(THEME MUSIC PLAYS)
KAISER KUO: Is China becoming the world leader in technology?
KELLY SIMS GALLAGHER: The United States and China
are locked in a big power struggle.
Innovation creates global power.
Over the last 40 years
China has had an unprecedented economic boom.
SILVIA LINDTNER: To understand how China innovates
is to rethink what innovation means in the first place.
TRANSLATION: To the front!
They became the manufacturer of the world,
tinkering, innovating and even stealing the lead in some areas.
PAUL SCANLAN: Why was China successful with 5G?
It got the message of what could 5G do
from health care, education, manufacturing.
With support from the Chinese state,
huge corporations like Huawei have spread their wings.
JAMES MULVENON: It was their successes,
particularly in 5G technology,
that are really leading the way
and are causing us to have to play catch-up to them.
Today, a tech war between China and the West is starting to heat up.
What does it mean for China and the rest of the world?
This is the big annual meeting for the builders of the global internet.
Tech companies from all over the world
have come here to Barcelona, Spain,
and the biggest delegation is from the Chinese tech company Huawei.
Everybody in the world is talking about 5G. and the biggest delegation is from the Chinese tech company Huawei.
Everybody in the world is talking about 5G.
In this room it feels like Huawei is top dog.
In this room They have the biggest pavilion
and the most sales and patents They have the biggest pavilion
and the most sales and patents in the next-generation internet tech
called '5G'.
They are also just one of many Chinese tech giants
They are also taking over global industries -
solar power,
wind power,
drones,
batteries -
all fields where Chinese companies have taken the lead in innovation.
all fields where Chinese companies How is China doing it?
By copying others?
Or are they finding By copying others?
Or are they finding their own innovation secret sauce?
Could they even surpass the US as the world's leading innovator?
These are questions that I have discussed time and time again.
Welcome to the Cynical podcast,
a weekly discussion of current affairs in China.
I'm Kaiser Kuo, a journalist and podcaster.
I live in the States, but for 20 years I lived in China.
I was comms director at one of their biggest tech firms
and guitarist in China's first heavy metal band, Tang Dynasty.
and guitarist in China's first (HEAVY METAL MUSIC PLAYS)
Oh.
Hi! Hey!
How are you? Good to see you. Yeah!
It's been a while. Good to see you.
Yeah, looking forward to this.
When I interview people for my podcast,
I find no shortage of different takes on the rise of Chinese tech.
The entire Chinese tech landscape and business landscape,
I think that's actually getting stronger year on year. The entire Chinese tech landscape and business landscape,
I think that's actually getting stronger year on year.
I think that's actually A major misunderstanding
that Americans might have about China
is that it is mostly focused on lower-value work
as well as copying,
but China has mostly transcended that.
PAUL TRIOLO: China is really the only peer competitor of the US
that has companies competing across the technology sector. PAUL TRIOLO: China is really the only peer competitor of the US
that has companies competing across the technology sector.
China is beating the United States in tech-heavy industries.
It accounts for a third of global output
in knowledge-intensive industries
compared with the United States, which accounts for 20%.
Today, it might be surprising to think of China
Today, it might be surprising as a technology leader...
..but for much of history
China WAS the world leader ..but for much of history
China WAS the world leader in science and innovation.
In fact, the shame of losing this position
and the dream of regaining it
were major motivations
for the founders of the Chinese Communist Party.
It all started with a widespread national awakening.
ARCHIVE REPORTER: 3,000 students gather in front of Tiananmen
ARCHIVE REPORTER: 3,000 students on 4 May
shouting, on 4 May
shouting, "China is for the Chinese people."
So, to many Chinese, shouting, "China is for the Chinese people."
So, to many Chinese,
they saw science and technology
as a way of national rejuvenation
and national salvation,
and it became a foundational principle
and it became of the modern Chinese state.
Advancing science and technology
truly became a national obsession in 1978
with the rise of the then Chinese leader, Deng Xiaoping.
ARCHIVE REPORTER: A new beginning in US-China relations.
Deng opened China to the world so it could learn foreign technology.
His market reforms helped lift over 700 million people out of poverty.
That's more than twice the population of the US.
But this was only part of Deng's plan.
Another goal was to reclaim China's historical place
as world leader in science and technology
within a generation.
So, more than four decades later,
how is Deng's plan going?
To many Chinese, how is Deng's plan going?
To many Chinese, there is no better example of success
To many Chinese, than the tech giant Huawei,
but it's also at the centre of a storm of accusations
of intellectual property theft and ties with the Chinese government.
