China Power | Economy | Security | East Asia

Taiwan Can Profit from the US-China Tech War

The Taiwanese government could seize the space created by the U.S.-China tech conflict.

By Victor (Lin) Pu for
Taiwan Can Profit from the US-China Tech War
Credit: Pixabay

Recently, the Taiwanese government seemed to lure manufacturing companies back to Taiwan successfully amid the U.S.-China trade war, but can Taiwan continue to benefit in the concurrent tech war?

On October 7, 2019, the U.S. government blacklisted 28 Chinese organizations, including eight surveillance and artificial intelligence technology companies and other public security actors, over their involvement with human rights violations of Uyghurs and other Muslim minority groups in Xinjiang.

One of the eight Chinese surveillance manufacturers, Hikvision, is not only helping the Chinese government to build up surveillance systems in Xinjiang but exports its systems and products overseas. In exporting its tech, the company is promoting Chinese digital authoritarian diffusion around the globe. China’s state-backed Hikvision and another listed Chinese surveillance manufacturer, Dahua Technology, account for almost a third of the global market of video surveillance. Once put on the U.S. blacklist, they were banned from accessing U.S. components and technologies. As a result, the two companies’ shares sharply dropped more than 5 percent each. This move will surely impact their global business, escalating tensions amid the U.S.-China tech war.

Aside from the United States and China, there are other players poised to be potential winners in this game. Since the Trump administration has aimed at its ire at Chinese technology giants and surveillance providers, Western countries have begun to seek alternatives. Other international surveillance manufacturers — such as Hanwha Techwin, Avigilon, and Axis — might benefit. Among these technology companies, the share price of South Korea’s Hanwha Techwin rose over 4 percent in the wake of blacklist announcement.

But South Korea is not the only country to benefit. Taiwan, a high-tech island with advanced manufacturing capabilities, could win too.

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Taiwan has its own surveillance industry, and Taiwanese surveillance makers were once making a profit in the global market. But after the rise of both Hikvision and Dahua Technology with low-cost products, Taiwanese surveillance manufacturers have struggled. Some were pushed to purchase Chinese components to lower their manufacturing costs, yet, there were still other companies willing to invest in indigenous design and development. Vivotek was an example among Taiwanese firms choosing to enhance spending on research and design to develop its own techniques. The company is now positioned to grab the opportunities available in the escalating tech rivalry.

But before winning contracts, Taiwan still faces several challenges. One  problem is its own domestic market.

Many of the eight listed Chinese technology companies have their own agents in Taiwan. Taiwanese people can easily buy a Hikvision’s surveillance monitor online. On PChome, a well-known Taiwanese online shopping website, one can find different varieties of CCTV cameras and monitors from China. Besides individuals, enterprises and public sectors in Taiwan are customers of Hikvision and Dahua Technology.

The administration of Tsai Ing-wen has issued an order to ban Huawei and other Chinese companies (including Hikvision and Dahua Technology) from selling products to any sectors or government departments in Taiwan in January 2019, but some local governments are not following the central government’s step regarding this particular policy on Chinese technology companies.

One report said that the surveillance cameras installed in the underpasses in Taichung were made by Hikvision in July 2019. Concurrently, a Kaohsiung City councilor found surveillance cameras in the building of City Council were from Hikvision as well. Back in Taichung, public schools were found using Hikvision’s cameras in September. These cases exposed a risky sign that Taiwan’s various levels of government are not united on how to approach the security implications of Chinese technology.

In order to prevent potential security threats and to improve industrial competitiveness, the Taiwanese government should reposition both its national security policy and industrial policy. 

First, for national security reasons, the Taiwanese government should comprehensively inspect every security system and all information equipment of any government sector or department, and assure no devices made by listed Chinese firms are operating in public institutions.

Second, the trade war could be an opportunity for the Taiwanese surveillance industry, but Taiwanese companies will also have to compete with other surveillance manufacturers from South Korea and Japan keen to capitalized on the opportunity. To support the Taiwanese surveillance industry, the government should propose a comprehensive strategy to back Taiwanese surveillance companies in developing their own core technology, entailing Taiwanese technology firms will be more competitive in the global market in the long-term.

The reason for the U.S. government to blacklist Hikvision and other Chinese entities is not merely for concerns of U.S. national security, but in response to the human rights abuses in Xinjiang. To some extent, this move is also aimed at limiting the export of Chinese digital authoritarianism. If Taiwan can reposition its industrial and national security policies smoothly, it would make a profit amid the escalating tech war and beyond, as well as play a prominent role on the front-line against digital authoritarian China.

Victor (Lin) Pu is an analyst currently based in Taipei and a former staffer at the Institute for National Defense and Security Research (INDSR), and National Security Council, Taiwan. He has an M.A. degree in political science from National Taiwan University and focuses on issues related to authoritarian diffusion and Chinese influence.