The tech Cold War has begun

This is the moment which Huawei Technologies Co. expected. Chip manufacturers, such as Qualcomm, Xilinx and Broadcom, said they would no longer deliver to the Chinese electronics giant until the second order. These companies will need to receive new approval and permission to deliver Huawei items.

Similar was the process when ZTE Corp. were banned from being distributed in the US after the Chinese company broke commercial sanctions. Staff were ordered to stop all supplies until it became clear what was allowed and what was not. After all, the US imposed a trade embargo (later abolished), but it was enough to bring severe economic damage to the small Chinese communications company.

Huawei's management has been expecting this move from the United States for a year. Huawei have resources available for another three months. This is not much, but it tells how serious the situation can be for the Chinese company.

Now we can assume that China will redouble its efforts in creating its own chips, home operating system and its own motherboards and bottoms (including production and design tools), as well as implementing their own technology standards. This can only reinforce the process of creating a "digital iron curtain" that can divide the world into two different, mutually unique technological hemispheres.

It will be necessary for the government to allocate more subsidies to the sector so as not to lag. Money, however, can not solve all the problems. But if this process is given enough time, Chinese government-funded technology projects could face the challenges and become visible. Not so comparable to American technology, but to gain their own position.

This is the beginning of the Cold War. The winner here will not be the one with the best fighters, but the one who will be able to withstand the longest loss.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

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