With all the controversy, it's really easy to overlook something -
With all the controversy, it's really this company DOES innovate
and it does it in a very different way than we do in the West.
The first thing you notice when stepping onto a Huawei campus
The first thing you notice is its style -
Renaissance architecture, marble statues, European luxury.
It's all unmistakably Huawei.
But, despite the Disney vibes,
it's the perfect place to start exploring
how Chinese tech companies innovate.
So, this is our library.
Paul Scanlan is Huawei's chief technology officer.
He was drawn to China from abroad to work in tech
in part because he was impressed by Huawei's massive investment
in part because he was impressed in research and development.
PAUL SCANLAN: Why I love the company, it's very simple -
PAUL SCANLAN: Why I love it's a platform that allows me
to take a lot of the ideas I have to the world.
to take a lot of the ideas I have The platform is an R and D platform.
We spend more than 22% The platform is an R and D platform.
We spend more than 22% of our gross revenue on R and D.
We spend more than 22% That makes Huawei
one of the world's largest corporate spenders on research and development.
They've set more technical standards
than any other organisation in the world for 5G.
5G is an advanced wireless communication technology.
Because it operates at higher frequencies than 4G
it can be up to 100 times faster and also more reliable.
It also hasn't really been fully deployed yet,
but in the small town of Zhenyuan we can start to see what it can do.
With 4G, our cell phone towers connect mainly to our phones,
and there's a limit to how many devices
and there's a limit any one tower can handle at a time.
5G is a dramatic improvement
that promises to connect all sorts of devices wirelessly to the internet
and in much greater numbers.
In wireless communications
data is transmitted by radio waves.
As you progress from 3G to 4G to 5G,
the frequency of the radio waves becomes higher and higher.
the frequency of the radio waves This allows more data to be carried,
enabling faster download and upload speeds.
This is a big deal
because so much of tech depends on internet infrastructure.
because so much of tech As 3G progressed to 4G,
increased data loads enabled simple phone calls to progress
to ride-hailing apps, food-delivery apps, video conferences.
The list is endless.
Increased data loads helped build the so-called 'Internet of Things',
allowing devices to talk to devices,
like cars talking to cars
or machines in a factory coordinating to become fully automated.
PAUL SCANLAN: Why was China successful with 5G?
It got the message of what could 5G do.
It got the message that, if I can provide connectivity, It got the message of what could 5G do.
It got the message that, if I can provide connectivity,
I can collect data information.
Based on information, AI algorithms can do things
from health care, education, manufacturing, OK,
from health care, education, across all of the sectors.
It understood that urgently.
Huawei is a genuinely impressive, state-of-the-art, world-class
telecoms-equipment manufacturing company.
And it was their successes, particularly in 5G technology,
And it was their successes, that are really leading the way
and are causing us to have to play catch-up to them.
TRANSLATION: What's being installed right now is a new 5G antenna.
It supports a very wide range of frequencies,
including our 700 megahertz frequency.
China is deploying 5G
at a scale greater than any other place in the world.
China is exceptionally good at developing infrastructure, at a scale greater than any other place in the world.
China is exceptionally good at developing infrastructure,
whether it's, you know, 5G infrastructure
or electric-grid infrastructure
or electric-vehicle charging infrastructure.
It has this ability to do good planning and then also to execute.
Authorities in China are pushing 5G hard,
Authorities in China turning difficult-to-connect places
like China's mountainous Guizhou province
into laboratories for Huawei's 5G applications.
(INDISTINCT CHATTER) into laboratories for Huawei's 5G applications.
(INDISTINCT CHATTER)
YANG CHANGYU: (TRANSLATION) Out here in the mountains,
the internet has always been poor. Out here in the mountains,
the internet has always been poor.
A little bit of bad weather, a little bit of wind - no internet.
A little bit of bad weather, It was really hard to get a signal.
(SPEAKS IN OWN LANGUAGE)
In remote places forget about it.
But it has changed recently.
Now with 5G we've started doing smart farming.
(SPEAKS IN OWN LANGUAGE)
5G technology is able to make stronger connections
and transfer more data to more points.
This enables places like this tea farm
to deploy wireless sensors in hard-to-reach places.
TRANSLATION: This tea plantation has really embraced 'smart' farming.
(SPEAKS IN OWN LANGUAGE)
It's been quite useful for our agricultural management.
These sensors all help us predict
the humidity, wind conditions These sensors all help us predict
the humidity, wind conditions and temperature.
the humidity, wind conditions (SPEAKS IN OWN LANGUAGE)
More data leads to better modelling and better crop yields.
Processing the information fed to it through 5G,
a smart farming system can alert farmers
to the optimal times to remove weeds, plant seeds and harvest crops.
