ChinahastakentheleadoffourU.N.Agencies:UNIDO,ITU,ICAOandFAO(LeMonde,15-16/09/2019).2JamesManyika,WilliamHMacRaven,AdamSegal,InnovationandNationalSecurity:KeepingourEdge,CouncilofForeignRelations,September2019.3Ibidem,p.75.4JulianBairdGewirtz,“China’sLongMarchtoTechnologicalSupremacy:TheRootsofXiJinping’sambitiontocatchupandsurpass”,TheNewYorkTimes,August27,2019.5EuropeanBusiness:EuropeanConfidenceSurvey,China-EuropeanChamberofCommerce,2019.

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policyonS&T6,whichtendstocatchupthecountry’sbackwardnessrelativetotheU.S.infrontiertechnologies.ChinahasmadeprogressonallindicatorsandinsomeareasitisnowinfrontoftheUnitedStates7.China’sR&DspendingsurpassedtheEUin2014andisrapidlycatchingupwiththeU.S.(Fig.0&1).Figure0.ResearchandDevelopmentspending

China’s2007investmentinR&Dwas33%lessthantheU.S.By2017itrepresents76%ofU.S.levelsand2.13%ofitsGDP.

Figure1.ChineseExpendituresonR&DasaShareofGDP,RelativetotheUnitedStates2007-2017

6Cf.GuilhemFabre&StephaneGrumbach,“TheWorldupsidedown:China’sR&Dstrategy”,FMSHWorkingPaper,2012:https://halshs.archives-ouvertes.fr/FMSH-WP/halshs-00686389;GuilhemFabre,“China’sdigitaltransformation:WhyisartificialintelligenceapriorityforChineseR&D”,FMSHWorkingPaper,2018:https://wpfmsh.hypotheses.org/9947RobertD.Atkinson&CalebFoot,“IsChinacatchinguptotheUnitedStatesininnovation?”,InformationTechnologyandInnovationFoundation,April2019.

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Inbasicresearch,whichhasthegreatestpotentialtocreatefundamentalinnovation,ChinalagsbehindtheU.S.butduringthesameperiod,ithascloseditsgapfrom13to26%oftheU.S.level(Figure2).

Figure2.ChineseExpendituresonBasicR&DasaShareofGDP,RelativetotheUnitedStates2007-2017

IntermsofinstitutionChineseBusinessR&D(BERD)wentupto80percentoftheUSlevel,HigherEducationR&D(HERD)roseto40percentofUSlevel,andGovernmentR&D(GovERD)surpassedtheUSby19%(Figure3),astheUSR&DismainlyfocusedonprivateinvestmentandfederalsupportforR&DtendtodeclineintheirshareoftheGDP(Figure4).

Figure3.PerformersofChineseExpendituresonR&DasaShareofGDP,RelativetotheUnitedStates2007-2017

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Figure4.U.S.R&DFundingbySectorasaShareofGDP

In terms of talents, China performsmuchworse fordoctoraldegrees per capita,relativetotheU.S.,butcomputerscienceandengineeringdoctoratesreached35%ofthepercapitaU.S.level.(Figure5)Thus,inabsoluteterms,thenumberofChinesedoctoraldegreesiscatchingupveryquicklyandevensurpassestheU.S.incomputerscienceandengineering.

Figure5.ChinesepercapitaDoctoralDegreesas%oftheU.S,2004-2014

IntermsofUniversityranking,Chineseresearchuniversitiesrosefrom9.5percentoftheU.S.scorein2009,to28percentoftheU.S.scorein2018(Figure6).Thequalityofresearchhasalsoimproved,astherelativecitationofChinesescientificandengineering

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articlesreached68percentoftheU.S.levelandmorethanhalfareaslikelyasU.S.articlesto be among the top 1 percentmost cited articles in their field, surpassing the globalaverage(Figure7). AsforIntellectualPropertyRights,theChinesepatentsfiledundertheInternationalCooperationTreatyrosefrom10to80percentoftheU.Slevel(Figure8).ChinahasbecomethelargestproducerandexporterofICTgoods,exportingovereighttimesthenumberofAmericanICTexports,andICTvalue-addedwentfromabouthalfofUSlevelsin2006toaround50percentmoretenyearslater(Figure9).

TwosectorsmayillustrateChina’scatchinguptheU.S.inadvancedfields:Artificial

Intelligenceandaerospace.InAI,apartfromTsinghua,threeotherChineseuniversitiesandresearchcentershaverisenintermsofpublication intopAIconferencesbetween2014 and 2018, Beijing University, the Academy of Sciences and Nanjing University(Figure 10). The impact of Chinese scientists publications on AI has been growingcomparedtoEuropeanandU.S.ones(Figure11).Butthatisonlyonepartofthestory.Ifwerefertotheattendeestothe2018ConferenceoftheNeuralInformationProcessingSystem (NIPS) as the top AI researchers, 60 percent (or 68 scientists) are currentlyworkinginAmericaninstitutions(Figure12).Butmorethanhalf(38outof68)oftheAItalentpool inAmerica, iscomposedof foreignnationalswhochosetowork intheU.S.(Figure13)andthelargestsupply(10)comesfromChina,justbeforeIndia(Figure14).

