CKGSB Knowledge - China Business and Economy

BETTING ALL THE CHIPS

For China’s technology sector, the decision of the United States to hit Shenzhen-based telecommunications giant ZTE with a trade ban in April was an abrupt and painful wake-up call.

Until then, many in China had grown accustomed to thinking of their country as a global leader in technology. After all, China’s smartphones, high-speed railways and e-commerce platforms were the envy of the world. But in the days following the ban, designed to punish ZTE for violating US sanctions on Iran and North Korea, it became clear that one of China’s most successful companies was totally dependent on American suppliers.

ZTE’s business was crippled and it announced it would have to shut down. The firm, and the jobs of its 75,000 employees, was saved only by the Trump administration’s reversal of the ban in July.

Beijing is doing everything it can to reduce China’s dependence on foreign-made microchips, which the country now spends more on importing than crude oil. But catching up with the world’s leading semiconductor firms will not be easy

The tech company’s most glaring weakness was reliance

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