But this is just the beginning of what 5G can do.
China says its goal
is to ultimately move away from coal
and into cleaner forms of energy.
5G is a critical part of this plan as well.
This is the Dingzhuang floating solar farm.
Across a large swath of sea are endless solar panels,
Across a large swath of sea each requiring monitoring.
The plant's expected total output is 550-million kilowatt hours per year.
That's enough to power 52,000 typical American homes.
PAUL SCANLAN: You have tens of thousands of photovoltaic cells,
and 5G can monitor information from them PAUL SCANLAN: You have tens of thousands of photovoltaic cells,
and 5G can monitor information from them
more efficiently than anything else can.
China's national 5G infrastructure
gives a built-in advantage to this large-scale solar farm.
Solar-panel technology is prone to malfunctions
and one problematic panel can shut down an entire grid.
5G enables each panel to constantly send data
5G enables each panel to a central command station,
making inspections more efficient to a central command station,
making inspections more efficient and saving labour costs.
And a solar farm can scale to a size that wouldn't be possible otherwise.
I can now monitor them
to see whether they're failing or when they're going to fail
so I can optimise that prediction of maintenance for these farms.
And there's another unexpected benefit here.
The shade from the solar farm actually cools the surrounding water,
helping create an ideal environment for farming shrimp and other seafood.
helping create an ideal environment But all of this is possible
because the Chinese government But all of this is possible
because the Chinese government sees the advantage
of creating a web of connectivity across the entire country
and is willing to use its central authority to make it a reality.
5G cellular technology and is willing to use its central authority to make it a reality.
5G cellular technology
is really sort of a major leap.
And it really is more of the high-tech future
that we've seen in the movies and in sci-fi
in which we're surrounded all the time by, you know,
really high-speed data and the ability to exploit all of that.
And that just basically means really high-speed data and the ability to exploit all of that.
And that just basically means
5G will enable much more precision-based applications.
Driverless cars.
Automated ports and factories.
Next-generation AI.
What all of these things Next-generation AI.
What all of these things have in common
is that they can't fully develop until 5G infrastructure is built.
is that they can't fully develop And, as with most new infrastructure,
we don't yet know how it will change society for better or worse.
(ANDROID CHATTERS)
Why is it that a Chinese company is leading the way
in building the next generation of the internet?
There's no doubt that the Chinese Communist Party
uses its central authority to force change
in ways that aren't possible in Western democracies.
But another key reason is the intense work culture.
It can be brutal, with six-day weeks and 12-hour days being the norm.
Western observers often call the Huawei company culture militaristic.
Western observers often call the That's probably part of the story.
But there's also something else.
Huawei tries to motivate But there's also something else.
Huawei tries to motivate its employees
in ways that probably would not fly in Western industry.
Wang Wenjun leads the training for new recruits.
TRANSLATION: This is our training area.
I think it's different than the training facilities
in most other companies.
(SPEAKS IN OWN LANGUAGE)
Our facilities are outdoors, on top of a mountain.
This slogan... How would I translate it for foreigners?
"If you want to take more responsibilities,
"you must work harder in the training."
I look at these slogans
and think about how out of place they would seem at a Western company.
The messages are about enduring hardships and winning battles.
Huawei was founded by Ren Zhengfei,
who started his career in the Chinese army.
He then went on to found Huawei,
whose name literally means 'Chinese achievement'.
What I find interesting is how the posters around campus
echo the propaganda style of the Chinese government.
They talk about the importance of sacrifice and hard work echo the propaganda style of the Chinese government.
They talk about the importance of sacrifice and hard work
in aiding China's technological development.
A lot of what Beijing tries to do is it is trying to use ideology
to corral a lot of the dynamic firms and people in China
to pursue the goals that it really wants to have.
WANG WENJUN: (TRANSLATION) My job is to train the young people
to develop the spirit of bitter struggle,
to train everyone to become full with vigour.
Only when you have suffered can you understand the sweet things in life.
People live good lives now, they never have experienced the struggle.
The point of this place is to give them a taste of that.
The people here
train to connect not just China but every corner of the world.
This is in line with Chinese state goals,
which seek to export Chinese technology globally.
KELLY SIMS GALLAGHER: In countries in Africa
KELLY SIMS GALLAGHER: you will mostly see
Chinese equipment everywhere. you will mostly see
Chinese equipment everywhere.
I was recently in Ethiopia
and I was struck
because I kept having this out-of-body experience.
I felt like I was in China.
The subway was constructed by China.
The subway cars have Chinese words in them.