Figure6.ChineseUniversitiesamongthetop500relativetotheUnitedStates,weightedbyranking

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Figure7.RelativeCitationsofChineseSciences&EngineeringArticlesasaPercentageoftheUnitedStates2004-2014

Figure8.ChinesePatentsFiledUndertheInternationalPatentCooperationTreatyasPercentageoftheUnitedStates,2008-2018

Figure9.ChineseICTGoodsTradeandProductionasPercentageoftheUnitedStates,2006-2016

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Figure10.ChineseUniversitiesRisinginArtificialIntelligenceField

Figure11.Field-WeightedCitationImpactofAIauthorsbyregion(1998-2016)

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Figure12.NIPSOralPresentationAuthorCurrentLocation

Figure13.NIPSOralPresentationAuthorUndergraduateLocation

Figure14.Comingto,Stayingin,America

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ThustheattractivityofU.ScampusesforforeignscholarsisthemainassetforthequalityofAIresearch8.Thecurrentadministration’sexecutiveorderonestablishingAIleadershipandanti-immigrationpoliciescouldbeself-defeating,asitwouldallowBeijingto catch up by building a strong talent pool, according to a top Chinese technologyinvestor9 . New visa limitations only aid Beijing’s ambitions10 . And besides, ChinesescientistsmayalsogotoCanada…

China’s catch-up in the aerospace industry is also particularly impressive. It has

surpassedRussiaandtheU.Sin2018forthenumberofsuccessfulspacelaunches(Figure15).According toa2019USChinaEconomicandSecurityCommissionreport,China’sspaceprogramismoreconnectedtothe“leversofpower”,meaningitsgoalsmoreoftendrawsupportfromtopleadersandareconnectedtothecountry’sprioritiesinindustrialandforeignpolicies.ThisisparticularlythecasefortheChina’sBeidousatellitenavigationsystem,whichisavitalcomponentoftheBeltandRoaddigitalSilkRoad.ItpromotestheuseofBeidouandothersatellitesamongBRIparticipants,includingformilitaryuse,inthecaseofPakistan11(Figures16,17,18,19).Chinaaimstohave35Beidousatellitesinorbit by 202012 . Apart from its dual dimension, the growth of China’s satellite datapositioninghasprofoundimplications.ChinesesmartphonesandcarnavigationsystemsareBeidoucompatiblebydefault.Forcompanieswithglobalambitions,makingBeidoucompatibleproducts isanecessity,becauseproductsandservicesthatuseBeidouareavailable in many countries. More than 30 countries in the Middle East, Africa andelsewhereuseBeidou.Ifitbecomesthestandardinthesecountries,Chinawillhaveanadvantage in introducingtechnologiesandproducts.USchipmakerQualcommwasthefirst to supply chips for Beidou-capable smartphones. Leading American smartphonemakersotherthanAppleusethechipsintheirdevices.13.

8DanielCastroetal.,“WhoiswinningtheA.Irace:China,theE.UortheUnitedStates?”,CenterforDataInnovation,August2019;JoyDantongMa,“TheAIraceiswideopenifAmericaremainsopen”,MacroPolo,April15,2019:https://macropolo.org/us-china-ai-race-talent/9CatherineWong,“ToughU.SimmigrationpolicycouldbethekeytoChinawinningtechnologyrace,saystopChinatechnologyinvestor”,SouthChinaMorningPost,HongKong,October30,2019.10YangyangCheng,“Don’tclosethedooronChinesescientistslikeme”,ForeignPolicy,June4,2018.11U.S.-ChinaEconomicandSecurityCommission:China’sPursuitofSpacePowerStatusandImplicationsfortheUnited-States,April2019:https://www.uscc.gov/research/chinas-pursuit-space-power-status-and-implications-united-states12BBC,Technology,September20,2018:https://www.bbc.com/news/technology-4547195913KazuhiroKidaetal.,“China’sversionofGPSnowhasmoresatellitesthanU.Soriginal”,NikkeiAsianReview,August19,2019.TheEuropeanGlobalNavigationGlobalSatelliteSystemsAgencyestimatethemarketfordevicesandlocationdataservicestoreachUS$190billionby2020,with8billionreceiversinoperation.

