EAI Commentary: The Future of US-China Competition - Technology Edition: The US-China Tech War: Focusing on Semiconductors, 5G, and Artificial Intelligence

Editor's Note

The East Asia Institute (EAI) has been operating a mid- to long-term research project titled "China's Future Growth and the Construction of a New Asia-Pacific Civilization" since 2018. This project aims to design a desirable order for the Asia-Pacific region that will ensure China's future growth contributes to human coexistence and sustainable development, and to propose Korea's role within this framework. As the first phase of this project has concluded, EAI published its research findings as an English working paper series in April and May. As a follow-up series, EAI has planned a special issue brief series, "The Future of US-China Competition: Four Stages of Competitive Dynamics," comprising four reports that offer a perspective on the future of US-China relations.

This issue brief, authored by Professor Bae Young-ja of Konkuk University, is the second report in this series, focusing on the US-China tech war. The author points out that the hegemonic competition between the US and China is expanding beyond trade into advanced technologies, with semiconductors, 5G, and artificial intelligence emerging as key areas of competition. The author emphasizes that if this technological competition between the two countries continues in conjunction with tariff pressures, restrictions on business transactions, and foreign investment regulations, it could lead to the bifurcation of global supply chains and ultimately reshape the world economic order. In particular, if global supply chains are bifurcated, countries like Korea, which are closely linked economically to both the US and China, could face difficult choices of having to pick a side. Therefore, the author suggests that efforts should be made to find compromises to manage the US-China tech conflict within the bounds of universal norms.

Problem Statement

The hegemonic competition between the United States and China is the most significant topic in 21st-century international politics. Amidst the prolonged trade conflict between the two nations, advanced technologies such as semiconductors and 5G communication equipment have garnered attention as the core of this trade dispute. China is challenging the solid technological superiority that the US has enjoyed, while the US is attempting to impede China's progress in various ways. This has led to sharp confrontations in the form of tariffs, foreign investment restrictions, transaction limitations, and intellectual property disputes. 5G, semiconductors, and artificial intelligence technologies, the primary battlegrounds of this technological competition, are key areas driving the new economic paradigm referred to as the Fourth Industrial Revolution. Although the sense of crisis that escalated following the agreement between President Trump and President Xi at the Osaka G20 summit to continue trade negotiations without additional tariffs has temporarily subsided, the potential for conflict in advanced technology sectors remains, and the dispute between the two countries is expected to persist.

Competition among great powers over technology is not a new phenomenon. In the 1980s, as Japanese automobile and semiconductor companies made significant advances in the global and US markets, the US accused Japanese semiconductor firms of stealing American technology and selling militarily sensitive products to the Soviet Union (Johnson 1991). In 1982, IBM sued Hitachi for stealing technology, and the US government pressured Toshiba for selling technology to the Soviet Union. The US attacked Japanese semiconductor companies using Section 301, anti-dumping duties, and ex officio investigations, and through the 1986 US-Japan Semiconductor Agreement, it imposed 100% tariffs and secured increased market share for US companies in Japan. Meanwhile, the proposed acquisition of Fairchild Semiconductor, a US semiconductor company, by Japan's Fujitsu led to US resistance and tense negotiations between the two countries, ultimately causing Japan to abandon the merger. Separately, following the Soviet Union's successful launch of Sputnik, the first artificial satellite, in 1957, the US and the Soviet Union engaged in a fierce space technology race to be the first to land a probe on the moon. This led to the US establishing NASA in 1958 and launching the Apollo 11 mission to the moon in 1969.

In the modern international political order, technological innovation has been recognized not only as a driver of economic growth but also as a foundation for military power. Consequently, achieving superiority in advanced technology has become a crucial condition for global political and economic hegemony. Britain, which succeeded in the Industrial Revolution driven by innovations in spinning, steam engines, and railways, was able to build a global empire on this foundation. Similarly, the United States, at the forefront of innovations in electricity, chemistry, and automobiles, solidified its position as the undisputed global hegemon through the First and Second World Wars. While the significant role of technology as a basis for hegemony is widely acknowledged, technological competition and conflict between hegemonic powers have not previously come to the forefront of attention as much as military or economic conflicts.

Why, then, has technology become such a prominent and central area in the current hegemonic competition between the US and China? How is the technological competition and conflict between the two countries actually unfolding? What are the implications of US-China technological competition for the global political and economic order and the shift in hegemony? This study addresses these questions by first considering the meaning of US-China technological competition and hegemony. It then examines the dynamics of US-China technological competition in the fields of semiconductors, 5G, and artificial intelligence. Finally, it analyzes how this US-China technological competition is reshaping the global political and economic order.

Hegemonic Competition and Technology

Technological foundations played a crucial role in the expansion and operation of the British Empire in the 19th century. At the time, Britain considered itself a "Titan of Technology," possessing a technological advantage over other nations and taking great pride in it (Kubicek 1999). However, in the latter half of the 19th century, as technological innovation and industrialization accelerated in Germany and the United States, these two countries surpassed Britain in sectors such as steel, chemicals, and electricity, marking a significant turning point in the challenge to British hegemony.

Despite the widespread recognition of technology's importance as a foundation for hegemony, there are few studies that specifically analyze the rise and fall of great powers with a focus on technology. Research on the decline of great powers often cites general factors such as "imperial overstretch" and "intolerance and exclusivity" as causes for decline (Kennedy 1987; Chua 2007). Organski's power transition theory posits that the international political order changes according to the relative shifts in national power, emphasizing changes in national power as the most critical variable (Organski 1958; Kim Young-jun 2015). These theories argue that national power is determined by domestic factors, with population, economic productivity, and political system efficiency being the three key elements. They measure economic productivity using GDP or the Composite Index of National Capabilities (CINC). While CINC includes indicators such as the proportion of urban population, steel production, energy consumption, and military expenditure, it does not explicitly incorporate elements of technological innovation (Singer 1980). Power transition theory suggests that when one great power's national strength grows through industrialization, emerging as a challenger to the hegemonic power, a crisis within the system begins. The theory further posits that the possibility of interstate war increases when a power transition occurs, where the challenger's national power catches up to that of the hegemonic power. While power transition theory has drawn attention to the existence of hegemonic powers in the world political and economic order, focusing on the replacement of hegemons and the possibility of war, it only briefly mentions industrialization and economic growth as conditions for a great power's rise, without providing a detailed explanation of this process.