The United States is not visibly present
in a lot of developing countries around the world.
Huawei was bringing 5G and its applications to the entire world,
and then the US government started to take notice.
CHUCK SCHUMER: Huawei and ZTE are both state-backed companies.
Their efforts to enter the American market
is a great example
of how China attempts to steal our private data
of how China and intellectual property.
In 2018
Huawei CFO, Meng Wanzhou,
the daughter of Huawei founder, Ren Zhengfei,
was apprehended in Canada under suspicion of violating US sanctions.
TRANSLATION: The whole world sees this for what it is.
America is trying to strangle China's high-tech companies.
America is trying to strangle In May 2019
the US government placed Huawei In May 2019
the US government placed Huawei on the so-called 'Entity List',
the US government placed Huawei a registry of companies
that are effectively banned from doing business in the US.
James Mulvenon is one of the architects of this policy change.
JAMES MULVENON: The day that Huawei and its subsidiaries
JAMES MULVENON: The day were placed on the Entity List
was, frankly, a day of real sense of personal accomplishment for me.
I had been writing about Huawei for 25 years
I had been writing about Huawei and informing the US government
about many different features of Huawei's relationship
with the Chinese military, with the Chinese government,
its activities abroad that I thought were suspicious and questionable.
A country is always going to be extremely protective
of its telecommunications infrastructure.
It is the way it maintains control over its territory
and connects its leaders, its police forces, its military,
and during the Cold War and connects its leaders, its police forces, its military,
and during the Cold War
the United States government
was the way in which the United States government
maintained command and control over weapons
that could have destroyed the world hundreds of times over.
Mulvenon contends that,
while there hasn't been any proof - nothing in public at least -
while there hasn't been any proof - of Huawei's spying in the US,
there is no way of ensuring a Chinese company's independence from Beijing.
To protect against this threat,
the US government has mandated Huawei equipment across the country
the US government has mandated be ripped out and replaced.
In the town of South Canaan, Pennsylvania,
local telecom company CEO, Jim Kail,
is overseeing the removal of Huawei equipment
from the internet infrastructure.
But now he faces a new problem -
alternate equipment is three times more expensive than Huawei's.
alternate equipment is three times Without Huawei
there is no cost-effective way to Without Huawei
there is no cost-effective way to connect this region to the internet.
JIM KAIL: Our allegiance is to our own country here,
and that's very important, I take that very seriously,
and the rest of us, as rural Americans,
we're patriotic, and the rest of us, as rural Americans,
we're patriotic,
and yeah, so, we...we did think long and hard about that
and yeah, so, we...we did think before we made that decision.
Had about 1,300 of these units deployed in customers' homes.
Over the course of the last couple of years in particular
there was the push to ban the product and...
Which eventually led to the mandate where we had to rip and replace.
And we're now in the process of doing that.
We're taking...swapping out the Huawei solution
We're taking...swapping out with a different solution.
And, actually, that, with a different solution.
And, actually, that, when you think about it,
it's actually a windfall for China, right?
So, you're actually taking equipment out there, you're ripping it out
and you're going out and buying new equipment, right?
Buying it from China, right?
I mean, it's the vendors, the vendors we do business with,
they're getting their parts from China.
And, so, China is getting a windfall out of this.
For many observers in America,
the most challenging thing about Huawei
the most challenging thing is that they can make products
that no Western firm is that they can make products
that no Western firm has been able to replicate,
that no Western firm especially when it comes to cost.
And without Huawei there is simply no cost-effective way right now
to build 5G across much of America,
something that lawyer Eric Atria discovered
when he and his family moved to rural Florida.
We moved out here
and found out that there literally wasn't internet out here.
and found out that there literally We couldn't get any internet.
And the only place in our yard that we could actually get
one bar of service from our cell phone provider
one bar of service is this log,
so, my wife called it 'logging on'.
And you only get one bar of signal standing here.
So, my wife was out here the other day
holding her phone in the air as a personal hotspot
and her laptop in the other hand so she could do a work meeting.
(YELLS) Actually not working!
The United States has only built about 100,000 5G base stations
compared to the over 2 million in China.
KID: Now it's working!
Why is China so much more successful
at creating affordable, cutting-edge tech?
VICTOR SEOW: So, historically,
a country's capacity to produce was itself viewed as innovative.
So, in imperial times, China's capacity to a country's capacity to produce was itself viewed as innovative.
So, in imperial times, China's capacity to
produce these wonderful goods, this porcelain, this silk, So, in imperial times, China's capacity to
produce these wonderful goods, this porcelain, this silk,
was inspiring for those who were able to view them, to see them.
