US officials outline urgency of outpacing China in 5G technology

America’s free-enterprise structure will prevail over China, where consumers are held “hostage,” in the race for global dominance of 5G telecommunications technology.

That was the message from Washington on Wednesday, delivered by US defense and commerce officials at an annual conference on export controls organized by the Commerce Department’s Bureau of Industry and Security (BIS). They said the US government was already moving to “leverage” private capital to speed up America’s development of 5G solutions.

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“Repeatedly our own US companies have come back […] and explained that they were lured into China with promises of accessing a 1.4 billion consumer market only to have technology transfer result in competition in that very same technology area,” said David Stapleton, the US Defense Department’s acting deputy assistant secretary for industrial policy.

“They were later forced out of that market and are now competing with those same Chinese companies back in America.”

The threat China poses to US national security and corporate competitiveness in the telecom sector globally dominated Wednesday’s discussion at the three-day BIS 2019 conference.

Since last year’s edition, Congress passed a law strengthening the ability of the Committee on Foreign Investment in the United States (CFIUS) to scrutinize and block foreign direct investment, a move prompted by concern about China’s acquisition of American technology.

In May, US President Donald Trump issued an executive order demanding action to counter foreign adversaries that are exploiting vulnerabilities in the information and communications technology and services sector. On the same day, the Commerce Department placed Huawei and 68 affiliates on its Entity List, which prohibited the sale of US technology to the Chinese smartphone maker.

The order gives the department until mid-October to establish rules to determine which countries should be deemed “foreign adversaries” and which telecom products would be blocked from the US market if they are produced in those countries.

In a keynote address at the conference on Tuesday, Commerce Secretary Wilbur Ross said Washington would allow American companies to sell technology to Huawei where there is no threat to US national security.

In the meantime, Stapleton and the Commerce Department’s Earl Comstock said the US government would encourage greater cooperation with companies in Japan, Mexico, India, and Europe to develop and manufacture 5G equipment and make up for time lost by US producers who had tried to expand in China.

Foreign tech companies in China “have ultimately been displaced because once the Chinese companies bring in the capability that’s organic to their nation, they have 1.4 billion consumers who will buy their products and then expand their revenues, increase their research and development, and then expand into international markets,” said Comstock, the Commerce Department’s director of policy and strategic planning.

China’s ability to quickly develop telecom products for the international market is greater than Japan’s in previous decades, he added.

“The key difference is that [Japan] did not have a 1.4 billion market to hold hostage,” he said.