The Leadership Long Cycle theory explains the replacement of hegemonic powers in the world political and economic order with a focus on technological innovation (Modelski and Thompson 1996). This theory uses the concept of "leadership" rather than "hegemony." It argues that leadership in the world order since 1500 has been replaced approximately every 100 years, co-evolving with Kondratiev waves (K-waves) of technological innovation occurring roughly every 50 years. Kondratiev argued that cycles of recession and prosperity in the world economy, based on indicators such as prices, wages, and savings rates, have repeated every 40-50 years. Schumpeter demonstrated the connection between these cycles and technological innovation (Schumpeter 1939), a view that Modelski adopted. Specifically, they proposed that K-waves are not composed of general economic indicators like GDP, prices, or recessions, but rather by the rise and growth of leading sectors. Innovations in these sectors cluster together, driving the circulation of the world economy. Technological innovations in leading sectors occur predominantly in specific regions and countries, and the nation leading these sectors rises to become a hegemonic power by spearheading the restructuring of the world political and economic order and its normative system. The United States emerged as the global hegemonic power by leading sectors such as electricity, steel, electronics, oil, and automobiles from the late 19th century onwards, constructing a US-led world political structure and normative system. It has maintained its hegemonic status by leading the information and communication technology innovations that have occurred since the 1970s. The current world economy is seen as being in the descending phase of the 19th cycle, with the 20th cycle beginning to emerge.

The Leadership Long Cycle theory posits that technological innovations occur in clusters within specific spatiotemporal contexts, and the nation leading these innovations emerges as the world political hegemon. However, unfortunately, the specific mechanisms through which technological innovation leads to leadership or hegemony, and the subsequent process of restructuring the world political economy and normative order, have not been sufficiently studied in existing international relations and innovation research. The current linkage is described as a series of concepts: economic crisis, increased investment in new technologies and innovation, friction with existing technological systems, crisis, war and changes in the world political order, leadership change, and the diffusion and stabilization of new technology industries, simply explained as "coevolution" between technology and the world political order (Modelski and Thompson 1996). Despite these conceptual linkages, ambiguities remain. For instance, it is not sufficiently explained why crises arising from the clash between existing and new technological systems inevitably lead to war, or how a nation driving technological innovation rises to become a hegemonic power (Bae Young-ja 2016).

Explaining the differences in technological innovation capabilities and economic growth rates among countries, and defining and measuring the sectors leading K-waves, fall outside the scope of international relations scholars. Here, we present and organize several perspectives that are important for exploring the relationship between hegemony and technological innovation and contribute to understanding the characteristics of the current US-China technological competition.

First, there is the understanding of the relationship between superiority in advanced technology and hegemony. Many current articles and reports assume that superiority in advanced technology directly leads to hegemony and focus on comparing US and Chinese technological capabilities (Abrami 2014; Atkins 2019). They acknowledge China's rapid technological advancement but argue that US hegemony will continue because the US maintains a solid lead in basic science and advanced technological innovation. Conversely, others argue that China will soon become the hegemonic power because it surpasses the US in technological innovation capabilities, including the number of scientific papers and patents in certain fields. However, these simplistic assumptions about the relationship between scientific and technological capabilities and hegemony are questioned by several historical examples and call for a broader perspective on this relationship. For instance, the fundamental technology of the steam engine, invented by Newcomen in England in 1712, originated from Papin in France in 1691 (Kim Tae-yu et al. 2017). British iron production was the world's highest in the mid-19th century. However, as the center of the iron industry shifted to steel, Britain's steel industry was surpassed by the US and Germany. The Bessemer process, one of the most important innovations in steel production, was developed in Britain. Yet, it was US companies, such as Carnegie Steel, that recognized the importance of this process and maximized its potential through large-scale facility investments. In the case of telegraph machines in the mid-19th century, although developed first in Britain, it was German companies like Siemens that improved its technical completeness and reaped significant profits from laying telegraph networks across Europe and continents.

Studies on the historical process of technological innovation in the United States emphasize that the emergence and diffusion of new production methods based on new technologies, known as the "American System of Manufacturing," along with large markets and abundant resources that enabled them, played a crucial role in solidifying America's industrial dominance around the turn of the 20th century, rather than superiority in individual technologies (Chandler 1990; Nelson et al. 1992). It is argued that based on this industrial superiority, the US conducted more organized research and development, eventually surpassing Europe in science as well. Indeed, between 1901 and 1930, the number of Nobel laureates in physics and chemistry was 33 in Germany, 18 in Britain, and only 6 in the United States. It was only after World War II that the US began to catch up to the number of laureates from France, Britain, and Germany (Brunnermeier et al. 2018).

In contrast to most studies discussing the US's technological superiority in the recent US-China competition in artificial intelligence, Kai-Fu Lee argues that in the world of AI, implementation is more important than discovery, and data is more crucial than expertise. He contends that China surpasses the US in implementation and data, tilting the playing field of the global AI order in China's favor (Lee 2018). While the US leads in discovery and expertise, Lee points out that four factors—abundant data, entrepreneurial drive, AI scientists, and an AI-friendly government environment—work to China's advantage, highlighting the need to consider China's role in the development of the global AI order. His argument suggests that beyond focusing solely on technology itself, we must consider new technologies' development into new industries or production methods, as well as various factors such as markets and government policies.

Second, we must consider how to interpret the fact that technology has become particularly prominent in the recent US-China hegemonic competition. Recent studies on the dynamic relationship between technology and hegemony criticize existing research for treating technological innovation and industrial development as black boxes or exogenous variables, emphasizing the need to explain technological innovation as an endogenous variable in the formation of the world political and economic order (Kennedy et al. 2018; Mayer 2017). Studies by Kennedy et al. argue that a hegemonic challenger faces an "innovation imperative" to continuously enhance its technological innovation capabilities and strives to strengthen them through various means such as in-house development (making), technology transfer (transacting), and technology acquisition (taking). The process by which the existing hegemonic power attempts to check these efforts in various ways needs to be analyzed in greater detail from an international relations perspective.

The argument that the technological advancement of a challenger nation and the weakening of the existing hegemonic power are predetermined outcomes existing outside the international political order, and thus should be analyzed endogenously within the context of international relations, is persuasive. However, finding ways to develop endogenous analyses of the relationship between technology and world politics within the current framework of international relations is challenging. These scholars connect technology and world politics through the concept of "externality." They argue that while a hegemonic challenger's continuous and diverse efforts to enhance technological innovation may, to some extent, strengthen cooperation with the hegemonic power, they inevitably lead to conflict between the two nations due to the externalities of technological innovation. Since most advanced technologies are dual-use, the advanced technological innovation of a hegemonic challenger generates a "security externality" in the form of a military security threat, prompting the hegemonic power to pay attention and impede technology transfer and acquisition through trade and investment restrictions. Furthermore, when a hegemonic challenger engages in advanced technology transfer or acquisition, violations of norms and rules institutionalized by the existing hegemonic power can create an "order externality" of challenging the existing order, leading to conflict as the hegemonic power employs coercive measures to maintain the existing order.

Unlike the hegemonic competitions that occurred within Western countries in the past, the hegemonic competition between the US and China, which have different cultural backgrounds, reveals more explicit military implications of advanced technologies and externalities related to challenging the existing world order. This can be interpreted as the reason why technology has emerged as a core area of conflict. Semiconductors, 5G, and artificial intelligence, where the US and China are currently experiencing friction, are all key components of advanced military equipment, related to core military information infrastructure, or directly linked to the emergence of new weapons such as killer robots. Furthermore, conflicts surrounding China's challenges to and violations of international norms established by the US, such as the TRIPS Agreement on intellectual property rights and internet freedom, lie at the heart of the US-China technological hegemony competition.