And it's only closer to our present
where we see this distinction between innovation and production.
Shenzhen is the manufacturing epicentre of China.
It's also the home town of most of the Chinese tech giants,
including Huawei.
So, Shenzhen was declared, famously, by Deng Xiaoping
a 'special economic zone' in the 1980s.
Before 1979
Shenzhen was a small fishing village of 30,000 people.
Then it was designated China's first special economic zone -
an experiment with capitalism
that set it apart from the centrally planned economic model
that set it apart from in the rest of the country.
From the beginning
authorities viewed mastery of manufacturing as key to innovation.
authorities viewed mastery of Flash forward to today,
Shenzhen is the manufacturing Flash forward to today,
Shenzhen is the manufacturing powerhouse of the world.
TRANSLATION: In 1997 there were many foreign investors here.
It was the peak of the 'reform and opening' years.
Lots of foreign capital was flowing into China,
and this gave us lots of opportunities
and this gave us to learn and improve ourselves.
To walk around Shenzhen
is to see a tech hub which is very different
from Silicon Valley's software start-up culture.
At the centre of it all are the factories and the art of making.
Maker spaces are everywhere,
where people produce, tinker, hack
and, most famously, copy foreign tech.
DAN WANG: A lot of developing countries got to be richer
by copying and, indeed, stealing from advanced countries.
by copying and, indeed, stealing That was the case
when the United States was a major IP violator That was the case
when the United States was a major IP violator
back in the 19th century,
mostly from the United Kingdom.
Zhang Jiuzhou is a product designer in Shenzhen.
He challenges the whole idea of what IP theft means.
(SPEAKS IN OWN LANGUAGE)
TRANSLATION: A lot of people talk about 'knock-off' products in China,
like all the fake iPhones made here.
But I see 'knock-off' as a neutral word,
But I see 'knock-off' which means learning and evolving.
Something that's associated with intellectual property, with patents, which means learning and evolving.
Something that's associated with intellectual property, with patents,
arguably with a very Western-centric definition
of what counts as innovation,
which is often rooted in this idea
that there is an authentic, original,
a charismatic technology creator
who came up with this fantastic, completely novel idea
that's revolutionising a whole industry,
and we don't really think of something like modification
and we don't really think or slow paced-change as innovation.
And, so, what I think is really important
for us to understand how China innovates
is to rethink what innovation means in the first place.
is to rethink what innovation means In my years working in tech in China
I saw it become the workshop of the world.
Like a nation of busy chefs, China was making things at turbo speed,
Like a nation of busy chefs, China building world-class skills.
But then something else started to happen.
As there was increasing clustering of manufacturing centres But then something else started to happen.
As there was increasing clustering of manufacturing centres
around different industries,
a lot of learning occurred.
I remember going through a factory in China
and one of the ways
they had been able to cut the cost of the solar panel
was to figure out a way to slice the ingot more thinly.
China is masterful at these types of process innovations,
and, over time, also began to really gain innovation capabilities.
The spaces where China has world-leading tech
tend to be the places where China holds manufacturing dominance.
Chinese battery companies make 77% of the world's batteries.
China's firms produce 80% of the components in solar panels.
China's firms produce 80% Huawei followed a similar path.
After producing telecom equipment for foreign companies for years,
their manufacturing experience
helped them develop better and cheaper products.
If China had never become the workshop of the world,
I doubt we'd even be talking about Chinese tech giants.
DAN WANG: And a lot of the manufacturing workforce in China
DAN WANG: And a lot of has expanded very significantly,
in part at the expense of the US.
As we see from COVID-19,
a lot of the US manufacturers, in its early days,
struggled to make something as simple as masks for people
struggled to make something as well as cotton swabs for testing.
The contrast that we see in China
is that manufacturers were able to respond really quickly.
Manufacturing dominance
creates spillover advantages for Chinese entrepreneurs,
advantages that show up in unexpected places.
TRANSLATION: In 2014 I built a 10-megawatt Bitcoin mine
in the Inner Mongolia province. I built a 10-megawatt Bitcoin mine
in the Inner Mongolia province.
At that time, it was one of China's largest facilities.
Now in 2021
I'm building the same kind of facility here in the desert...
I'm building the same kind (SPEAKS IN OWN LANGUAGE)
..except this time around (SPEAKS IN OWN LANGUAGE)
..except this time around it's 60 times larger.
It's like coming full circle, just in a new location.
It's like coming full circle, Kevin Pan is the CEO of Poolin,
one of the largest Bitcoin mining operations in the world.
A Bitcoin mining facility is similar to a data centre.
