With the recent release of Apple’s 5G-capable iPhone 12 series and the release on October 22 of Huawei’s Mate 40 series smartphones, competition in the smartphone handset market is heating up in China. Even some die-hard iPhone fans are considering buying the latest Huawei smartphone amid the U.S.-China trade war and U.S. sanctions imposed on Huawei.

“The new iPhones will increase the share of high-end phones in the overall smartphone market,” said Wang Xi, Research Manager of global market consultancy IDC. IDC estimates that about 240 million 5G-enabled smartphones would be shipped this year, with the Chinese market alone accounting for more than 160 million units, or 67.7% of the total. C.K. Lu, Senior Research Director with market consulting firm Gartner, however, said that the iPhone, a latecomer to the 5G technology, still does not pack enough punch to attract Android users. Lu said 5G connectivity has already become the standard configuration for several Chinese mobile phone makers. Apple’s launch comes after companies like Huawei, Samsung, Oppo, Vivo and Xiaomi rolled out their handsets. Data from the China Academy of Information and Communications Technology showed that China’s mobile phone shipments stood at 23.33 million units in September, down 35.6% on a yearly basis. Shipments of 5G mobile phones in China amounted to 108 million units during the first nine months of this year, accounting for 47.7% of the country’s overall smartphone shipments. A total of 359 models were introduced in the market from January to September, of which 167 were 5G models.

Nicole Peng, Vice President of mobility at market research company Canalys, said the iPhone 12 will trigger a new wave of phone replacements for Apple in China before the end of the year and in the first quarter of next year. Canalys expects 50% of Chinese phone owners to be using a 5G device by the end of this year, as telecom carriers and phone brands have made tremendous efforts to push the adoption. “It is expected that by 2021, nearly 60% of the 5G smartphones in China will be cheaper than USD400, while 5G penetration in China will reach 83% in the next 12 months,” said Canalys Analyst Jin Shengtao. Global smartphone shipments decreased by 16% on a yearly basis during the second quarter of this year, according to IDC. Huawei became the biggest smartphone player in the world during the second quarter of the year, a major milestone for Chinese smartphone makers. The Chinese vendor shipped 55.8 million devices worldwide, accounting for 20% of the market share in the second quarter, while Apple shipped 37.6 million iPhones between April and June, which placed the company third with a 13.5% market share, the China Daily reports.

China has cemented its position as a global leader in 5G wireless technology and is expected to account for 70% of global 5G connections this year, according to the Global System for Mobile Communications Association. Zhao Dachun, Deputy General Manager of China Mobile, said that the firm had completed its annual construction target ahead of schedule by putting into service over 350,000 5G base stations, while Fan Yunjun, Deputy General Manager of China Unicom, said his company had joined hands with China Telecom to put into service 330,000 5G base stations. The total number of 5G base stations in China has already reached 680,000, slightly ahead of the 630,000 annual target announced by the three major telecom operators at the beginning of the year. “The country has attached unprecedented importance to the development of the digital economy, including 5G, in face of global economic uncertainties and the Covid-19 pandemic. The new 5G infrastructure will further boost the enthusiasm for 5G and increase its use in all walks of life,” said Zhao from China Mobile. A report by the China Academy of Information and Communications Technology pointed out that China’s investment in 5G will be over CNY900 billion this year. Total investments on 5G technologies will reach CNY1.5 trillion in the next five years and help create more than 3.5 million jobs. By 2030, 5G will help create a total economic output of CNY6.3 trillion, the China Daily reports.

One of China’s major smartphone makers – Xiaomi – is building a next-generation, completely unmanned automated factory that can make over 10 million smartphones every year. Lei Jun, Founder and CEO of the fourth-largest smartphone maker in the world, told China Daily that the target was set after Xiaomi’s first smart factory completed six months of operations in Yizhuang, an economic and technological development area in Beijing. Spread over an area of 18,600 square meters, the facility has an autonomous production line that can make 1 million smartphones a year. Xiaomi has been investing heavily on research and development of core frontier technologies. The Beijing-based company ended 2019 relatively well with a 27.1% growth in fourth-quarter revenue. Sales rose to CNY56.5 billion from CNY44.42 billion in the same quarter a year earlier.