However, the fact that US-China technological competition is particularly prominent in the fields of semiconductors, 5G, and artificial intelligence is due to the prediction that these technologies are general-purpose technologies that serve as the cornerstone of the new economic paradigm called the Fourth Industrial Revolution. It is also predicted that these technologies will play a crucial role in the rise and fall of individual national powers, as well as the future reshaping of the global political and economic order, as new industries and economic paradigms emerge based on them, even if they have not yet fully materialized. In this light, economic externalities, along with military and world order externalities, deserve greater attention. Furthermore, it is worth considering whether conceptualizing the emergence of new industries and economic paradigms, military applications, and their relationship with the world order as technological externalities is indeed appropriate.

It is also important to recognize that the close economic and technological interdependence between the US and China today significantly differs from historical cases of hegemonic competition. Even considering the high degree of mutual trade interdependence within the Western economy in the early 20th century, when Britain, Germany, and the US competed, it is incomparable to the level of global economic integration that has accelerated since the 1990s. In the flow of globalization that accelerated after the 1990s, the US has built a global production network, and China, after joining the WTO in 2001, became fully integrated into this network through trade and foreign investment. Within the global production network, the US and China have established a close competitive and cooperative relationship, each taking on roles in areas where they have advantages. The theory of "Commercial Peace" has predicted that a high degree of economic interdependence between nations reduces the likelihood of conflict escalating to war, serving as a basis for optimism regarding US-China relations. Recent cases of US-China trade and technology disputes suggest that the interdependence within the global economy, which has accelerated since the 1980s, may not be a constant but a variable. In light of the recent conflicts surrounding advanced technologies between the US and China, predictions are emerging that the two countries will form separate economic and technological blocs, reducing their technological and economic interdependence at immense cost and with significant side effects (Bremmer et al. 2018; Luce 2018; Orange et al. 2019; Panda et al. 2019).

This study will first briefly examine the process of technological competition between China, the hegemonic challenger, and the US, focusing on how China has increased its technological innovation capabilities in response to the "innovation imperative" and how the US has responded, particularly in the fields of semiconductors, 5G, and artificial intelligence. It will then analyze the impact of this bilateral technological competition on the changes in the global political and economic order.

US-China Technological Conflict Status:Semiconductors, 5G, and Artificial IntelligenceSemiconductors, 5G, Artificial Intelligence

Following Deng Xiaoping's reform and opening-up policy initiated in 1978, China began to form its current technological innovation system by restructuring its economy around two pillars: decentralization and privatization (Fu 2014; Gu and Lundvall 2006; Lewin et al. 2016; Someren et al. 2013; Zhou et al. 2016, etc.). In 1985, the "Decision of the Central Committee of the Communist Party of China on the Reform of the Science and Technology System" led to a major reorganization of R&D organizations, which had been centrally managed and separated from production sectors. Over 5,000 R&D organizations were merged, transformed into production entities or enterprises, and guided to engage in innovation activities that directly contribute to economic development. Furthermore, with a surge in foreign direct investment and government R&D investment, innovation activities intensified, and innovation capabilities were rapidly enhanced in a short period. Since 2005, China has emphasized the importance of scientific and technological innovation in its sustained economic growth, announcing various policies to support it. In particular, by stressing the need to transition from a resource-based national development strategy to an innovation-driven one, China has pursued goals such as building an innovation-oriented nation by 2020 based on "indigenous innovation." To this end, it has implemented a series of plans, including the "Mid-to-Long-Term Plan for Scientific and Technological Development (2006-2020)," the "Science and Technology Leader Strategy for 2050," and the "13th Five-Year Plan for Innovation Development (2016-2020)," focusing on strengthening technological innovation capabilities to become a global science and technology power.

China defines an "innovation-oriented nation" as one that invests over 2% of its GDP in R&D, where the contribution of science and technology to economic growth exceeds 60%, knowledge-intensive service industries account for 20% of GDP, and the external technological dependence is below 30% (Outline of China's Innovation-Driven Development Strategy Planning, 2016). It is expressed that building a science and technology power is not about reaching a few "Taishan Mountains" (which appear majestic but are only 1,545m above sea level), but about constructing a "Tibetan Plateau" of science and technology (3,000-4,000m) (Yoon Dae-seung 2018). China has set forth plans to enter the ranks of innovation-oriented nations by 2020, become a leader among innovation-oriented nations by 2030, and emerge as an innovation powerhouse by 2050.

Among China's various science and technology plans, "Made in China 2025," announced in 2015, has garnered the most attention. This plan aims to transform China's economic model from "quantitative growth" to "qualitative growth" by fostering its manufacturing base, promoting technological innovation, and pursuing green growth. It classifies major manufacturing countries into three tiers: Tier 1 (US), Tier 2 (Germany, Japan), and Tier 3 (China, UK, France, Korea), and outlines China's plan to upgrade its manufacturing sector to become the world's leading manufacturing power. Specifically, in the first phase (2016-2025), China aims to enter the ranks of major manufacturing powers; in the second phase (2026-2035), it aims to surpass Germany and Japan to reach an intermediate level among major powers; and in the third phase (2036-2049), it aims to lead among major powers. This plan particularly emphasizes the localization of core technologies, a goal reiterated by Xi Jinping in his joint annual conference speech to the Chinese Academy of Sciences and the Chinese Academy of Engineering in 2018. He stated, "Core technologies cannot be obtained by asking, buying, or begging. [...] Only by mastering core technologies can we fundamentally guarantee national economic and defense security, and national safety. Strive to achieve self-reliance in core technologies and seize the initiative in innovation and development" (Yang Jeong-dae 2018).

With the Chinese government's will and active support, China's science and technology level has rapidly advanced over the past two decades. In 2017, China's PCT (Patent Cooperation Treaty) patent applications numbered approximately 49,000, closely trailing the US, which held the top position with 56,000 applications. China also ranked second in SCI papers with 360,000, following the US with 520,000 (Korea-China Science and Technology Cooperation Center 2018). In 2017, China became the country with the most supercomputers, possessing 202 out of the world's top 500, surpassing the US (143 units) for the first time. China currently operates the Tiangong space station, connecting 35 satellites to provide 24-hour global surveillance, positioning, weather observation, and resource exploration capabilities. It has also initiated the construction of a navigation system and announced a space plan to become the world's leading space power by 2045, surpassing the US. Following the successful maiden flight of its indigenously developed large passenger aircraft, the C919, in 2017, China aims to reshape the global aviation industry landscape into an "ABC" structure—Airbus, Boeing, and the Commercial Aircraft Corporation of China (COMAC). Despite the Chinese government's full support and remarkable achievements in scientific and technological innovation, China's overall innovation level and environment are still evaluated as not particularly high, indicating that there is still a long way to go. In 2018, China's overall innovation index ranked 17th globally, receiving low scores particularly in areas such as government regulation, innovation environment, and qualitative achievements (Global Innovation Index 2018). Considering China's rising wages and declining economic growth rate, it is evident that China faces an "innovation imperative" to overcome the "middle-income trap" and ascend to hegemonic status.