Powerful computers operate 24/7 to run the Bitcoin network.
For security
the network depends For security
the network depends on the participation of computers
scattered around the world
to collectively keep track of Bitcoin ownership.
The system issues Bitcoins to participants
by rewarding those who solve complex cryptographic puzzles,
an activity that requires huge amounts of electricity.
Bitcoin mining was once dominated by US miners,
but, as so often happens, China was quick to get into the game
and grew to hold as much as a 75% share of the industry.
I'm especially interested in asking Kevin
what he thought gave China that edge in this and in so many other areas.
KEVIN PAN: (TRANSLATION) It's almost unfathomable
how quick the supply chain is in Shenzhen.
In America, it takes days to receive prototypes for your designs.
In Shenzhen, if you send blueprints to a factory in the morning,
they'll deliver a prototype by the afternoon.
It's a paradise for any entrepreneur working with hardware.
In other places you just can't do this, only in Shenzhen.
Kevin built his massive Bitcoin operation in China,
and then the hammer came down.
China's central bank cracked down on cryptocurrencies,
calling all crypto-related activities illegal.
It happened around the same time as a wide-ranging tech crackdown
that also hit social-media companies and online loan providers.
As powerful as the Chinese government is
when it comes to rapidly deploying infrastructure like 5G,
when it comes to rapidly deploying it can be equally harsh,
and, essentially, with the same stroke of a pen
and, essentially, it banned Kevin's entire industry,
citing the environmental consequences it banned Kevin's entire industry,
citing the environmental consequences of Bitcoin mining.
TRANSLATION: Ever since we got shut down,
the company's been in a tough position.
the company's So, what happened to Kevin?
Turns out he wasn't about to give up so easily.
He just pulled up stakes and started over in a new home...
..where he has been welcomed with open arms.
I love Bitcoin because it's bringing freedom to people.
I love Bitcoin because You can protect your own assets
and nobody want...nobody could ever, ever, could take it from you.
and nobody want...nobody could So, where does it actually exist?
It's on the internet.
Kevin's not alone in jumping ship.
Many entrepreneurs caught in Chinese tech crackdowns
Many entrepreneurs have relocated to America.
They're here because the Chinese government
takes an active role in steering innovation.
takes an active role Policymakers funnel talent and money
into industries they view as important.
At the same time
they shut down industries they view as wasteful, risky or frivolous.
KEVIN PAN: (TRANSLATION) When China shut us down,
we immediately complied with the law.
we immediately But in our hearts we felt hopeless.
We spent so long building so much,
and it was all torn down We spent so long building so much,
and it was all torn down in a single night.
We either had to give up or start from scratch.
Today Kevin and his team of Bitcoin miners
Today are meeting with Kenneth Winkles...
Kevin, good morning!
..head of a local economic development organisation.
Good to see you again, sir.
How many total megawatts will you be utilising
How many total megawatts once you're up and running?
Yeah, phase one once you're up and running?
Yeah, phase one is about 100 megawatts.
OK.
I don't believe that what happened in China
I don't believe will happen in the United States.
I really don't. will happen in the United States.
I really don't.
We've got a very stable
type of government, We've got a very stable
type of government,
whether you're a red or a blue state.
You happen to be in a red state.
Texas is business-friendly,
so, you're not going to see somebody come in and say,
"No, you can't do that in my backyard."
Yeah. OK.
Yeah. Crypto was banned in China
because the Chinese state uses its strong central authority
to guide innovation as it sees fit.
But is it just driving out the disruptors and original thinkers
But is it just driving out the needed to foster true innovation?
There's no shortage of strong opinions.
I've seen many times in Chinese bookstores, There's no shortage of strong opinions.
I've seen many times in Chinese bookstores,
there are many, many books in those bookstores that say,
there are many, many books "Where is China's Steve Jobs?"
And this is a question "Where is China's Steve Jobs?"
And this is a question that China itself is asking.
And, so, I do believe, ultimately,
that it's the combination of the American free market
that it's the combination with our democratic system
that ultimately with our democratic system
that ultimately is best for fostering innovation.
Beijing's vision of the technological future
is a little bit different from California's.
In its view, a lot of social-media companies
are actually creating a lot of social unrest.
And, frankly, it doesn't see a great use for cryptocurrency,
which is almost explicitly designed to be out of state control.
There are certainly efforts by the government which is almost explicitly designed to be out of state control.
There are certainly efforts by the government
to redirect talent and capital
toward so-called 'hard tech' sectors
such as climate tech, such as electric vehicles, etcetera.
China's government guides innovation into areas that it deems important.
But can a single institution always choose the right winners?
