Tech leaders in Asia are warning that risks from ongoing trade tensions are broadening, accelerating the fragmentation of the global industry and threatening collaboration in key research areas.

China and the U.S. announced face-to-face negotiations will be held in the coming weeks, but the prospects for a quick resolution to the trade conflict look slim. Some tech companies are seeing weakening sales and their competitive edge erode, pushing players to radically overhaul supply chains. Such splintering may now extend to other areas, including critical fields like artificial intelligence, in which the pair of global superpowers lead.

“The risk of the tension of the nature we see between the U.S. and China -- the two largest economies -- is that we may end up with a global economy that’s fragmented and supply chains that are fractured,” said Singapore’s Communications and Information Minister S. Iswaran. “That supply chain and fragmentation pertains to markets, investment flows and cooperation in terms of technology as well.”

The minister was speaking at Bloomberg’s Sooner Than You Think technology conference in Singapore on Thursday, an event that featured representatives from U.S. tech giants including Microsoft Corp., International Business Machines Corp. as well as Chinese artificial intelligence pioneer SenseTime Group Ltd.

Ongoing trade tensions have been particularly hard on the tech players in both the U.S. and China. Tariffs have made it more difficult to win business, eroding the competitiveness of American companies in China. U.S. tariffs on roughly US$110 billion ($152 billion) worth of consumer imports from China went into effect at the beginning of this month, drawing retaliation from Beijing.

In May, Washington added Huawei Technologies Co. to an entity list that curbed the Chinese tech giant’s ability to sell equipment in the U.S. and prohibited it from purchasing components from American suppliers. This move is also a blow to American suppliers, who are seeing their market share dip as they miss out on sales opportunities in China.

“I think the U.S.-China issues are more than the trade war issues. Fundamentally they are issues of technology. I think 5G and IOT (internet of things) is important because, not just from an economic standpoint but from the military complex, dominance in those technologies is a game changer, so I think that’s a source of tension,” Piyush Gupta, chief executive officer of DBS Group Holdings Ltd., told Bloomberg TV.

The harsher business environment is also pushing tech companies on both sides to re-evaluate their operations, giving rise to a splintering of supply chains -- into one that serves customers inside China, and another one outside of China that’s serves American customers. President Trump has even taken to Twitter to order multinational companies out of China.

Many American companies that have spent decades wading deeper into the world’s most populous country in search of new markets, now face the prospect of losing hard-won market share in China to rivals from Europe, Asia -- as well as from Chinese companies whose increasing sophistication means that in some cases they now offer viable alternatives to foreign tech products.

As a result of the trade war, many Chinese tech firms are developing their own alternatives to certain American technologies like semiconductors, said Xu Li, CEO of Chinese AI leader Sensetime. For the past two years, his company has been developing its own tailored chips for applications like health care and autonomous driving to rival more general-purpose chips from American companies like Nvidia Corp.

Still, Sensetime aims to create a platform for idea exchange and collaboration internationally because that’s where “technology breakthroughs” come from. The company is focusing on partnerships with academic institutions that bridge “East and West,” he said.

The disconnect is particularly acute in emerging technologies, where a tussle for leadership in areas like artificial intelligence and advanced computing underpins U.S.-China trade tensions. The backlash has prompted concerns over the technological setbacks that could result from a pullback in global collaboration, and has led to calls for more cooperation, not less. “No country has the resources and technologies it needs” to tackle the coming technology wave, said Tom Mitchell of the school of computer science at Carnegie Mellon University, at the World AI Conference in Shanghai last week. “We must have global cooperation in AI.”

“I don’t think anyone wins a trade war in the end,” said David Kenny, CEO of ratings and consumer tracking company Nielsen Holdings Plc, which operates in more than a hundred countries. “The uncertainty does cause investment levels to come down.”

He said AI models improve with more global data and without the ability to share data across borders makes all the algorithms less effective. “Those who share globally are going to beat any individual countries’ initiatives,” he said.

Tech leaders in Asia warn of supply chain split 

Data is the new oil but is it as dirty?

Tech leaders in Asia warn of supply chain split

Related News

Highlights

Data is the new oil but is it as dirty?

Related News

Arm's IPO just the shot needed to restart muscle-memory fondness for new listings

Tesla-driving Hou of DBS stays positive on US big tech

Vision Pro is the face of computing's future