The Chinese government is going all out to achieve a breakthrough in semiconductor manufacturing as the nation faces U.S. sanctions on hi-tech goods. Over the past year, President Xi Jinping has on multiple occasions described China’s reliance on imported technology as “being strangled by an adversary”. China often boasts of having the world’s most extensive industrial value chain and is known as the global leader in assembling mobile handsets, but the country relies on foreign chips, most notably from the United States, the South China Morning Post reports.

China has spent more than about USD300 billion annually on imported chips over the past two years. But a rapidly deteriorating relationship with the U.S. is making it increasingly hard for Chinese technology companies to acquire components used in its devices. U.S. sanctions on companies like ZTE and Huawei have severely dented production, effectively cutting these companies off from American-made components without a special U.S. government waiver.

As it becomes increasingly clear that easy access to chips and the equipment used to make them is vanishing, China is doubling down on support for its domestic semiconductor industry. In late July, Beijing introduced a 10-year corporate tax break for established companies that could produce chips of 28 nanometers or smaller. It also expanded tax incentives for the entire semiconductor supply chain, from design to packaging. The semiconductor industry is set to become one of the most prominent features in China’s five-year plan for the period 2021-25. A new investment fever has emerged in the chip industry as Beijing rolls out preferential policies and cheap loans for projects. “There used to be difficulties for the semiconductor industry to obtain enough financing, but now it is a hotter area than property investment,” said Chang Junfeng, Secretary General of the Shenzhen Semiconductor Industry Association. Across the country, it is hard to find a province or major city that has not targeted semiconductor manufacturing as a key industry. China’s total investment in the chip industry, from both state and private sectors, could reach CNY9.5 trillion in the next five years, according to Guosen Securities. In the first eight months of this year, as many as 9,335 companies in China expanded into semiconductor production, a growth of 120% compared to the same period last year.

According to the South China Morning Post, China’s push to develop the semiconductor industry could signal a tolerance for inefficiency. “The current market is a bit overheated. There is no way for China to counter the U.S. on the chip market except investing more in the industry. A majority of the companies are just speculating, but there is nothing to worry about because that’s the way Chinese companies grow. Most newcomers entering the industry will fail, but China is hoping a handful will survive”, said Sheng Linghai, Analyst at research and advisory firm Gartner. “If none succeed, the whole industry in China will collapse. The central government’s supportive policies for the semiconductor industry will only keep increasing because the country is facing the possibility of being blocked from technology by the U.S.,” he added. Chang Junfeng of the Semiconductor Association said that because the semiconductor value chain was so globalized, no single country – be it the U.S., Japan, or South Korea – could be totally independent.

SMIC’s shares fell 7% on the Shanghai Stock Exchange and 4% on the Hong Kong Stock Exchange after news broke that the U.S. is considering imposing export controls on the company, banning U.S. suppliers from exporting to SMIC without obtaining export licenses from the U.S. government. Seen as a premium production base in China’s drive to be more self-sufficient in semiconductor manufacturing, SMIC’s shares jumped more than 200% on the first day of trading, after its secondary listing in Shanghai in July, lifted by broad enthusiasm among investors. Now investors are worried about SMIC’s future business, although it is unclear whether the sanctions will be as harsh as those imposed on companies on the Entity List. While many international IC manufacturers have been making 5-nanometer microchips for years, SMIC only started its 14 nm production last year. Most of SMIC’s products fall into the range between 28 nm to 90 nm, and chips of 28 nm or smaller accounted for less than 10% of SMIC’s total revenue in the second quarter this year. In the meantime, Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, is planning volume production of 5 nm chips this year, and it will begin manufacturing 3 nm processors around 2022. Samsung, another leading chipmaker, has also started mass production of 5 nm chipsets. China needs to make more effort to achieve independence in electronic design automation (EDA) software used for designing integrated circuits. Most of the best EDA companies are in the U.S., the Global Times reports.