While increasing R&D investment, China has also strived to acquire advanced technologies through various methods such as technology transfer and mergers and acquisitions (M&A), with the technology transfer and M&A involving US companies playing a particularly significant role (O’Connor 2019). China's outward foreign direct investment (FDI) in US companies rapidly increased after 2010, peaking at $46.9 billion in 2016, and is currently declining. 97% of China's FDI in the US consists of M&A, with a particular focus on the information and communication technology (ICT) and energy sectors. A report by the Office of the United States Trade Representative (USTR) states that China has illegally acquired advanced US technologies through forced technology transfer from US companies, discriminatory licensing restrictions, M&A of US companies, and intellectual property infringement via the internet (USTR 2018). The report specifically details and analyzes China's acquisition of advanced technologies in sectors such as ICT, aerospace, and biotechnology through M&A of US companies. For example, the Chinese government has established and operated a $107 billion semiconductor fund, investing $37 billion in the M&A of 27 semiconductor companies between 2010 and 2016, which enabled the development of the current Chinese semiconductor industry, according to the report. This study examines China's efforts to enhance technological innovation and the US response, as well as the conflict dynamics between the two countries, focusing on the fields of semiconductors, 5G, and artificial intelligence, where intense technological competition is currently underway.

Semiconductors

In 2017, China's semiconductor imports amounted to $259.6 billion, making it the largest import item by value for China in that year (Kim Soo-jin 2019; Bae Young-ja 2011; Lee Eun-young 2018; Ernst 2016; Lewis 2019; McKinsey 2018, etc.). This figure is over 60% higher than the second-largest import item, crude oil (approximately $160.6 billion). As of mid-2018, China's consumption accounted for about 44.2% of the global semiconductor market, while its self-sufficiency rate was a low 13.5%. The semiconductor industry is one of the ten key industries in "Made in China 2025."

The global semiconductor industry is broadly divided into two sectors: non-memory and memory, with a market share ratio of approximately 7:3. The industry is characterized by a division of labor structure, including fabless companies specializing in the design and marketing of chips for specific applications without direct production; foundry companies specializing in producing chips commissioned by other firms based on advantages in production technology and cost; and assembly and testing (packaging & testing) services. Memory chips are mostly designed and manufactured by the same entities.

The United States accounts for approximately 50% of global semiconductor production and has established a production network centered on non-memory semiconductors. In the non-memory semiconductor sector, advanced design technology capable of meeting diverse demands is the core of competitiveness, and integrated device manufacturers (IDMs) or fabless companies possessing this technology are the key players leading the non-memory semiconductor production network. The US semiconductor industry holds an overwhelming advantage in the design segment, which is the largest in market size and highest in added value. Currently, US companies lead the non-memory sector, while Korean companies lead the memory sector.

China's semiconductor industry began with the labor-intensive assembly and testing segment, outsourced by US semiconductor companies, and has gradually expanded into the more technologically advanced process and design segments (Bae Young-ja 2011). China entered and developed within the global semiconductor industry's production network by actively adopting existing standards—specifications for semiconductor chips, specific manufacturing and assembly processes, operating methods for production lines embedded in semiconductor equipment, and related technologies. China's scientific and technological innovation in the semiconductor sector has progressed by investing enormous capital to upgrade manufacturing processes and acquiring core technologies through M&A of foreign companies with relevant expertise or by recruiting top talent (Thomas 2015).

The Chinese government established the "China Integrated Circuit Industry Investment Fund" in 2015 to increase the semiconductor self-sufficiency rate to over 70% by 2025 (Lee Eun-young 2018). China has focused its investments particularly on the fabless, foundry, and memory sectors, achieving remarkable results in recent years. In the non-memory fabless market, China's share, which was around 5% in 2010, reached approximately 11% in 2017. Chinese companies like Hisilicon and Unigroup have shown significant progress. Hisilicon, in particular, was strategically nurtured by Huawei, a Chinese telecommunications equipment company, starting in 2004 to reduce its reliance on US companies like Qualcomm and Intel. With the rapid growth of the fabless market, domestic demand for foundry services in China has increased, leading to a steady growth in China's foundry sector, with its market share rising from 11% in 2015 to 12% in 2016 and 13% in 2017 (Lee Eun-young 2018). China's semiconductor "rise" has particularly focused on the memory sector. In the memory sector, Samsung Electronics and SK Hynix hold about 80% of the market, with the remaining 20% held by Micron Technology of the US. Although China's memory industry has not yet shown significant visible achievements, companies like Yangtze Memory Technologies Corp. (YMTC), Fujian Jinhua Integrated Circuit (JHICC), and Hefei Changxin (Innotron) have garnered attention. Despite the progress made by Chinese companies in the fabless, foundry, and memory sectors through aggressive investment and M&A of US companies, they are currently facing difficulties due to various export bans and foreign investment restrictions imposed by the Trump administration.

The Trump administration views China's semiconductor technological innovation as being driven by aggressive M&A of its companies and illicit technology transfers, deeming it a threat to the US semiconductor industry and an act of "economic aggression" (White House 2018). Furthermore, recognizing the close link between the development of China's semiconductor technology and the development of advanced weaponry as a "military threat," the administration has employed various means, including tariffs, export restrictions, regulation of Chinese M&A of US companies, and intellectual property lawsuits, to thwart these efforts.

In December 2017, Micron Technology, the largest US memory semiconductor company, filed a lawsuit in a US court against Fujian Jinhua, a Chinese state-owned semiconductor company, and Taiwan's UMC, which was constructing a joint venture factory with Fujian Jinhua, for patent and trade secret infringement. In response, UMC filed a counterclaim in a Chinese court, requesting a sales ban on Micron products (Lee Soo-hwan 2018). The Fuzhou Intermediate People's Court in China ordered a sales ban on 26 Micron products, including DRAM and NAND flash memory, within China.

In August 2018, the Trump administration finalized its decision to impose a 25% tariff on Chinese imports, with many items included being beneficiaries of "Made in China 2025," such as semiconductors and related equipment, as well as electronics, plastics, railway vehicles, and chemicals. In October 2018, the US Department of Commerce imposed export restrictions on Fujian Jinhua, a Chinese DRAM manufacturer. The Department of Commerce determined that Fujian Jinhua's memory chip manufacturing capabilities posed a "significant threat" to the survival of US suppliers of chips for military systems. Consequently, Fujian Jinhua was added to the Entity List, restricting the export of software and technology, requiring US companies to obtain special approval from US authorities before exporting to Fujian Jinhua. In 2019, the US Department of Commerce designated Huawei's subsidiary, semiconductor design firm HiSilicon, as an entity subject to transaction restrictions. HiSilicon is now facing difficulties as it is unable to use automated design tools from US companies.

