Updated: Mar 31
Political risk is a new factor which global high-tech manufacturers have to take into account when structuring their supply chains. For advanced sectors of the industry, legislation passed in the US and other Western markets has led to a ban on investment in China, the export of advanced technologies and services to China as well as the use of Chinese made electronic components in Western infrastructure. The aim of the legislation is to:
· Set back the development of China’s chip design and manufacture in order to prevent the technology ‘bleeding’ from commercial to military use. The US sees companies such as Huawei as an extension of the Chinese government.
· Reduce the vulnerability of Western infrastructure (communications, technology, energy, transport and financial) to hacking by Chinese intelligence services through purposefully designed ‘backdoors’ in electronics components.
The ban extends to the export of all proscribed advance technology products to China which contain US intellectual property. This has had significant impact on many other countries’ high-tech sectors which risk being shut out of a substantial market.
One company to be impacted by the export ban is Apple. US government restrictions which came into force in 2022 meant that it became unable to use the memory chips of China's Yangtze Memory Technologies Co. (YMTC) in its smartphones, computers and iPads. Although there are more advanced chips in the market, YMTC’s were 20% cheaper than its competitors due to government subsidy. Apple had planned to use the chips in a Chinese-only version of its iPhone and then roll out their inclusion globally. However, this now no longer looks feasible, not least because of the ban on future input into th2