By Jon Pelson

Few days back China launched a curious and bold response to the United States’ ban on sales of advanced chip technology. The restrictions were intended by the U.S. to prevent companies like Huawei from buying, or even making, state-of-the-art microchips. Coinciding with the U.S. Secretary of Commerce Gina Raimondo’s visit to China, Huawei abruptly launched its new flagship phone, the Mate 60 Pro, featuring an advanced China-made chip in late August. The launch was so abrupt that the company’s own marketing organization seemed to be caught off-guard, with few answers to the most basic questions, including, “Is this even a true 5G phone?”

Analysis on the release has been divided; many experts consider this proof that China can move forward without participation in the world-wide chip ecosystem, developing and manufacturing advanced 7 nanometer chips on a wholly domestic platform.

A far more likely explanation is that China is attempting to bluff its way back into the global market for advanced chips by appearing to demonstrate that the country can make them on its own; the world might as well give up on the “failed” chip ban. According to these more skeptical observers, this bluff, achieved by using economically unviable techniques to make small batches of high-tech chips at an unsupportable cost, is intended only to mislead policy makers into abandoning their bans.

The pressure to walk back the ban is enormous. Manufacturers of the high-end chips want to be free to sell to China again, and many would like to once again buy the cheap and powerful 5G solutions that Huawei and ZTE have been delivering to the world. But the implications of the chip ban go far beyond the impact on sales by manufacturers. The entire ASEAN region will be affected by the latest standoff between the world’s two super economies.

Most importantly, 5G technology, and the security implications it brings, is likely to figure prominently in every aspect of business that matters to the region:

  • Port operations already rely heavily on automated cranes and warehousing technology, increasingly driven by 5G solutions.
  • Advanced manufacturing of electronics, drugs, automobiles and other products has long used remote sensors to control operations, and factories have started shifting to wireless technology to enable more flexible and agile manufacturing layouts.
  • Municipal and national governments are increasing their reliance on high speed wireless communications to control city operations, utilities safety and efficiency, transportation security and other elements of daily life.

With China re-asserting its efforts to lead the world in 5G, a resurgence of Chinese-made 5G deployments would create a risk of reliance on the CCP for vital supply chain support. This means that Singapore may find that loading container ships requires the effective permission of China’s trade ministry. Thailand or Indonesia may need Huawei to enable smooth operations of their new pharmaceutical or medical device factories. Even Japan may find its industrial operations beholden to China-based 5G companies, if they proceed with deployments of advanced wireless networks from China’s giants. All of this should make China’s neighbors very nervous.

The irony is that the CCP leadership may have misjudged the response to their aggressive actions. China’s latest moves may bring even greater opportunities for the ASEAN region. 

The bluster – seen by many as outright bullying, especially with the tightening rules of China’s latest national security laws – is making China a less inviting place for global manufacturers to operate. While low labor costs and motivated workers are attractive, many other countries in the region are able to offer attractive environments. Vietnam, an emerging rival to China for technology manufacturing, provides a more predictable alternative. The Philippines and Malaysia, both growing at around 8%, also offer locations for the United States and other free countries to offshore advanced manufacturing in democratic environments, taking advantage of beneficial work conditions and resources.

But all of these opportunities assume that the countries aren’t basing their infrastructure on China-controlled 5G wireless networks. If the ASEAN region can source its communications infrastructure from Japan, Korea, Europe or other free countries, the alternative may be too good to pass up. And China, with its bluff exposed, may find itself compelled to re-enter the world market on terms more consistent with the trust and cooperation that have historically defined global trade. 

Jon Pelson is a technology executive in the Washington, D.C. area and the author of “Wireless Wars, China’s Dangerous Domination of 5G and How We’re Fighting Back.”

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TNL Editor: Kim Chan (@thenewslensintl)

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