In 2015, Tsinghua Unigroup, a Chinese semiconductor company, attempted to acquire Micron Technology, the world's third-largest memory chip maker, to expand its memory semiconductor business, but the attempt was thwarted. In 2017, the acquisition attempt of Lattice Semiconductor, a US semiconductor company, by Canyon Bridge, a Chinese private equity firm, was denied approval due to concerns about "potential intellectual property transfer and risks to national security, considering the semiconductor supply chain to the US." The acquisition attempt of Qualcomm, a US semiconductor company, by Broadcom, a Singaporean company with Chinese ties, was also blocked in 2018 (Yoon Dae-gyun 2018). The background to the frustration of Chinese companies' M&A attempts with US companies lies with the Committee on Foreign Investment in the United States (CFIUS). Based on the USTR's Section 301 investigation, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) was included in the National Defense Authorization Act for Fiscal Year 2019 and became effective in August 2018 upon the President's signature. This law expanded CFIUS's review scope, applied a comprehensive interpretation of national security to its reviews, and strengthened its authority, allowing it to suspend investment transactions under review or investigation.

China has also initiated antitrust investigations into US semiconductor companies and investigations into the monopolistic practices of Micron, Samsung, and SK Hynix within China. Furthermore, China has made progress in intellectual property protection, arguing that it has not violated intellectual property laws, as evidenced by the increase in royalty payments from $3.4 billion in 2011 to $7.2 billion in 2011. In April 2018, immediately after the US imposed sanctions on telecommunications equipment provider ZTE, President Xi Jinping visited Wuhan Xinxin Semiconductor (XMC), an affiliate of China's Tsinghua Unigroup, emphasizing that semiconductors are the "heart" for realizing the "China Dream" and encouraging continuous technological innovation efforts. As the US-China trade and intellectual property war has materialized into a semiconductor war, setbacks are anticipated for China's semiconductor rise. Fujian Jinhua is a key component of the "Made in China 2025" program, and China had predicted that 2019 would be the inaugural year for Chinese memory semiconductor production with the progress of Fujian Jinhua, Changjiang Memory Technologies Corp. (YMTC), and Hefei Changxin (Innotron). However, with import restrictions on equipment from the US, delays in Fujian Jinhua's mass production plans for memory semiconductors are inevitable. For the time being, China's semiconductor rise efforts are expected to enter a lull (Kim Soo-jin 2019). However, considering China's domestic market demand, which accounts for nearly half of the global semiconductor demand, and the Chinese government and companies' commitment to localization and their investment capacity, China will continue to invest in and innovate in the semiconductor sector, focusing on memory, foundry, other fabless segments, and the downstream semiconductor equipment industry, despite the various difficulties caused by US actions.

5G

As new communication technologies have developed, the telecommunications industry ecosystem has transformed, leading to fierce competition to preemptively secure technological standards and gain market leadership. 5G is predicted to bring about significant domestic and international changes, not only by reshaping the telecommunications industry as a general-purpose technology that enables the creation of new industries and business models, but also through its integration with artificial intelligence and the Internet of Things (IoT) (Lee Ji-yoon 2019; Samjong KPMG 2018; Korea Trade Insurance Corporation 2018; CGS 2019; Eurasia Group 2018; Kania 2018; Lewis 2019). While "5G" is the commonly used term, the official designation approved by the ITU-R (International Telecommunication Union Radiocommunication Sector) Plenipotentiary Conference in 2015 is "IMT-2020." Its characteristics include ultra-high speed, ultra-low latency ensuring rapid response times, and ultra-connectivity enabling the connection of a massive number of devices. The 5G industry ecosystem is expected to initially activate network equipment, infrastructure providers, terminals, components, and services, and then expand to content such as virtual reality, autonomous driving services, and further into smart homes, smart factories, remote healthcare, and smart cities.

The International Telecommunication Union (ITU) is scheduled to adopt the final 5G standard in the first half of 2020, with the US, China, and Europe vying for leadership. Due to the broad scope of the ecosystem covered by 5G, it is difficult for a single company to dominate. Currently, the competition surrounding 5G is particularly intense in areas such as equipment, terminals, components, and services. In the telecommunications chip manufacturing sector, which develops the modem chips that practically implement 5G, US companies like Qualcomm and Intel hold an overwhelming position. In the field of various communication equipment required for high-frequency bands, companies such as Ericsson, Nokia, Huawei, Samsung, and ZTE are active. In the telecommunications terminal sector, Samsung Electronics and Apple are the dominant players, but Chinese companies like Huawei and Xiaomi are catching up, focusing on mid- to low-priced products. Currently, China holds a dominant share of 5G-related intellectual property rights, and it is expected that China's intellectual property revenue will significantly increase as the scale of the 5G industry expands (CGS 2019).

In October 2016, the Ministry of Industry and Information Technology (MIIT) of China announced the "Next Generation Information Technology Industry Plan" (2016-2020), presenting guidelines for the mid- to long-term development of the 5G mobile communication industry (Cho Eun-gyo 2019; Finley 2018; Kania 2018, etc.). Promoting commercialization by dividing 5G mobile communication into two phases: Phase 1 (2016-2018) for core technology development and testing, and Phase 2 (2018-2020) for commercial product development and demonstration. The MIIT, in collaboration with the Ministry of Science and Technology, is supporting research exchange activities with international standardization organizations and defining technical requirements for market, network, and frequency for "IMT-2020." Driven by the government's active promotion policies, the three major telecommunications carriers (China Telecom, China Unicom, China Mobile) and the two major telecommunications equipment manufacturers (Huawei, ZTE) have formed a synergistic structure. That is, telecommunications carriers benefit from the active technical support of equipment manufacturers, while equipment manufacturers, in turn, benefit from large-scale orders from carriers, creating a virtuous cycle of expanding 5G infrastructure and growing the market.

Huawei, a Chinese telecommunications equipment and mobile phone provider, is at the center of the current US-China technological conflict. Founded in 1987, Huawei surpassed global companies to become the number one player in the Chinese telecommunications equipment market in 1999. It began expanding into Southeast Asia, India, and Africa in 1996 and entered the US market in 2003 (Groll 2019; Lin et al 2018). Since 2010, it has actively established a global R&D network. Huawei, which has grown based on its success in the rapidly expanding domestic and international telecommunications markets, has invested an average of 15% of its annual revenue in R&D to drive technological innovation. It has now grown to form a top-three structure in the 5G telecommunications equipment market alongside Ericsson and Nokia.

Figure 1: Top 5G Standard Essential Patent Countries

Source: CGS 2019 (data from IPlyrics)

As a result of continuous innovation, Huawei's patent count significantly surpasses that of other Chinese companies like Lenovo, Haier, and Xiaomi. Furthermore, it has surpassed Samsung and Apple in the number of PCT (Patent Cooperation Treaty) patents, which are internationally recognized (Choi Ui-hyun et al. 2018). Huawei's PCT patents began with one in 2000 and reached 20,722 by the end of 2015, making it the company that filed the most PCT patents globally in 2015. Samsung Electronics had approximately 10,402 PCT patents by the end of 2015, while Apple had only 3,335.