Microsoft said it would continue talks with ByteDance to acquire the U.S. operations of popular video-sharing app TikTok, after a meeting of Microsoft CEO Satya Nadella with President Donald Trump, who already banned the app form being installed and used on smartphones issued by the government. Trump said he would ban TikTok altogether if the sale is not concluded by September 15. If the sale is successful, Microsoft would also operate TikTok in Canada, Australia and New Zealand. “Microsoft fully appreciates the importance of addressing the President’s concerns. It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the U.S. Treasury,” Microsoft said in a statement. It has been reported that Twitter is also interested in buying TikTok, although it would need substantial external financing to do so.

The negotiations between ByteDance and Microsoft will be overseen by the Committee on Foreign Investment in the United States (CFIUS), a U.S. government panel that has the authority to block the agreement. TikTok, which boasts 100 million U.S. users, has been a source of national security and censorship concerns for the Trump administration. In its statement, Microsoft said it may invite other American investors to participate on a minority basis in the purchase of TikTok. Financial terms were not disclosed. TikTok’s U.S. user data is stored in the U.S., with strict controls on employee access, and its biggest investors come from the U.S., the company said earlier. ByteDance’s valuation expectations for the app exceeded USD50 billion, although U.S. pressure to divest it could lower that price tag. “While we encounter mounting complexities across the geopolitical landscape and significant external pressure, our response teams have been working around-the-clock and giving up their weekends over the past few weeks to ensure the best possible outcome,” CEO Zhang Yiming said.

ByteDance said it is committed to becoming a global company despite facing “complex and unimaginable difficulties” in going global, including “the tense international political environment, collision and conflict of different cultures and plagiarism and smears from competitor Facebook.” TikTok has attracted criticism from Facebook CEO Mark Zuckerberg, who last year accused the app of censorship. TikTok has denied the claim, the Shanghai Daily reports.

President Trump said the U.S. Treasury should get a “very large percentage” of the sales price because the U.S. government is making the deal possible. China sternly condemned the plan as “political manipulation”. “This goes against the principles of the market economy and the World Trade Organization’s principles of openness, transparency and non-discrimination,” said Foreign Ministry Spokesman Wang Wenbin. “It’s outright bullying.” The national security grounds for the U.S.’s clampdown on Chinese firms “does not hold water,” he added, as the company conducted its business activities in accordance with international rules and U.S. laws. “But the U.S. is cracking down on them on trumped-up charges,” said Wang, who warned the U.S. not to “open Pandora’s box.”

While it followed a sweeping crackdown by the Trump administration on a growing list of Chinese technology companies, the “illegal and immoral” move against TikTok marks an unprecedented step in the legal and commercial arena and sounded a dire warning of how more Chinese businesses could be targeted by a “shameless” U.S. administration ahead of the presidential election, Chinese experts noted. Such a dangerous escalation warrants stern retaliation from the Chinese government, including taking a proportionate, reciprocal countermeasure on U.S. businesses in the Chinese market, to make it clear to the U.S. administration that its reckless behavior won’t go unchecked, the experts urged, adding that without concrete countermeasures, the U.S. President could further step up crackdowns on more Chinese firms and could even pick fights in other geopolitical areas, the Global Times adds.

Following TikTok, President Trump is also planning to ban WeChat, another popular Chinese social messaging app. President Trump issued an executive order to ban any U.S. deal with Tencent, the operator of WeChat, after 45 days, or starting on September 20. Banning WeChat would also have a huge impact on Apple. As one of the largest markets for Apple, some 20% of iPhone sales globally are from China, and taking WeChat off the App Store “would be a serious hindrance,” Anand Srinivasan, Analyst with Bloomberg Intelligence said.

On Chinese social media platforms, many declared the end of the U.S. as a free market and a country ruled by the law, calling the move “naked robbery”. “This is a Chicago mafia-style way of doing things, pure and simple: Pointing a gun at your head and ordering you to make a deal,” Shen Yi, Professor at the School of International Relations and Public Affairs at Fudan University, told the Global Times. “There is no point in discussing the legality of the move because there is none. It’s utterly immoral.”

