| Fears of the Supply Chain in China |
 | | Printed circuit boards at a factory in Hangzhou, China. The global electronics supply chain, which made headlines last week, defines the most important diplomatic relationship in technology. Agence France-Presse — Getty Images | |
| Each week, technology reporters and columnists from The New York Times review the week's news, offering analysis and maybe a joke or two about the most important developments in the tech industry. |
| Hello, everyone. I'm Paul Mozur, a reporter based in Shanghai, and I have covered technology in Asia for eight years. Though lately the big story has been internet companies, hardware and the supply chain remains close to my heart. Maybe that's why the tech news bombshell a little over a week ago has been so fascinating to me. |
| An astonishing piece released by Bloomberg on Oct. 4 described a worst-nightmare supply-chain hack in which the Chinese military implanted tiny chips on circuit boards that then made their way to American corporate and government users. |
| Since then, people in the security community have questioned the claims in the piece, while the companies named, including Apple and Amazon, dispute it. Bloomberg published a follow-up that spurred even more debate. |
| Instead of litigating details, I'd like to use the Bloomberg article to do something that tech journalism probably doesn't do enough: Dig into the juicy politics of the global electronics supply chain. Jack Ma and Elon Musk may get more headlines, but it's the circuitous route taken by the innards of smartphones and servers that really defines the most important diplomatic relationship in technology. |
| For years, China and the United States have squabbled over the supply chain, which sits mostly in China but is under the charge of companies from dozens of countries. |
| After Edward J. Snowden's disclosures about how the United States used American companies to spy overseas, China accelerated a campaign to build just about every piece of advanced tech itself. That quest for self-reliance led it to introduce quotas on foreign-made products and require so-called tech transfers for market access. Those policies helped pave the way to the current trade war between the United States and China. |
| Not surprisingly, the United States has had the same spying concerns as China. Congress effectively blocked China's Huawei and ZTE from selling their equipment to major telecom carriers in the United States in 2012, and more recently made it harder for Huawei to sell phones. |
| The fact that the two sides share the same fears shows how difficult it can be to ensure security in a world in which the design, production and assembly of electronics occur across multiple countries. |
| The American block on Huawei isn't completely effective against hypothetical supply chain hacks. That's because European and Japanese telecom equipment brands also have a good chunk of their supply chains in China. On the other hand, China's control of a huge portion of the supply chaindoesn't ensure its security, because high-end design and production often happens elsewhere. |
| Neither side is happy with this. Both China and the United States will probably continue to winnow their mutual tech reliance. It won't be easy. They are working against 40 years of economic integration and a tremendously complex web of big and small companies. |
| A different approach would be to identify the key things that need to be protected. In a discussion I had the other day with Samm Sacks, a tech policy fellow at the Center for Strategic and International Studies, she put forward the idea of having a "small yard and a high fence." |
| The point is to identify key products that cannot be compromised and come up with solutions to protect them. Obviously, companies should always do their best to ensure security. But that doesn't have to lead to ripping apart the global supply chain. |
| For example, regular Americans shouldn't be too concerned about buying Huawei phones. Senators and admirals, on the other hand, should probably stick with something more closely guarded. That could involve building small, secure supply chains closer to home or special audits of phones used by people who could be high-profile targets. Even if it's a bit expensive. |
| In China, instead of expending untold state resources to build industries that don't exist, Beijing might come up with ways to audit and certify foreign-designed products that the government would procure. Then it could focus more on future technology, instead of creating competitors from scratch in industries that are already largely established, like memory chips. |
| Either way, it's worth remembering that even if a brand of electronics is from one country, what's inside it could come from six others. Country of origin also doesn't ensure security. It makes me glad I'm a journalist and not in charge of The New York Times's cyber defenses. |
| And now on to the other news of the week: |
| ■ In news that shows the game of spies will continue no matter what happens to the supply chain, a Chinese intelligence official was extradited to the United States to face espionage charges. The official, Yanjun Xu, stands accused of trying to steal trade secrets from GE Aviation, one of the world's top jet engine suppliers. |
| ■ In a leaked transcript from a meeting this summer, a Google executive said he hoped the company would be able to introduce a censored version of its search engine in China in six to nine months, or sooner. Revelations about the project, code-named Dragonfly, have spurred criticism from all corners, including within Google. |
| ■ My colleagues Kate Conger and Cade Metz examined the fallout from Dragonfly and other Google plans to work on Pentagon projects with a look at how tech workers are beginning to demand more information about what they're helping to make. |
| ■ Technologists and scientists have often proved shortsighted. But sometimes it's hard to know how technology will change the world. I'm not sure anyone foresaw how a social network that linked college students could become one of the most important geopolitical actors in the world just over a decade after it was created. From the front lines of Facebook's global problem with fake news, my colleague Alexandra Stevenson examined how fact-checkers in the Philippines feel overrun and disappointed in Facebook. |
| ■ Our lead consumer technology writer, Brian X. Chen, had practical advice on that front, offering his ideas for how to break up with Facebook and Instagram if all that social media squabbling is getting you down. Ghosting does not mean jumping to Snapchat. |
| ■ Google is shutting down its onetime challenger to Facebook after discovering a security vulnerability that exposed the data of up to 500,000 users. Google did not disclose the issue when it found out about it last spring, out of fears about regulatory scrutiny and reputational damage. Sundar Pichai, Google's chief executive, will probably have a chance to explain that decision when he meets with lawmakers in Washington before the end of the year. |
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