Since entering the US market in 2001, Huawei has been involved in numerous lawsuits related to patent infringement and technology theft. It currently faces severe criticism for alleged intellectual property infringement and its opaque relationship with the Communist Party of China. In 2003, Cisco, a major US telecommunications equipment manufacturer, sued Huawei, alleging that it had stolen Cisco's source code. Huawei has also been accused of illegally supplying equipment containing US components to Iran.

The first official expression of suspicion towards Huawei in the US came in a 2005 report published by RAND (RAND 2005). The report claimed that Chinese companies, including Huawei, formed a "Digital Triangle" with the Chinese military and national research institutions. "Huawei maintains deep ties with the Chinese military, which serves as an important customer, political patron, and R&D partner for Huawei. The government and military promote Huawei as a national champion, and the company is currently China's largest, fastest-growing, and most impressive telecommunications equipment manufacturer." In 2008, Huawei's attempt to acquire 3Com, a US software company, was blocked by CFIUS.

In 2012, the US House Permanent Select Committee on Intelligence released a report discussing the national security implications of Huawei and ZTE (SCI 2012). The report concluded that Chinese telecommunications equipment could be used for cyberattacks by the Chinese government, posing a threat to US national security. Given the lack of transparency regarding the relationship between Huawei and the Chinese Communist Party and security concerns related to Huawei, the report recommended that the US government should not adopt Huawei or ZTE telecommunications equipment, and that US companies should also avoid using equipment from these firms. The announcement of "Made in China 2025" in 2015 served as a significant catalyst for fostering a climate of scrutiny towards Chinese technological innovation in the US (Lee Min-ja 2019). Under the Trump administration, a series of documents have been published, raising issues regarding Chinese M&A of US companies, unfair US-China trade practices, and advanced technologies and national security. These include the USTR's "Section 301 Investigation Report" (USTR 2018), the US-China Economic and Security Review Commission's (USCC) "Hearing Report on Chinese Market Distortions" (USCC 2018), and the White House's "Report on China's Economic Aggression" (White House 2018). All of these documents criticize "Made in China 2025" for implementing large-scale overseas investment strategies aimed at acquiring advanced technologies from developed countries, including the US and EU, to achieve China's indigenous innovation and enhance the international competitiveness of Chinese companies. They argue that this state-led technological development and overseas investment is a form of "Economic Aggression," involving the acquisition of core technologies and intellectual property rights from major countries and the theft of advanced technologies. As US-China trade tensions escalated, in May 2019, the US Department of Commerce announced that Huawei, a leading company in next-generation mobile communications (5G), and its 68 affiliates were added to the "Entity List" for export control. This list comprises individuals, companies, research institutions, and civil organizations that the Bureau of Industry and Security (BIS) under the Department of Commerce deems a threat or high risk to US national security. Subsequently, US companies are required to obtain separate authorization to conduct business with Huawei, including licensing agreements for software like Google apps and patents. Following this announcement, Google, Microsoft, Intel, and Qualcomm declared the termination of technology use agreements with Huawei or the suspension of business dealings. The US has also pressured its allies, such as Canada, Australia, the UK, and New Zealand, to ban Huawei's telecommunications equipment, and Canada and Australia have complied.

Despite facing difficulties due to the US's stringent restrictions, which prevent it from importing key components and software, Huawei is strongly protesting and resisting the accusations regarding its intellectual property rights and its relationship with the Communist Party of China. Huawei recently published a white paper titled "Respecting and Protecting Intellectual Property: The Cornerstone of Innovation," detailing its contributions to innovation and intellectual property rights (IPR) protection (Huawei 2019). The white paper states that innovation and IPR protection have been central to Huawei's success over the past 30 years, and as of the end of 2018, Huawei had received 87,805 patents, including 11,152 US patents. Furthermore, the white paper indicates that Huawei generated $1.4 billion in licensing revenue from 2015 onwards. It also states that Huawei has paid over $6 billion in royalties to legally use the intellectual property of other companies, with 80% of this amount paid to US companies. The US has not lifted its import restrictions on Huawei, and the conflict is expected to continue as Huawei counters with patent lawsuits.

Artificial Intelligence (AI)

Andrew Ng, a world-renowned expert in deep learning, described artificial intelligence as 'the new electricity.' AI is expected to be applied across all industries, bringing about various political and economic changes both domestically and internationally (Oh Jong-hyuk 2018; Lee Wang-hwi 2019; Hass et al. 2018; Horowitz et al. 2018; Lee 2018). It is difficult to analyze the AI sector from the perspective of overall industrial structure or global value chains. Generally, superiority in the AI sector is perceived to be determined by the availability of appropriate data, talent, computing power, algorithms, and the presence of diverse demands and policy will to drive its utilization (Horowitz et al. 2018). Currently, the United States has advantages in talent, computing power, and algorithms, while China leads in data, demand, and policy. China is particularly evaluated to be significantly ahead in voice and facial recognition technologies (CISTP 2018; Ding 2018). China currently surpasses the U.S. in the number of AI-related papers and patents (Kim Dae-jung et al. 2019; Park Seung-hyuk 2019). However, a closer look reveals that in terms of patents, China's domestic applications account for the majority (13,088 cases, 95.8%), with universities (6,496 cases) filing more patents than companies (5,824 cases). While China's AI patents are filed through a university-led academic approach, U.S. patents are led by global market-leading companies (5,478 cases, 87.2%), suggesting the U.S. has an advantage in technological commercialization competitiveness.

China has already established a two-strong structure with the U.S. in AI technology, and institutions like Goldman Sachs and McKinsey predict that China will surpass the U.S. to lead global AI technology within the next decade, driven by its human resources, infrastructure, and industrial policies (Goldman Sachs 2017; McKinsey 2017). In 2015, 'Artificial Intelligence' (人工智能) first appeared in China's government work report (He 2017). Following 'Internet Plus' in 2015, the Chinese government announced the 'New Generation Artificial Intelligence Development Plan' (新一代人工智能发展规划) in 2017, presenting a roadmap to lead global AI technology by 2030. "We must seize the historic opportunity of AI development. It is an opportunity for economic and social development, national security, and for enhancing China's overall competitiveness and achieving a leap forward (牢牢把握人工智能发展的重大历史机遇，[…] 引领世界人工智能发展新潮流，服务经济社会发展和支撑国家安全，带动国家竞争力整体跃升和跨越式发展)."

China's major IT companies, BAT (Baidu, Alibaba, Tencent), are proactively expanding their AI investments (Oh Jong-hyuk 2018; Lee Wang-hwi 2019, et al.). These companies are currently leading the development of China's AI sector through a division of labor. Baidu has launched the Apollo project, a platform development plan for autonomous vehicles. Alibaba is responsible for the 'City Brain' development project, a platform for smart city construction, and after piloting a smart city in Hangzhou, Zhejiang Province, plans to build a futuristic smart city integrating advanced technologies like AI in the Xiong'an New Area, Hebei Province. Tencent is focusing on platforms in the medical and healthcare sectors.

