Impact of a Traditional War Between China and the U.S. on the Global Technology Sector

A traditional war between China and the United States—two of the world’s largest economic and technological powers—would not only be catastrophic in terms of human lives and geopolitics, but it would also severely impact the global technology industry. The effects would ripple through supply chains, innovation, internet infrastructure, semiconductors, artificial intelligence, and even cybersecurity. Here’s a detailed look at what such a scenario could mean for the tech world.

Current US-China Tech Rivalry Context

Since 2017, the US and China have engaged in an intense technology competition involving tariffs, export controls, and restrictions aimed at dominating future technologies such as semiconductors and artificial intelligence. The US has imposed sanctions and export controls to limit China’s access to advanced semiconductor manufacturing technologies, fearing their use for military purposes. China, in response, has pushed for technological self-sufficiency and innovation, heavily subsidizing its domestic semiconductor industry and making significant breakthroughs despite US sanctions.

Despite these tensions, the two economies remain deeply interdependent, especially in electronics manufacturing. For example, nearly 30% of US semiconductor manufacturing machinery exports go to China, and many US electronics imports from third countries contain significant Chinese components.

Potential Impact of a Traditional War on the Technology World

1. Disruption of Global Supply Chains
   The most immediate impact would be the breakdown of global supply chains. Both China and the U.S. play key roles in manufacturing and assembling technology products.
   • China is the world’s largest electronics manufacturing hub, responsible for producing components and final products for companies like Apple, Huawei, Dell, and more.
   • The U.S. designs and sells high-end processors, software, and cloud infrastructure. A war would likely shut down ports, restrict trade routes, and halt the production of critical parts like smartphone components, laptops, networking gear, and more.
2. Acceleration of Decoupling and Fragmentation
   The existing tech war already risks fragmenting the global technology ecosystem into competing spheres dominated by either the US or China. A traditional war would accelerate this decoupling, forcing countries and companies to choose sides or develop independent supply chains, increasing costs and reducing innovation efficiency.
3. Stifling of Innovation and Collaboration
   Scientific and technological collaboration between the two countries would effectively cease, limiting the exchange of ideas and slowing global technological progress. Restrictions on talent exchange, joint ventures, and research partnerships would intensify.
4. Increased Military Use of Technology
   The blurring of civil and military technology sectors in China, already a concern for the US, would likely deepen. Both countries would prioritize military applications of advanced technologies such as AI, semiconductors, and quantum computing, potentially diverting resources away from civilian innovation.
5. Global Economic Consequences
   The technology sector is a major driver of the global economy. Disruptions caused by war would ripple through other industries reliant on electronics and technology, leading to economic instability and slower growth worldwide.
6. Long-Term Strategic Shifts
   Both nations would likely increase investments in indigenous technology development to reduce reliance on the other, spurring a new era of technological nationalism. China’s emphasis on self-reliance and the US’s CHIPS Act to boost domestic semiconductor production are examples of this trend already underway.

Conclusion

A traditional war between China and the United States would have devastating consequences for the global technology industry. Beyond the human toll, it would fracture the internet, halt innovation, destroy supply chains, and force a new technological Cold War. While the hope is that diplomacy and cooperation prevail, it is crucial for global stakeholders to prepare for such high-risk scenarios to mitigate long-term damage.

Citations:

1. https://www.coface.com/news-economy-and-insights/tech-wars-us-china-rivalry-for-electronics-out-to-2035
2. https://www.worldscientific.com/doi/10.1142/S237774001950012X
3. https://www.csis.org/analysis/analyzing-impact-us-china-trade-war-chinas-energy-transition
4. https://www.realinstitutoelcano.org/en/analyses/the-us-china-technology-war-and-its-effects-on-europe/
5. https://cscr.pk/explore/themes/defense-security/the-escalating-us-china-tech-war/
6. https://www.lawfaremedia.org/article/why-the-united-states-is-losing-the-tech-war-with-china
7. https://www.bbc.com/news/articles/c4g2089vznzo