But can a single institution Either way,
it does seem to be working Either way,
it does seem to be working for a number of key industries,
and the Chinese model of a heavier state hand
seems to be gaining influence worldwide.
The challenge of competing with China
The challenge has caused people to reassess
whether the market alone can create and mobilise
the resources for innovation in the United States.
And the belief, I think, is that it can't,
especially when you're competing with a country where the government
has been able to mobilise such vast sums of resources in the same areas.
And, so, the US government has put its own thumb on the scale
with the 2022 passage of the CHIPS and Science Act
injecting public money into the semiconductor industry.
Today's computer chips are easily the most complex devices ever made,
and they're also seen now as a critical strategic resource.
Besides trying to jumpstart domestic production,
the US and the West
are also trying to keep the means of production out of China's hands.
DAN WANG: Without advanced semiconductors
there is no way that China can have a thriving technological industry.
China is now out of the starting gate in semiconductors,
but, in the most rosy view,
it is probably at least 5 to 15 years behind the US
in terms of the most crucial semiconductor technologies.
Computer chips are solid pieces of silicon and metal
with literally billions of tiny electronic switches
with literally billions packed into a very small space.
Since the 1970s
the key to increasing the power and speed of computers
has been tied directly to the density of those switches.
As they've shrunk down to the atomic scale,
the technology required to make them
has become increasingly costly and complex.
Pushing the envelope of chip innovation
is like building a pyramid -
everything rests on what came below,
and China's pyramid is really just getting started.
JAMES MULVENON: One of the most dramatic consequences
JAMES MULVENON: One of the most of the trade war with China
was the exposure of China's dependence
on high-quality and high-end semiconductor chips
from the United States and Japan and Korea and Taiwan.
And, I would say, right now that catch-up in the semiconductor space
is probably the single greatest challenge
that the Chinese technology sphere currently faces
and the highest hill that they have to climb.
This is a Huawei cell-phone factory.
Just a few years ago
Huawei was on track to become the leading maker of mobile phones
Huawei was on track to become in the world.
Then the US government cut off their access to advanced semiconductors.
DAN WANG: Huawei has had a lot of different problems
with trying to maintain production.
There's simply no way to be a major technology provider
if you don't have the most advanced semiconductors in the world.
And, so, at this point, Huawei's revenues have collapsed
mostly because its smartphone business has collapsed.
mostly because its smartphone It was for one period
the second-largest smartphone maker It was for one period
the second-largest smartphone maker in the world.
Today, it is just barely in the running
for being the top-10 largest smartphone makers in the world.
In Chandler, Arizona,
I visit an Intel semiconductor factory,
I visit an Intel also known as a 'fab'.
Here Intel is building a new state-of-the-art facility.
If any one place represents the front line of the tech war today
If any one place represents this is it.
Welcome to Fab 42. this is it.
Welcome to Fab 42.
You're in one of Intel's most advanced factories.
Very large outfit here that we run
with a lot of different people doing various activities.
Semiconductors process the data that run through digital devices.
HUGH GREEN: We start our process with a bare silicon wafer.
It looks like a pizza, 300 millimetres in diameter.
Digital electronics work
by processing our voice, the videos we watch and the data we collect
into a binary code that can be transmitted between us.
This is the language of computers and the internet.
What creates this code are switches called 'transistors'.
At the heart of computers today are tiny wafers of silicon
that can hold more than 100 billion transistors
that can hold in just a few square centimetres.
The switches of today's computers are only a few atoms wide,
only visible under an electron microscope.
Arranged by millions of minuscule networks,
they look like farmland viewed from 30,000 feet.
The connections between them are just as tiny.
On this package itself there are 1.1 million interconnects. The connections between them are just as tiny.
On this package itself there are 1.1 million interconnects.
And of those interconnects
about 980,000 of those interconnects are at Intel state-of-the-art.
Each new generation of fabrication machinery
Each new generation is an advance on what came before it.
Starting in the 1970s,
Moore's law predicted that chip technology would improve so rapidly
that the number of transistors on a chip would double every 18 months.
that the number of transistors on This has held mostly true so far,
making it almost impossible This has held mostly true so far,
making it almost impossible for newcomers to the game to catch up
making it almost impossible without relying on equipment
produced by just a few standard-setting companies.
KEYVAN ESFARJANI: Imagine you have billions of transistors
on a...you know, your fingernail.
If a small defect -
and I mean small defects being like a size of a molecule or even a DNA -
the whole thing breaks apart.
It's not a stretch to say
that here the US is relearning a lesson
that here that China is already committed to.
It's a reminder that China is already committed to.