The vast amount of data generated by China's enormous population accounts for 13% of the world's data, serving as a crucial source for the big data essential for AI development. Goldman Sachs predicts this proportion will increase to approximately 20-25% by 2020. The relatively weaker personal information protection levels compared to developed countries are also cited as a significant factor enabling the acquisition of vast amounts of data. Investments are rapidly increasing in China, particularly in next-generation industries requiring high security such as finance and online payments, focusing on companies in facial and voice recognition, humanoid robots, and AI healthcare. AI technologies like facial and voice recognition are expected to be applied in China's next-generation industries, including finance and autonomous driving, elevating China's industries to a higher level. While China leads in some application areas such as facial and voice recognition and healthcare, based on massive venture capital investment and data, the U.S. is assessed to maintain its superiority in the overall AI sector, including hardware, high-quality talent, and fundamental research (Ding 2018).

Unlike in the semiconductor sector, negative containment strategies are not prominent in the AI sector. However, the U.S. is suppressing Chinese investment in its AI technologies and companies and strengthening the authority of CFIUS in this area (O’Connor 2019). Furthermore, the U.S. is closely monitoring the development of Chinese AI technology while criticizing the Chinese government's use of AI for control and its military applications (Horowitz et al. 2018).

While maintaining an overall advantage in artificial intelligence, the U.S. is emphasizing investment and talent development for its own AI technological advancement. The Obama administration, in a report on AI just before the end of its term, presented three strategies: AI technology development, citizen education, and worker support (Obama Administration 2016). The Trump administration has seen conflicts with the scientific and technological community due to discussions of measures detrimental to U.S. scientific and technological innovation, such as research and development budget cuts and anti-immigration laws. However, it issued an executive order prioritizing AI research and development investment (White House 2019a). This executive order, named the 'AI Initiative,' stipulates that the federal government must strive to develop technologies to secure a leading position in next-generation AI and specifies support for mid-to-long-term research, expanded access to federal government information to promote AI research, and enhanced education in science, technology, engineering, and mathematics. President Trump, who pledged to increase investment in AI and 5G communication in his State of the Union address earlier this year, emphasized at the signing ceremony, "Continued leadership in AI is more important than anything else for maintaining the U.S. economy and national security."

In the future, China's AI sector is predicted to continuously challenge the U.S. in new application areas, driven by its vast data and technological advancements. Both sides are expected to compete by sharing areas of superiority. In reality, the U.S. has few cards to play to contain China, which is growing centered on specific sectors, fueled by massive data, capital, and full government support. On the other hand, it will be difficult for China to quickly catch up to the U.S. in areas where the U.S. holds an advantage, such as fundamental research and high-quality experts. This requires reforms in China's education system, regional disparities, and its overall national innovation system.

Recently, concerns have been growing in the U.S. about the potential for the Chinese government to use AI technology for surveillance and control (Horowitz et al. 2018; Mozur 2019). With the growth of human rights awareness and strengthened information control in China, questions are being raised about the continued ease of collecting and utilizing large-scale data, which forms the basis of AI technology. China's facial recognition technology is already being used to identify jaywalkers and criminals, raising human rights issues. Predictions also suggest that China's AI technology's global expansion capabilities may be relatively limited due to restrictions on the accumulation of external data resulting from the Chinese government's strengthened internet control.

Synthesizing the above discussions, it is predicted that U.S. sanctions against Chinese semiconductor companies will significantly delay China's semiconductor rise, given the U.S.'s overwhelming technological superiority in the semiconductor sector. China currently has limited options to counter the U.S. in the semiconductor sector. However, considering China's domestic market demand, which accounts for nearly half of the world's semiconductor demand, and the Chinese government and companies' commitment to localization and investment capacity, continuous innovation in China's semiconductor sector is expected, and despite delays, China's semiconductor rise is likely to be realized.

In the case of artificial intelligence, the industry is currently in its early stages of development, and the U.S. and China are focusing on different sectors based on their respective advantages. Consequently, there are only criticisms regarding the U.S.'s overall containment efforts and China's military and governmental control applications, but it has not emerged as a full-blown conflict. As time progresses, core technologies and key sectors overlap, and the military application of AI expands, while AI becomes closely related to government control and surveillance, competition and conflict in the AI sector between the two countries are expected to intensify.

In the case of 5G, in the telecommunications equipment sector, the U.S. maintains its superiority in core chip technology and is striving to preempt 5G technology standards to compensate for its generally weak physical infrastructure, while developing related service sectors. The U.S. lost competitiveness in the telecommunications equipment sector due to excessive competition and losses in 4G LTE equipment, and instead, China's Huawei and ZTE have emerged prominently, which the U.S. is reacting to very sensitively. Huawei is currently facing the brunt of the U.S.-China tech conflict, and it is judged that the conflict will not subside in the short term. A leaked White House report from 2018 expressed concern about the U.S. falling behind in 5G infrastructure and proposed establishing federal regulations related to the procurement, installation, and operation of telecommunications equipment, and unifying disparate regulations at the state/local level to enhance security against Chinese cyber espionage. As the best solution, it suggested the government directly build/own the 5G network and lease it to service providers, which caused controversy (Swan et al. 2018). This incident can be seen as reflecting the U.S.'s anxiety and sense of crisis in the 5G sector. The competition between the U.S. and China to gain an advantage in 5G is also expected to intensify.

Over a century ago, Britain and Germany held superiority over the U.S. in new scientific and technological fields such as chemistry, telegraphy, and steel. However, new industries and production methods based on new technologies took root successfully across the Atlantic in the U.S., laying the foundation for its rise as a hegemonic power. At that time, the U.S. was a dynamically growing nation, characterized by its vast territory, abundant resources, the challenges and innovations of inventors and entrepreneurs, and active government support for manufacturing. The reason why China's challenge cannot be underestimated in the current semiconductor, 5G, and AI sectors, despite the U.S.'s core technological superiority, is that China also possesses a vast population and resources, the challenges of an innovative entrepreneurial class formed during its economic growth, and active government policies. The crucial question is whether this potential can be realized, and for that, China faces numerous internal and external challenges. The current trade and technology conflict with the U.S. poses a significant challenge for China and is a major hurdle it must overcome. Whether China can continue technological innovation and economic growth while appropriately responding to these challenges, and whether the U.S. can regain vitality and achieve another leap forward by leading the current Fourth Industrial Revolution, similar to how it regained vitality and maintained hegemony with the rise of the IT new economy in the early 1980s, will be key points to watch.