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Figure15.Commencingcountdown,engineson

Figure16.BeidouSatelliteNavigationSystem

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Figure17.GlobalNavigationSatelliteSystems

Figure18.ChineseversionofU.S.GPS,BeidouexpandsinfluenceinAsiaandAfrica

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Figure19.Numberofpositioningsatellitesinmajorcities

II.THESTAKESOF5G

China’snewsatellitesinfrastructureisparticularlyimportantinthecontextofthenew5thGenerationofmobile,(5G),whichisabreakthroughinnovationcomparedwiththepreviousones,becauseitsintentionistoservebothconsumersandmachinesthroughtheInternetofThings(IoT)(Figure20). Although5Gremainsinafairlynascentstageandwill fully develop between 2020 and 2030, it will deeply disrupt transport, withdriverlessvehicles,energy,manufacturingwiththe4thindustrialrevolution,healthcare,smartcities,smarthomes,andentertainmentwithvirtualrealityetc.(Figure21).

Figure20.TheInternetofThings(IoT)

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Figure21.What5Gisabout

Figure22.How5GCouldWork

With5G,wirelessconnectivityistransformingfromatraditionalmacronetworkbasedonlargetowerswithbroadcoverage,toanetworkofatleasthundredsofthousandof small cells strung closely together, which, because of spectral re-use, producessignificantlyhigherbandwidth(uptoamillionconnectionsversus4000connectionsthat4Gbase stations cancopewith)at amuchhigherdownloadspeed (600megabitspersecondandfasterinthefuture,comparedwith28megabitspersecondfor4G)andata

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muchlowerlatency(thetimeittakesforasignaltotravelacrossthenetworkisjustasinglemillisecondcomparedwith50millisecondsormorefor4G)14(Figure22).

Concrete examples of 5G’s IoT applications range from the commercial to themilitary field, with integrated missile defense systems or 360 degrees battlefieldawareness(Figure23).

Figure23.CommercialandMilitaryApplicationsoftheIoT

Source:U.S.-ChinaEconomicandSecurityCommission,U.S.Congress,2018.Thus5G,withitspotentialintermsofinnovation,itsdualcharacteraswellasits

implications in terms of Cloud datamanagement and competition, a US $ 200 billionindustry dominated by Amazon Web Services, Google, Microsoft Azure and AlibabaCloud15 , marks a return of geopolitics to international relations, and is now at theforefrontoftheU.S-Chinatechnologicalrivalryanddecoupling.Forsomeanalysts,“Chinahasmadeitsdecision:ChinaisbuildingaseparatesystemofChinesetechnology:itsownstandards,infrastructureandsupplychainstocompetewiththeWest”16.Butintermsofcommunication,thingsarenotsosimple,asthestandardsneedtobeglobal.Ifwetaketheexampleof5G, themostpromisingand influential technology for thenextdecade,technical standards that will enable interoperability and facilitate widespreadcommercializationaretakingshapethroughthe3GenerationPartnershipProject(3GPP),aconsortiumoftelecomfirmsandassociationsundertheUnitedNationsInternationalTelecommunications Union (UNITU), which holds the World Radio Conference every

14MITTechnologicalReview,April19,201915ScottMalcomson,“TheRealFightfortheFutureof5G”,ForeignAffairs,November14,2019.16Cf.“TheEndoftheAmericanOrder”,IanBremmerspeechat2019GZEROSummit,Tokyo,EurasiaGroup,November18,2019:https://www.eurasiagroup.net/live-post/end-of-american-order-ian-bremmer-2019-gzero-summit-speech

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threeorfouryears.AsChinadidnothaveasayin2G,developedaninternalstandardfor3G, had a relatively small participation in the conception of 4G, 5G, as a new globalstandard, gives it a brand newopportunity to be a significant player. Thus China hassoughtleadershippositioninthetechnicalstandardsforumstoraiseitsinfluence,whichhasirritatedtheU.Sandotherincumbents.ThesecretarygeneralofITUisnowaChinese,Houlin ZHAO, and three Chinese firms, Huawei, CATT and China Mobile haverepresentativesinthethreetechnicalgroupsof3GPP(Figure24).Figure24.3GPPPlenaryLeadership2019-2021

CT=CoreNetworkandTerminal;RAN=RadioAccessNetwork;SA=ServiceandSystemsAspects.

The core technologyof amobilenetwork isRadioAccess (RAN). It is abouthowsignals (voiceordata)are transmittedbetweenabase stationand the terminal (i.e. amobilephoneorawearabledevice).Anotherkeyconsiderationistheamountofspectrumand frequency level that can be made available for 5G. This has an impact on theperformanceofthemobiletechnology.Finally,tosimplifyacomplextechnologicaltopic,theamountofStandardEssentialPatent(SEP)ownedbydifferentfirmsdeterminestheshare of IPR revenues, in an ecosystem where no single company controls thetechnology17.