Despite the fact that China-U.S. relations are currently in the worst shape since the establishment of diplomatic relations on January 1, 1979, Chinese Foreign Minister Wang Yi said that “China is ready to restart the dialogue mechanisms with the U.S. side at any level, in any area and at any time. All issues can be put on the table for discussion.” According to the Global Times, this shows China’s consistent stance: It has no intention of escalating tensions with the U.S. and is willing to cool down the situation. Meanwhile, U.S. Health and Human Services Secretary Alex Azar has paid a visit to Taiwan and met with Taiwan’s President, Tsai Ing-wen, in the highest-level U.S. visit in more than four decades, pledging “strong support and friendship” from President Donald Trump, further aggravating China-U.S. relations.

Chinese President Xi Jinping attended a ceremony in Beijing to mark the launch of full global services of the Beidou-3 Navigation Satellite System, indicating that China’s domestically-developed and independently-operated global satellite navigation system has been fully completed. The Beidou Navigation Satellite System (BDS) is China’s largest space-based system and one of four global navigation networks, alongside the U.S.’ GPS, Russia’s GLONASS and the European Union’s Galileo. It provides global users with basic navigation, global short message communication, and international search and rescue services. At present, the system’s services cover more than 200 countries and regions, with more than 100 million users and 200 million daily services. “Beidou is not only China’s Beidou, but also the world’s Beidou. It not only serves China, but also serves the world,” Chinese Foreign Ministry Spokesperson Wang Wenbin said.

The BDS system has been completed in 26 years since it was first started in 1994. More than 400 entities and over 300,000 scientists worked on the project since its inception. On June 23, the Long March-3B launch vehicle, carrying the last satellite of the BDS, blasted off from the Xichang Satellite Launch Center in Xichang, Sichuan province. The satellite was the 55th in the Beidou system, and has begun providing navigation, positioning and timing services. From November 2017 to June 2020, in 31 months, China successfully launched 30 Beidou-3 network satellites and two BeiDou-2 backup satellites, at a success rate of 100%, creating a new record for the world’s satellite navigation system network launch, with the speed of deployment exceeding an average of one satellite every month. The system is completely free from imports of core components as they are 100% home-made. “Key technologies that cannot be brought or obtained from other countries, especially during this pandemic period, sometimes decide the level of a country’s development. The only way for a country to achieve long-term stability and prosperity is to make utmost efforts to ensure their independent development of high technology,” Gao Lingyun, an expert at the Chinese Academy of Social Sciences (CASS), told the Global Times.

The successful launch of BDS ensures the satellite navigation industry enters “a new golden age” in terms of comprehensive applications, insiders said. China’s domestic satellite navigation and location service sector has grown to around 14,000 companies with over 500,000 workers in five main industry clusters across the country. China’s BDS played an important role in providing mapping services that supported the rapid construction of the Huoshenshan and Leishenshan temporary hospitals in Wuhan at the beginning of the year, when the city was struck by the outbreak of Covid-19. BDS terminals were also carried to the top of Mount Qomolangma for the first time in late May to help a Chinese surveying team measure the height of the world’s tallest mountain. By the end of 2019 on the Chinese mainland, more than 6.5 million road vehicles, 40,000 postal and express delivery vehicles, 80,000 buses in 36 major cities, 3,200 inland navigation facilities, and 2,900 marine navigation facilities were using services from BDS, forming the world’s largest dynamic monitoring system for road vehicles. In the first quarter of 2020, more than 70% of smartphones in China used Beidou services. A report by the GNSS and LBS Association of China showed that the industry’s market scale is expected to exceed CNY400 billion by the end of 2020, up from CNY340 billion in 2019.

China has also achieved other successes in space. In January 2019, China’s Chang’e-4 probe touched down on the far side of the moon, becoming the first spacecraft to make a soft-landing on the moon’s uncharted side that is never visible from earth. In July, China successfully launched its first Mars probe, Tianwen-1, on a Long March-5 Y4 carrier rocket from Wenchang Space Launch Center in Hainan province. The move heralded a new era for China’s deep-space exploration that has steadily progressed beyond moon probes to interplanetary missions, the Global Times reports.