A brief examination of the ongoing U.S.-China technology competition in semiconductors, 5G, and artificial intelligence reveals that technological development does not occur in a vacuum but rather within specific political and economic contexts, and particularly in interaction with global political and economic factors. The motivations for technological development, as well as its speed and trajectory, are shaped by global political and economic factors, and this technological development, in turn, acts as a major factor shaping changes in the global political and economic order. Research that closely analyzes the interrelationship between technology and the global political and economic order within the framework of their co-evolution must be continuously conducted.

US-China Technological Hegemony Competition and Global Political-Economic Order's Bloc Formation?

As the U.S. continues to impose tariffs on Chinese technology products, restrict corporate transactions, and regulate foreign investment, changes are predicted in the liberal world political-economic order established after World War II. In particular, the possibility of supply chains, which were closely linked within the intricate network across borders for the production of goods and services, the global value chain (GVC), since the 1990s, being bifurcated into U.S. and Chinese sides is being presented. This is indeed perceived as the strategy intended by the U.S. Trump administration, and this process is being variously named as 'Decoupling,' 'Bifurcation,' 'Economic Iron Curtain,' 'Balkanization,' and 'Cold Tech War' (Bremmer et al. 2018; Luce 2018; Orange et al. 2019; Panda et al. 2019).

In 2018, Huawei disclosed a list of 92 key component suppliers, of which 33 were U.S. companies such as Intel, Xilinx, and TI (Rollet 2019). Immediately after the Trump administration issued an executive order banning transactions with Huawei, U.S. companies like Intel, Google, and Qualcomm suspended their dealings with Huawei. Furthermore, news that foreign companies in China are considering scaling down or withdrawing due to tariff pressures suggests a high possibility of GVC restructuring. Currently, supply chains centered around China and connecting Asian countries are prominent in electronics, apparel, and automobiles. Concerns are also being raised about the pressure on Huawei expanding to other sectors and across the entire Asian region.

If the U.S. Trump administration's tariff pressures, restrictions on corporate transactions, and regulations on foreign investment continue long-term, and the GVC built over the past decades is actually separated, leading to the bifurcation of technology product supply chains, this will raise two important issues. First, whether the GVC will actually be divided as intended by the Trump administration, and to what extent the supply chains on both sides will be separated. Artificially dividing the GVC, which has been formed over decades within market and government policy environments, will entail considerable economic costs and political burdens, and managing the subsequent global economic downturn will also be difficult. For example, Apple has seen a surge in Chinese suppliers over the past decade and operates about 380 production facilities in China. While there have been reports of plans to relocate about 30% of these facilities outside of China, the execution remains uncertain, and it is certain that this will pose a significant burden for Apple (Kynge 2019).

Second, many countries other than the U.S. and China will likely find themselves under pressure to choose which GVC to align with. For countries like South Korea or the EU, which are connected to both China and the U.S. within the GVC, this choice will inevitably entail painful processes and outcomes, and finding alternatives will be difficult (CGS 2019; Lucas 2019). It is also difficult to predict which side these countries will join. For 24 Asian countries, the average export share to China is 24%, while the export share to the U.S. is half that, at 12%. From an economic perspective alone, choosing China would seem logical, but considering the security cooperation built by the U.S. in the Asian region and the world political-economic order established around the ideology of universal liberal democracy, the choice becomes complex. Considering that the U.S.-China hegemonic competition will unfold in the first half of the 21st century, the best path for South Korea and the global economy is to find ways to manage the U.S.-China technology conflict at a level that does not significantly violate universal principles or norms, rather than the world political-economic order splitting into U.S. and China blocs. In reality, the U.S. and China have been the two largest beneficiaries within the GVC built over decades, and recognizing that they have contributed to the prosperity of both countries through the movement of labor and capital within the liberal world economic order, they must seek points of compromise and avoid full-scale conflict (Thomson and Bremmer 2018).

The ultimate question regarding how the global political-economic order will be reshaped by the U.S.-China technological hegemony competition is whether China can successfully overcome its various domestic and international challenges to lead the development of continuous technological innovation and the new industrial and economic paradigms based on it. However, a more fundamental question for China is what kind of nation and world it aims to build based on technological innovation and economic growth, and whether it can present norms that are rationally and persuasively acceptable to other countries. Regarding this, one study argues that it is important whether China can provide a 21st-century answer to the 19th-century problem of 'Eastern Ways and Western Means' (동도서기, 東道西器) (Hui 2016). It points out that a major issue is the lack of clarity regarding what 'Way' (道) China seeks to achieve beyond materially catching up to the U.S., through technology and material superiority. The author introduces the anecdote of 'Pao Ding Jie Niu' (庖丁解牛) from Zhuangzi. 'Pao Ding' (庖丁) refers to the person who butchers an ox, and 'Jie Niu' (解牛) refers to the act of butchering an ox.

"Pao Ding was butchering an ox for Lord Wenhui. As he moved his hands, shoulders, feet, and knees, the knife moved with a whirring sound, all in perfect rhythm, like a dance of the Big Dipper. 'Wonderful!' said Lord Wenhui. 'How is your skill so advanced?' Pao Ding replied, 'What I care about is the Way (道), which is superior to mere skill. When I first began butchering oxen, I saw nothing but the whole ox. After three years, I no longer saw the whole ox. Now, I meet it with my spirit and don't look at it with my eyes. My senses stop and my spirit moves freely. The heavenly principles guide the knife through the spaces, the hollows, and the natural lines of the joints, following the natural structure of the ox. It has never slipped, even when cutting through thickets of muscle and tendon. A good cook changes his knife once a year because he cuts. A mediocre cook changes his knife once a month because he hacks. My knife has been used for nineteen years and has butchered thousands of oxen, yet its edge is as keen as if it had just been sharpened..."

This anecdote suggests that superior skill is achieved when it is inevitably combined with the spiritual Way (道), and that technology and the Way are inseparably related. In other words, the technology competition between the U.S. and China is not merely a contest of material and practical strength, but ultimately a matter of ideology and spiritual Way (道). It prompts us to consider the importance of the norms and ideologies with which the U.S. and China will lead the 21st-century global political-economic order, which is being formed based on new technologies. ■

■ Author: Bae Young-ja_Professor of Political Science and International Relations at Konkuk University. She graduated from Seoul National University with a degree in Political Science and International Relations and earned a Ph.D. in Political Science from the University of North Carolina. Her main research areas include international political economy, the political economy of foreign investment, science and technology and international politics, the internet and international politics, and science and technology diplomacy. Her major works include 'Network and National Strategy' (2015, co-authored), 'North Korea in the World Seen Through Networks' (2015, co-authored), and 'Public Diplomacy of Middle Powers' (2013, edited).

■ Editor: Choi Soo-ee, Senior Researcher at EAI

Inquiries: 02 2277 1683 (ext. 206) I schoi@eai.or.kr

[EAI Commentary] is a commentary series designed to provide a platform for discourse where experts from various fields can offer in-depth analyses and policy recommendations on major domestic and international issues. Please cite the source when quoting. EAI is an independent research institution independent of any partisan interests. The views and opinions expressed in reports, journals, and books published by EAI are not affiliated with EAI and solely represent the views of the respective authors.