ChinahasclearlytakentheleadinRANthroughitspublicpolicy,ithasoutspentthe

U.S by around24 billion inwireless infrastructure, and 400 billion $US in 5G-relatedinvestmentinits5-yeareconomicplan.ChinaToweraddedapproximately460sitesperday,implyingUStowercompaniesandcarriersaddedfewersitesfrom2015to2018,duetostatutoryconstraints,thatChinaToweraddedinthreemonths.TheRANisdominatedbyHuaweiandtheScandinaviansEricssonandNokia,whosharealmost80percentofthemarket’srevenue(Figure25)18.

17Foranexcellentpresentation:JefferiesFranchiseNote,TelecomServices:TheGeopoliticsof5GandIoT,September14,2017:https://www.jefferies.com/CMSFiles/Jefferies.com/files/Insights/TelecomServ.pdf18XuewuGuetal.,GeopoliticsandtheGlobalRacefor5G,CGSGlobalFocus,May2019.

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Figure25.MainPlayersontheRAN-Market

Figure26.ChineseFirmsdominate5GRollout

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Huawei is building on its established presence in 4G networks, which alreadyamountstonearlyathirdoftheglobaltelecommarket(Figure26).Itisoneofthefewplayers that can provide mature and cost-effective equipment for 5G. It has shipped150.000basestationsasofJune2019,andsigned50commercial5Gcontractswith30countries,includingRussiaandasignificantproportioninEurope19.

Oneofthekeypointstowinningandexercisinga5Gleadershipisthespectrumand

frequenciesused,ascarcepublicresource.Mid-bandandlowfrequencies(under6GHz)arecongestedbutprovidemuchbetterareacoverageat lesscost,becausetheydonotrequireasmanysitesortowers.Highfrequencies(over24GHz),alsocalledmmWawe,canoffermuchwider,cleanerbandwidthbuthastechchallenges,suchasrainfade,treeblockageandshorttransmissiondistance.Chinahasclearlypreferredmid-bandandlowfrequenciesforcoverage,whichissupportedbyEurope,butithasalsoallocatedspectrumonhighfrequencies.TheU.Shaschosenhighfrequencies,butisnowconstrainedtoadoptoptionsformid-bandfrequencies,despitetheiractualusagebysatellitecompaniesandthemilitary.AccordingtoaUSDefenseInnovationBoardReport,“as5Gisnowdeployedaroundtheglobeinsimilarbandsofspectrum,China’shandsetandinternetapplicationsarelikelytobecomedominant,eveniftheyareexcludedfromtheU.S.Chinaisonatracktorepeatin5GwhathappenedintheUnitedStateswith4G“20.

Apart from its leadership in RAN, and its facility of spectrum allocation by

government’s decisions, instead of a longer process of auctions to operators madeelsewhere,Chinahasaclearadvantage in termsofscale,sincethenumbersofmobilesubscribersinitsmarketsurpasstheU.SandEuropealtogether(Figure27).Figure27.Largestmobilenetworkoperatorsbysubscribers

19ElsaB.Kania,Securingour5GFuture:TheCompetitiveChallengeandConsiderationsforU.S.Policy,CenterforaNewAmericanSecurity,November2019:https://www.cnas.org/securing-our-5g-future20MiloMedin&GilmanLouie,The5GEcosystem:RisksandOpportunitiesforDoD,DefenseInnovationBoard,April3,2019.

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With a forward-looking industrial policy and huge enthusiasm among localgovernments, the forecasts for 5G capital expenditures and connections in China areimpressive,theyvaryfrom428to576millionin2025(Figure28).

Figure28.5GconnectionsandcapitalexpenditureforecastinChina

Source:EYTheadvantagesoffirstmoverstatusaretwofold:successacrosslargenetworksin

Chinacandemonstratetocarriersinotherbigmarketsthatlowfrequenciescandeliveron performance. Second, since 5Gwill enablewidespread use of IoT applications andupgrade toadvancedmanufacturing,China’s technologygiantswill capitalizeon thesenewtechnologiesandthenwillmoreeasilyexport5GsystemsalongtheBeltandRoadInitiative,asapartoftheDigitalSilkRoad.)21.Inthiscontext,firmsareexpectedtobethemainsourceofrevenuesfortheoperators(Figure29).Figure29.Sourcesofnewoperatorrevenuesfor5G

Source:GSMAIntelligence

21PaulTriolo,KevinAllison,EurasiaGroupWhitePaper:TheGeopoliticsof5G,November15,2018:https://www.eurasiagroup.net/live-post/the-geopolitics-of-5g

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Thus, with firm governmental support, facilities of investment and frequenciesallocation,aleadershipinRANandthescaleofitsmarket,Chinaisinthebestpositioninthe5Grace(Figure30).

