Technological standards: a background
Traditionally, technological standards have been developed by experts from Western technology companies, with the profits from licensing fees generating billions of dollars in annual revenues. Technological standards are an aspect of technology that are not frequently discussed, but are incredibly important in shaping the future direction of tech development for various companies and industries. This trickles down to the everyday technology user’s experience — standards like USB and HDMI, or Wi-Fi related standards have been universally adopted around the world. An example of this would be that a USB flash drive bought in the US can be plugged into a computer in China, or that a Chinese laptop can connect to American Wi-Fi networks.
Without universally adopted standards, the international technology sphere would be a chaotic mess of infrastructural competition and incompatibility. In recent months, there have been escalating concerns in the tech industry that technology standards could become yet another area where the US and China compete for influence.
China Standards 2035
China sees a world which has, for the past several decades, been dominated by Western countries and their tech companies. It is not content with this status quo and feels that a rising power like itself deserves more of say in setting global tech standards, among other important issues. China’s influence has been increasing in the realm of international standards over recent years — a key indicator, for example, is that Chinese officials have led or currently lead various standards organizations like the International Standards Organization (ISO). According to the Wall Street Journal, “Chinese executives and politicians now have a saying: Third-tier companies make products. Second-tier companies make technology. Top-tier companies set standards.”
Bearing this in mind, Beijing is set to issue what it is calling “China Standards 2035” as soon as this year. An initiative first proposed back in 2018, the plan is expected to encourage Chinese tech companies to take the initiative in developing tech standards themselves. The 2035 plan is expected to include subsidies or other financial incentives for companies developing globally influential standards. This is in addition to the existing Chinese plan of getting other countries to commit to adopting Chinese standards in the future. China has offered subsidies to countries willing to adopt Chinese tech standards, especially to those countries involved in China’s Belt & Road Initiative (BRI). Several BRI countries have indeed already signed memorandums of understanding with Beijing, pledging to adopt future Chinese standards. In light of this, China Standards 2035 has worried some Western countries, especially the US, which sees the plan as a potential challenge to the dominance of the US in the standards sphere.
Concerns over Chinese standards
Some analysts have expressed concerns that China setting global tech standards could potentially lead to the user data of people outside of China being collected by Beijing for clandestine purposes. One of the leaders in setting 5G standards, which will be some of the most important standards going forward, is Huawei, which Washington has heavily scrutinized and questioned its independence from the Chinese government. In March 2021, the Federal Communications Commission (FCC) declared that multiple Chinese tech companies, including Huawei and ZTE, “pose an unacceptable risk to U.S. national security or the security and safety of U.S. persons.” The day before, Washington announced that export licenses some US-based suppliers would face stricter conditions, banning them from exporting components that could be used in Huawei 5G devices. These security concerns center around the possible existence of “back doors” in software or hardware. According to the Wall Street Journal, “When telecom-equipment makers sell hardware such as switching gear, base stations and antennas to cell phone carriers — which assemble the networks that enable mobile communication and computing — they are required by law to build in ways for authorities to tap into the networks for lawful purposes.” In February of 2020, the US government claimed that Huawei is able access the networks it builds without the knowledge of cellular carriers.
In addition to these national security issues, decreasing US dominance in standards would also mean a hit to the bottom lines of top US tech companies, as patents are a lucrative enterprise. IBM, for instance, has often made more than $1 billion off patents in some years. Huawei, in March 2021, announced that it will begin making companies pay for using its 5G-related patented technology. The use of certain standards requires the use of certain patented technology in order to implement the standard. Although the use of 5G technology is still incipient, Huawei has managed to secure thousands of 5G related patents, more than any other company. Both Apple and Samsung rely on Huawei 5G technology, and the licensing fees they will have to pay will continue to bolster Huawei’s position in the 5G patent race.
Going forward, if the US wishes to maintain some level of dominance in setting standards, it will need to view the 2035 plan clearly and also recognize its own strengths, such as the potential its own tech companies have. While continued American dominance in standards is not guaranteed, neither is potential Chinese dominance. Also, the US will need to remember that standards are just that — standards, and no company is required to use one standard over another. As the US calls on European allies to abandon the use of Huawei’s 5G technology, the tech standards field risks becoming an area that further serves to widen the gap between the US and China. With there already being great concerns over technological and economic decoupling between the US and China, it seems reasonable to also wonder if national security concerns or the desire to promote standards put forth by domestic tech companies could lead to some countries adopting Chinese standards, and other countries adopting US standards in the future with technologies like 5G. At the same time, it is the quality of standards — not the quantity — which will determine which standards are adopted by companies going forward.
Chinese standards contributions have been increasing in recent years, and the quality of Chinese standards proposals has been increasing as well, as evidenced by the willingness of various countries to adopt Huawei’s 5G technology. To maintain US dominance, Washington will need to rely on its tech titans and look into ways of subsidizing or promoting research & development in 5G and other important future standards. As some European allies are still willing to make use of Huawei’s technology, US efforts to push them away from using Huawei could strain US foreign relations. Rather, it would be better for the US to compete by encouraging its tech titans to build better, more attractive 5G technology in order to encourage US allies to use American technology.