The UK’s mobile telecom providers are being banned from buying new Huawei 5G equipment after December 31, and they must also remove all of the Chinese firm’s 5G equipment from their networks by 2027, the UK government announced. New restrictions are also being applied to the use of the Chinese company’s broadband equipment. The UK government wants operators to “transition away” from purchasing new Huawei equipment for use in the full-fiber network, according to the BBC. “It will have very bad implications for the country. The UK will lag behind other major economies in utilizing the next-generation ultra-fast mobile technology, and potentially revolutionary new business models as well, to be enabled by Huawei’s 5G,” a Beijing-based industry analyst told the Global Times, adding that the UK’s trade ties with China will be hurt. The CEO of British Telecom has warned it may take a decade to remove Huawei equipment from Britain’s wireless infrastructure. The Chinese firm’s equipment has been in the UK’s telecoms infrastructure for two decades. Two-thirds of BT’s networks are currently provided by Huawei, with one-third from Nokia.

The UK decided in January to let Huawei continue supplying equipment to the country’s 5G network despite pressure from the U.S. to crack down on the Chinese firm, but with restrictions. The company was excluded from providing “core” 5G gear. “Excluding Huawei’s participation in the UK’s next-generation networks means the country’s telecommunications sector would suffer unbearable losses, and the extra costs would shift to consumers,” said Industry Analyst Ma Jihua. “Regrettably our future in the UK has become politicized, this is about U.S. trade policy and not security,” Huawei commented. It threatens to move Britain into the digital slow lane, push up bills and deepen the digital divide. Instead of “leveling up,” the government is leveling down and we urge them to reconsider, Huawei said.

China harshly criticized the UK’s decision to ban Huawei from the UK’s 5G development, painting London as an accomplice in the U.S.’ politically driven crackdown on the Chinese telecom firm based on fabricated “national security risks,” and vowed to take “all necessary” measures to protect the legitimate interests and rights of Chinese businesses, the Global Times reports. China’s Foreign Ministry Spokeswoman Hua Chunying said that the UK’s move has undermined mutual trust for China-UK cooperation and China’s confidence in the UK market. “This is not about one company or one industrial sector, this is about the UK highly politicizing commercial and technology issues at all costs,” she said. “If the UK insists on politicizing the business operations of a single Chinese firm, China could also do the same to defend the rights of Chinese firms,” Zhao Junjie, Research Fellow with the Chinese Academy of Social Sciences’ Institute of European Studies, told the Global Times, noting that UK firms’ “political bow” to the U.S. should make UK companies that make big profits in China like HSBC to “get nervous and suffer.” “It has become questionable whether the UK can provide an open, fair and non-discriminatory business environment for companies from other countries,” Chinese Ambassador to the UK Liu Xiaoming said, adding that “the way you are treating Huawei is being followed very closely by other Chinese businesses, and it will be very difficult for other businesses to have the confidence to have more investment”.

Some British Conservatives even want more. Iain Duncan Smith said that while he welcomed the decision, the government should shorten the seven-year timetable for purging Huawei equipment. “Let us bring it forward to five and let’s do it quickly,” he told Parliament. His colleague, Bob Seely, said in a statement he too wanted the government to move faster. Huawei said it is disappointed by the ban and called on ministers to reconsider. “UK revenues are less than 1% of Huawei’s global revenues,” Executive Vice President Jeremy Thompson said.

Prospects for a post-Brexit China-UK trade agreement have worsened considerably. If the Huawei ban prompted a wider trade conflict between China and the UK, the UK’s trade with China could fall by 90% in the worst case scenario, its GDP could drop by 0.75% and inflation could rise by 0.6% in 2020, the UK’s National Institute of Economic and Social Research (NIESR) said in a report, according to the Global Times. Huawei said it supported over 26,200 jobs in the UK in 2018 and contributed GBP470 million in tax revenue to the UK.

The U.S. announced it was imposing visa restrictions on employees of Chinese high-tech companies, including those from Huawei. It is also considering imposing visa restrictions on Members of the Communist Party of China.

Huawei posted revenue of CNY454 billion in the first half of 2020, a 13.1% increase year-on-year, with a net profit margin of 9.2%, beating forecasts amid the Covid-19 pandemic and an intensified U.S. crackdown. Huawei’s carriers, enterprises, and consumer businesses had revenue of CNY159.6 billion, CNY36.3 billion, and CNY255.8 billion respectively, all recording slight growth compared to the same period last year.