Figure30.5GReadinessIndex

Source:AnalysysMason,TheGlobalRacefor5G,CTIAReport,2018.

The U.S administration has been conscious of this situation early on. In January 2018, a senior National Security Council official floated the idea of rivaling Beijing with a government led effort to build a national wireless network, but regulators and elected officials rejected this proposition as ”overly expensive and unrealistic”22.Sincethen,Washingtonhasadoptedadefensive tactic, with American officials pushing allied countries to ban Huawei frombuildingtheir5Gnetworks,citingconcernsoversecurityandthecompany’sunclearlinkstotheChinesestate23.

ThisdoesnotmeanthattheU.Shasnoadvantage.Ifthegovernmenttypicallyavoids

mandatingandcoordinatingeffortsbyprivatefirmsinnetworkinfrastructure,U.Sisstilltheleaderinadvanced5Gtechnologies.CarrierssuchasVerizonandAT&Thavebeenthefirsttolaunchexperimentsof5GnetworksinselectedU.Scitiesin2019.U.Sfirmsarestill dominant in key telecommunications technologies like Ethernet switches, which

22JohnD.McKinnonetal.,“OfficialsRejectIdeaforGovernmentTakeoverof5GWirelessBuild-Out”,WallStreetJournal,January29,2018.23ChristopherBalding&DonaldClarkhaveshowedthat99%ofHuaweiisofficiallyownedbya“TradeUnionCommittee”,asurprisingownershipstructureinChina,where“tradeunionmembershavenorightto assets held by a trade union”, China File, April 19, 2019: http://www.chinafile.com/reporting-opinion/viewpoint/who-owns-huawei

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managenetworktraffic,EnterpriseWirelessLocalAreaNetwork(WLAN),whichprovidecommunicationnetwork,andRouters,whichforwarddatabetweennetworks,althoughHuaweiisinsecondposition(Figure31).Figure31.World’sLargestFirmsinSelectedTelecommunicationsTechnologies(2017)

Source:U.S.-ChinaEconomicandSecurityCommissionReport,2018,U.S.Congress.

ThekeyU.Sadvantageisinsmartphonesemi-conductors,whichallowasmartphone

to connect to telecom networks. In 2016, China imported $US 295 billion in semi-conductors,or2,8timesthevalueofallthecrudeoilitimportedthatyear.Only16percentof thesemi-conductorchipsconsumedinChinaareproduceddomestically24. In2017,Qualcommcontrolled59,6percentoftheUS$15billionmarketfor4Gmodemchips,and42percentof the$US8billionglobalsmartphoneSystemonChip(SoC)market,whichintegratesallthememoryandcomponentsandenablesmanagementofallsmartphoneequipment(Figure32).

24TheEconomist,May16,2019.The$US295billionseemtoincludeimportsofequipmentthatareusedinthemanufactureofgoodssubsequentlyexported(phones,etc.).

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Figure32.SmartphoneSystemonChipMarketSharebyValueQ3(2017)

Inshort,theU.S.dependsonChinaforthebulkofelectronicmanufacturing,while

China still reliesonanumberofAmericancomponents, including softwareandchips.Chinahasinvestedheavilytocatchupthisdisadvantageinsemi-conductors,whichhasbeen among the priorities of the Made in China 2025 plan, promoting indigenousinnovation.Inaddition,atthestartof2018,theChinesegovernmentunveiledapackageof incentives to attract specialists and students from Taiwan, which appear to besuccessful.Inthefirstninemonthsof2018,morethan300seniorengineersworkingatsemi-conductorcompaniesinTaiwanmovedtoChina.Intotal,morethan1.300Taiwanengineers have relocated to China since 2014, in search of higher paying jobs andsubsidized living expenses 25 . Despite the blacklisting of certain Chinese firms byWashington, Beijing’s push for technological sufficiency is on the verge of a majorbreakthrough,with the country’s nascent chip industryon track to produce around5percentoftheworld’smemorychipsbytheendof2020fromvirtuallyzeroin201826.

AsmobiledataisthefastestgrowingpartoftheInternettraffic(Figure33)future

technologies that enable connectivity will increasingly rely on patented technologystandardssuchas5G.Inthiscontext,theracefor5GStandardEssentialPatents(SEP)isdecisive. In2018,Qualcommwasstilldominatingwith15percentof the5GSEP,withotherU.SfirmslikeInterdigital(9%)andIntel(7%).ButtheChinesefirmsHuaweiand

25U.S.Congress,U.S.-ChinaEconomicandSecurityCommission,2019Reportp.467;GuilhemFabre,“China’sdigitaltransformation:WhyisartificialintelligenceaChinesepriority?”,FMSHWorkingPapercited,June2018,p.13.26ChengTing-Fang&LaulyLi,NikkeiAsianReview,November20,2019:https://asia.nikkei.com/Business/China-tech/China-memory-chip-output-zooms-from-zero-to-5-of-world-total

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ZTE,whichrepresentedabout7%ofthe4GSEP,wererisingto10%ofthe5Gpatents,surpassingEricsson(9%)andrunningjustbehindNokia(11%)(Figure34).