It's a reminder of what America may have lost
in allowing the decline of its own manufacturing sector,
but it's also a testament to some of America's strengths.
You have about 100 PhDs working in this facility, but it's also a testament to some of America's strengths.
You have about 100 PhDs working in this facility,
You have about 100 PhDs and we do care about diversity -
diversity of thought,
diversity of opinion, diversity of views.
As I look around
I see top scientists from many countries working here.
They come from Europe, India and even China
to provide different perspectives on how to solve difficult problems.
This is something that I never really saw in Chinese research labs,
This is something that I never and it's one of the many reasons
why Chinese companies are having such a difficult time
catching up in semiconductors.
In this facility
the most cutting-edge lithography In this facility
the most cutting-edge lithography machines are from the Netherlands,
the most cutting-edge lithography the chip designs are from California,
minerals for chip-making processes come from all over the world.
Producing something as complicated as a semiconductor
requires international cooperation.
There isn't a country in the world that can do it alone.
There isn't a country in the world But now China will have to try.
In late 2022 the US government expanded its tech war on China.
In late 2022 the US government New regulations
forced all Americans working in the semiconductor industry in China
to resign or renounce their citizenship.
The restrictions are only expanding in scope.
What started as an attempt to choke select companies like Huawei
seems to be expanding to the entire Chinese tech sector.
It was a very comprehensive set of rules seems to be expanding to the entire Chinese tech sector.
It was a very comprehensive set of rules
It was a very comprehensive designed really to allow the US
to control just exactly what capability China would have
across the semiconductor manufacturing space.
And, so, China faces a really significant problem.
No country has ever attempted to recreate, for example,
all the pieces of the semiconductor manufacturing supply chain
all the pieces of the semiconductor on its own.
Back at Huawei
the company is on a war footing.
Cut off from the technology it needs to power their products,
Cut off from the technology it needs they know they need to move fast.
The way the Chinese typically respond to efforts like that they know they need to move fast.
The way the Chinese typically respond to efforts like that
is they redouble their efforts to innovate internally.
is they redouble their efforts (SPEAKS IN OWN LANGUAGE)
TRANSLATION: As you may know,
our supply of semiconductors was choked off.
We can't make them.
But I can feel it -
the whole of society is working to find a way out of this problem.
Of course, here in this lab, we are focused on our own problems.
But you could say we're working on the fundamental problem
But you could say we're working this country faces.
How do we get around the pressure that has been put on us?
How do we get around the pressure (SPEAKS IN OWN LANGUAGE)
Is another route possible that doesn't rely on semiconductors?
In the Huawei R and D labs
researchers study how to use light to process data
researchers study how to use light rather than using traditional chips.
Losing access rather than using traditional chips.
Losing access to the most cutting-edge chips
Losing access has slowed down the progress
of many of the most prominent Chinese tech giants.
Or has it lit a fire?
In August 2023
Huawei stunned the world
by announcing a new phone Huawei stunned the world
by announcing a new phone with a 7-nanometre Chinese-made chip,
more advanced than anything anyone thought China could make so quickly.
It was a real morale boost for the Chinese tech sector.
GAO JIALIN:(TRANSLATION) China is trying to be held back.
But we will innovate ourselves out of the problem.
The rise of Chinese tech giants has changed the world.
China's model of innovation created world-leading companies.
While many insist that China did not come by these gains honestly,
relying on intellectual property theft and predatory pricing,
relying on intellectual property they still did it.
And they did it with a different they still did it.
And they did it with a different ethos and manufacturing focus
that challenges expectations of how innovation happens.
They rose in the time of globalisation,
but their very ascent triggered a tech war.
KELLY SIMS GALLAGHER: Trying to hamstring
KELLY SIMS GALLAGHER: China's ability to innovate
is really the wrong answer to the question.
And if the question is, "How can the US become more competitive?"
it needs to get its own house in order and compete.
(YELLS) Mum! It's not working!
PAUL TRIOLO: The reason (YELLS) Mum! It's not working!
PAUL TRIOLO: The reason you can have that iPhone
PAUL TRIOLO: The reason with so much capability in your hand
IS the result of globalisation.
So, that iPhone represents parts IS the result of globalisation.
So, that iPhone represents parts coming from all over the world.
So, what we've seen over the last two years
is, essentially, a reversal of that process.
is, essentially, What comes next? I don't know.
But I believe that Chinese technology What comes next? I don't know.
But I believe that Chinese technology will continue to change the world,
for better or worse.
(THEME MUSIC PLAYS)
Captions by Red Bee Media
Copyright Australian Broadcasting Corporation