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  • - [Narrator] This is a chip.

  • It's the brains of electronic devices,

  • laptops, smartphones, TVs,

  • and certainly the device

  • you're watching this video on right now.

  • Almost half of these chips sold globally

  • by American firms like Qualcomm and Intel.

  • But now China is racing to change that.

  • The country has added almost $30 billion

  • into its own semiconductor companies,

  • like Chinese manufacturer, SMIC.

  • - SMIC is China's hope to win this tech race with the US.

  • - [Narrator] SMIC is one of many

  • little known Chinese tech companies

  • that have seen their stocks rise

  • as the Trump administration announced a number of moves

  • to effectively shut Chinese tech giants,

  • including TikTok and Huawei out of the US market.

  • - Huawei is something that's very dangerous.

  • - I mean, Washington's attitude toward China,

  • particularly when it comes to technology

  • is that the two countries need to separate.

  • We could wind up with two different ecosystems

  • when it comes to technology.

  • - [Narrator] This separation process

  • has been called decoupling.

  • So how are the US and China

  • trying to become more self-sufficient?

  • And what does it mean for tech giants in both countries?

  • - We cannot take the security risks

  • of any of those companies,

  • including Huawei, which as you know, we put a halt to.

  • - [Narrator] Huawei and the hugely popular video app, TikTok

  • have both been accused of being potential tools

  • for Chinese espionage,

  • and have been labeled by the US as a security threat.

  • - We wanna see untrusted Chinese apps

  • removed from US app stores.

  • President Trump has mentioned impending action on TikTok,

  • and for a good reason.

  • - [Narrator] Both Huawei and TikTok

  • vehemently denied those allegations

  • and said they operate independently from Chinese government.

  • - And this administration has broadened

  • the notion of what national security is

  • way beyond any other administration.

  • And when it comes to China,

  • they define national security as data,

  • all Chinese technology is suspect,

  • according to this administration.

  • - [Narrator] As TikTok received threats

  • of being outright banned in the US

  • and the US government said Huawei would be barred

  • from buying chips from the US and other countries,

  • investment from China has almost ground to a halt.

  • - Chinese investment in the US is down 90 some odd percent.

  • - [Narrator] The restrictions have also startled

  • a number of American companies,

  • which have been lobbying hard against the changes.

  • Huawei is a big client for corporations,

  • including Qualcomm and Intel.

  • The likes of Microsoft's Bill Gates,

  • and Alibaba's Jack Ma have said the recent escalations

  • are counterproductive for both sides.

  • - American companies supply parts to Huawei,

  • that may all go away, all of it.

  • I mean, the Trump administration's message

  • to American companies and European companies

  • that wanna do business in China is don't do it,

  • come to the US.

  • - [Narrator] So how is China responding?

  • Beijing announced it would no longer allow

  • its own artificial intelligence tech,

  • think facial recognition and data processing,

  • to be exported without new licenses.

  • While Washington and Beijing

  • are fighting on a number of fronts,

  • from Hong Kong to Taiwan and the South China Sea,

  • tech has emerged as a strategic priority.

  • That's where companies like SMIC come in.

  • - China has had a long standing desire

  • to reduce Chinese companies dependence on foreign supply.

  • However, it's really not until the Trump's trade war

  • that the Chinese leadership realized

  • that this is really serious,

  • we really need to put our act together now.

  • - [Narrator] China launched its own version

  • of the NASDAQ last year, the STAR market,

  • and stocks there are soaring.

  • It reflects how much investors think companies can benefit

  • from the country's quest for self-reliance.

  • - Under Xi Jinping, there's a new slogan,

  • it's called domestic circulation.

  • This esoteric slogan means that China going forward

  • is going to prioritize its own companies,

  • its own markets and Chinese consumption.

  • - [Narrator] Chips are particularly important.

  • China is the world's biggest consumer of chips.

  • It spends more on chips than it does on oil,

  • and imported $300 billion worth of chips last year.

  • - Policy makers are using SMIC as a role model

  • for other companies with similar ambitions,

  • they're basically telling those companies,

  • we're willing to invest in you, we're willing to help you,

  • but as long as you adhere to the policy agenda.

  • - [Narrator] Beijing is already touting

  • a number of successes.

  • China's economy is forecast

  • to be the only major economy to grow this year.

  • And that's benefiting it's tech giants.

  • Huawei, which is already a global champion in 5G technology

  • became the number one smartphone seller in July,

  • mostly, thanks to its domestic market,

  • where it sells over 70% of its phones.

  • But ending its reliance on US technology

  • remains complicated.

  • - We have a lot of really smart engineers and scientists

  • on both sides of the Pacific.

  • If they are not working together,

  • that will clearly retard innovation.

  • - [Narrator] Huawei announced in 2019

  • that it can produce a phone without US chips.

  • Still, those substitute parts of themselves made

  • with American technology and tools,

  • and the administration has taken steps

  • to close the loophole.

  • And if US regulation doesn't allow Huawei

  • to buy key components made with US tech,

  • Huawei may simply not be able to produce its hardware.

  • Analysts estimate that Huawei stockpile of US components

  • will only last one or two years.

  • Huawei has declined to comment on its inventory.

  • Huawei situation is seen as a confirmation

  • that despite heavy investment,

  • Chinese chip companies like SMIC are still lagging behind.

  • China is said to be about four years

  • behind the US and Taiwan.

  • SMIC, which also uses a lot of US technology,

  • has said it aims to accelerate the development

  • of its own chip making capability.

  • - China has been here before.

  • It has been trying to catch up with the US for decades.

  • And it's not the first time it has invested so heavily

  • in semiconductor industry.

  • However, it still has a huge gap to fill,

  • and now time is running short.

  • - [Narrator] And the US is also making moves.

  • Legislation is making its way through the US Senate

  • that could pump an additional $37 billion

  • into American semiconductor manufacturing

  • and research and development.

  • And whether or not Trump is reelected,

  • US actions aren't likely to stop.

  • - I don't think that a Biden administration

  • would take a fundamentally different view toward China.

  • China would still be the number one competitor.

  • There would still be issues, you know, on human rights,

  • national security, technology.

  • - No matter who's next in the White House,

  • this kind of inward turning policy China has

  • is here to stay.

  • China's leadership realizes

  • the US is no longer a reliable partner.

  • - [Narrator] So after years of escalating tensions

  • between the US and China,

  • the decoupling of their tech industries

  • will now likely continue.

  • - I mean, what the US at the moment is doing

  • is saying to the rest of the world, choose,

  • you know, you're gonna go with us

  • or you're gonna go with them.

- [Narrator] This is a chip.

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