Figure33.GlobalIPTraffic,2017-2022

Source:CISCO

Figure34.ShareofCritical5GPatentsbyCompany

Source:LexnnovoQualcomm, which was the clear winner in terms of 4G patents finds itself in a

paradoxicalposition:theChinesemarket,thattodaycontributesmorethan60percentofits global revenues, with intellectual property and the production of 4G chips, alsohappenstobethemostlikelytochallengeitsdominantposition27.Huaweihaslearnedthe lesson: ithasspent15percentof itsannualrevenue,61billion$US,overthepastdecade, to develop technologies that have the potential to become global 5G telecomstandards.ThefirmplanstoincreaseitsR&Dto15billion$USperyear,andcouldreach

27JoyDantongMa,“Fromwindfallstopitfalls:Qualcomm’sChinaConundrum”,MacroPolo,PaulsonInstitute,2018:https://macropolo.org/analysis/from-windfalls-to-pitfalls-qualcomms-china-conundrum/

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20billion$USinyearstocome.Huaweiisbuildinguponitsestablishedpresencein4Gnetworks,whichalreadyamounttonearlyathirdoftheglobaltelecommarket28.Iftheseplansarerealized,HuaweicouldsurpassGoogle’sAlphabetR&Dinvestmentin2018,andreachanamountclosetoAmazon,thefirstandsecondMNC’sintermsofR&Dexpenses29.

In November 2019, Huawei’s founder, Ren Zhengfei, has unveiled a plan to“repatriate”numerousexperiencedscientists,specialistsandengineersinordertofillinthetechnologicalvacuumduetoWashington’ssanctions,andatransferofitsR&DfundingpolicyfromtheU.StoCanadianinstitutions30.Huaweihasbeenparticularlyactiveinthe5Gstandardizationinstitutions,ifwerefertothenumberof5Gofficeapplicationsandgrantstatus,tothenumberoftechnicalcontributionsto5Gstandards,andtothenumberofengineersattendingGPPmeetingson5G(Figures35,36,37)31

Figure35.Toppatentownerof5Gdeclarationsastothenumberofpatentsfamiliesastoofficeofapplicationandgrantstatus(Iplytics,November2019)

28ElsaB.Kania,Securingour5GFuture:TheCompetitiveChallengeandConsiderationsforU.SPolicy,CenterforaNewAmericanSecurity,November2019.29Cf.PriceWaterHouseCooperInnovation1000:https://www.strategyand.pwc.com/gx/en/insights/innovation1000.html#GlobalKeyFindingsTabs430DiYiCaijing,November17,2019:https://www.yicai.com/news/100406138.html31TimPohlmann,“Whoisleadingthe5Gpatentrace?ApatentlandscapeanalysisondeclaredSEPsandstandardscontribution”,November2019,www.iplytics.com

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Figure36.Topcompaniessubmittingtechnicalcontributionsfor5Gstandards(Iplytics,November2019)

Figure37.Numberofattendingengineersto3GPPmeetingsrelevantto5G(asofIplyticsPlatform,November2019)

ThisdatadoesnotmeanthatChinahasa leadershipposition in5G,sincenotall

patents are of equal value. Companies may overestimate and thus over-declare thenumber of patents they own. But it is clear that China has changed from a relativelypassiveposition in4G toa contender in theglobal technological race. InMarch2018,WashingtondetectedHuawei’sinfluencebehindthefailedattemptofthethenSingapore-basedBroadcom tobuy theU.S chipgiantand5G leaderQualcommInc. inaUS$117billiondeal.AndinJuly2018,BeijingpreventedQualcomm’splannedacquisitionofDutch

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chipmakerNXPSemiconductorsNV,adealthatwouldhavehelpedQualcommtoprofitfrom5Ginvestmentsinnewmarketssuchasconnectedcars.32.

CYBERSECURITYRISKSANDTHEFRAGMENTATIONOFTHE5GMARKET

Thesameyear,theU.ShastakentheleadontheglobalstagetobanChinesetelecomandequipmentcompanies,byemphasizingtheirthreatonnationalsecurity.Afteritwascutoff from theU.Smarket, theEuropeanmarketbecamea strategicone forHuawei,which aims to clear doubts about its reliability and has established a center forcybersecuritynotonlyinBonn,butalsoinBrussels.InBrussels,Huaweiisoneofthemostactiveplayerswithanannualbudgetof2,2billionEurosandeightlobbyistswithaccesstotheEuropeanParliament33.

TheU.SbanhascontributedtoafragmentationoftheEuropeanmarketbetween

countriesthataccept,refuseordiscussHuawei’sequipment(Figure38).Thebanextendsto U.S allied countries in other continents (Figure 39). The debate is complex, as therelianceof5Gnetworksmakeeconomyandnationalsecuritymorevulnerable.As“thereisnoability toprovetheabsenceofmaliciouscodeorbackdoor in interconnectedICTsystem (for any manufacturer not just Chinese), society, government and mobileoperatorshavetotrustthemanufacturertofixvulnerabilities,andthistrustdependsonthelegalandpoliticalsysteminwhichthemanufactureroperates”»34.But,accordingtothesameanalyst,“muchofthecurrentdebateisdrivenundertheassumptionthatonlythedevelopmentofChinesenetworkequipmentbearsriskfornationalsecurity,whichisnaïve”. Snowdendocuments revealed for instance that theNSAhada special team tointerceptcertainCISCOsoftwareandhardwaretypesofdevices(routerandservers)inordertospychosentargets35.

The “politicization of the supply chain”, while almost 80 percent of 5G related spending

would be used for hardware, may delay 5G implementation and generate important geopolitical implications. Japan and South Korea, which have already banned Huawei, are estimated to be the closest followers of the two giants. Emerging countries may prefer China’s lower costs and equal or higher performance 5G offering, especially as partof theDigital Belt andRoadInitiative36.ThusChineseinfluencewillexpand,intheSouth,South-EastAsia,aswellasinAfrica.InmanycountrieswhereHuaweiactuallyoperateandmanagetheequipmentofthehosttelecomcompanies,abackdoorisnotneededifyoualreadyhaveakeytothefrontdoor.HuaweiandZTEarealreadyexportingfacerecognitiontechnologiesfuelledby5Gconnectivitytorepressiveregimesglobally,suchasMongolia,Ethiopia,Zimbabwe,MalaysiaandEcuador37.

32JoshChinetal.“The5Grace”,WallStreetJournal,September9,2018.33XuewuGu et al.,Geopolitics and theGlobal Race for 5G, CGSGlobal Focus, Center forGlobal Studies,UniversityofBonn,May2019.34Jan-Peter Kleinhans, 5G vs. National Security: A European Perspective, Stiftung NeueWerantwortung,February2019:https://www.stiftung-nv.de/sites/default/files/5g_vs._national_security.pdf35Ibidem.36XuewuGuetal.,op.cit.,p.33and69.37CharlesClancy,TestimonybeforetheSenateCommitteeoftheJudiciary,Hearingon5G:Theimpactonnationalsecurity,intellectualpropertyandcompetition,USCongress,May14,2019:https://www.judiciary.senate.gov/imo/media/doc/Clancy%20Testimony.pdf;

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Figure38.DiscussionofHuaweiBansinEurope

Figure39. “14 Eyes”– Countries’ Loyalty to the United States RegardingHuaweiBans

As5Gwillbeacriticalcomponentofnewinfrastructure,acyber-attackonthesesystemsmaynotonlycausedatatheftbutalsodamagepublicsafetyandcriticalindustries.Thequestionofcybersecuritybecomescentral,astheconsequencesofinsecuritycouldbe far graver than before its implementation. Apart from the physical dimension ofswitchesandrouters,5Gisbuiltonlayersofcomplexsoftwarethatarefarmoreadaptingandconstantlyupdatingwithout theuser’sknowledge.Whoevercontrols thenetwork,controls the information flow, and may be able to change or copy data. In case ofgeopoliticaldisagreementorconflict,thismayleadtoa“winwithoutfightingsituation”,theidealofSunZi’sstrategy,inhisArtofWar. Nevertheless,U.Sattemptstodissuadenations that are considering working with Huawei are perceived as excessive or

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protectionist,anddonottakeintoaccountviableorpositivealternativesthataretobebuiltwithalliedcountries38.

Figure40.PotentialVulnerabilitiesoftheIoT

TherearesomanypotentialvulnerabilitiesoftheInternetofThings(IoT)(Figure40) that some countries like Russia (Figure 41), in the name of security and digitalsovereignty,areplanningtofollowChina’s“splinternet”model,wherethenationalaccesstotheWorldWideWebisundergovernmentcontrol.RapidproliferationofIoTdevicesisworsening global security risks. Themajority of these devices aremanufactured inChina,whichthroughastateledapproach,istryingtosetIoTinternationalstandards,aspartofitsoverallstrategytobecomeascienceandtechnologypowerhouse,andmoveupthevaluechain,whileencouragingcivil-military fusion39.Bycomparison,U.S firmsarecurrentlymarketleadersinindustrialIoT,bymarketvalue,andIoT-enablingtechnologiessuchassemi-conductorsandcloudcomputing40.ButhereagaintheU.SadvanceissubjecttothecompetitionofAlibabaCloud,whiletheEuropeansdonothavecompetitivecloudplatformssuchasAmazonWebServices,GoogleorMicrosoftAzure.

38ElsaB.Kania,op.cit.,p.12-15.39JohnChenetal.,China’sInternetofThings,ResearchReportonbehalfoftheU.S-ChinaEconomicandSecurityReviewCommission,October2018.40U.S.Congress,U.S.-ChinaEconomicandSecurityCommissionReport,2018,p.447-448.

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Figure41.RussianInternetisplanningtogosolo

CONCLUSION:WHEREAREWEHEADINGFOR?

As underlined by Elsa Kania, China has challenged the American leadership ininnovation through investing heavily in 5G, avital platform to realize the potential offrontier technologies like artificial intelligence, with its multiple and unexpectedapplications.Ithasseizedahistoricopportunity,whichcouldallowittosurpassitsmainrival in this decisive technology where the U.S may not be able to achieve decisiveleadership.Inthecurrent5Gcompetition,neithertheDepartmentofDefensenortheU.Sare inaposition todictate the contentand integrationof the5Gsupply chain, inpartbecausenoAmericancompaniesmanufacturetheequipmenttotransfersignalsbetweenmobilephonesandthetowerandsitesthatmakeupthenetwork.AccordingtotheU.SDefenseInnovationBoard,thismismatchmaycreateserioussecurityrisksiftherestoftheworldacceptsChineseproductsasthecheaperandsuperioroption41.

ThetechnologicaldecouplingbetweentheU.SandChinacontinuesinareaswhereitis most difficult to distinguish between commercial and military applications. AfterHuaweiandZTE,theTrumpadministrationblacklistextendsto200Chinesecompanies,includingfacialrecognitionstart-upsSenseTime,MegviiandYitu,threeofChina’sfourdragonsofartificialintelligence42.Atthesametime,thePrague5Gsecurityconferencewithparticipants from32countries, announced in its recommendations that the«riskassessmentsofsupplier’sproductsshouldtakeintoaccountallrelevantfactors,includingapplicable legal environment and other aspects of supplier’s ecosystem” while theEuropeanAgencyforCybersecurity(ENISA),identifiesNation-Statesasthemainthreatagentin5Gnetworks43.Inthistensecontext,the5GandIoTdevelopmentmayleadto

41MiloMedinandGilmanLouie,The5GEcosystem:RisksandOpportunitiesforDOD,DefenseInnovationBoard,April3,2019.JamesManyikaetal.,op.cit.,CouncilonForeignRelationsReport,2019,p.58.42TakashiKawakamietal.,NikkeiAsianReview,November19,2019.43PragueProposals,5GSecurityConference:https://www.vlada.cz/en/media-centrum/aktualne/prague-5g-security-conference-announced-series-of-recommendations-the-prague-proposals-173422/ENISA,ThreatLandscapefor5Gnetworks,November21,2019:https://www.enisa.europa.eu/publications/enisa-threat-landscape-for-5g-networks

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splittheInternetgovernanceaccordingtodifferentnationalinterests,andallegiance,akindofrevengeofthedigitalChinesemodelof“internetsovereignty”ontheWorldWideWeb.

SomecountriesarealreadyrespondingtoChina’sdigitalunilateralismbyfollowingthesamepath:inAsiaalone,India,Cambodia,Myanmar,Thailand,Indonesia,BruneiandVietnamhaverestrictedpublicInternetandsocialmediaaccess44.In2017,Chinacalledforamultilateralapproachtogoverningcyberspace,withtheU.Ntakingtheleadingrole.In2018,thelaunchofthenewDigitalSilkRoadisanotherwaytoimpactglobalInternetgovernance through Chinese trade and investment policy45 . All these developmentsexplainthereactionofTimBernersLee,bestknownastheinventoroftheWorldWideWeb,wholaunchedanewinternationalcontract46sothat“theWebremainsopenandaglobalpublicresource,forpeopleeverywhere,nowandinthefuture”.

*TheauthorwouldliketothankDeliaMorrisforherrevisionoftheEnglishofthispaper.

44HosukLee-Makiyama,“WillAsia’sdigitalintegrationbederailed”,EastAsiaForum,April7,2019:https://www.eastasiaforum.org/2019/04/07/will-asias-digital-integration-be-derailed/45AdamSegal,“WhenChinaRulestheWeb:TechnologyinServiceoftheState”,ForeignAffairs,September/October2018:https://www.foreignaffairs.com/articles/china/2018-08-13/when-china-rules-web46https://contractfortheweb.org/