Into the dragon’s lair
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - September 2, 2019 - 12:00am

I spent last week in the dragon’s lair. Family and friends were wondering why I was visiting Hong Kong and Shenzhen at this time of high anxiety. I guess that’s the journalist’s DNA in me. I need to satisfy the desire to see things for myself.

Well, Hong Kong was quiet last week. I didn’t see one demonstrator in the streets. I saw shoppers and families, but not the usual hordes of tourists. The airport was not as crowded… probably less than half of the usual number of people.

The Philippine Airlines check-in counter when we flew home last Friday was without the usual long lines. We were able to take an earlier flight. As it was in our flight into Hong Kong, the wide body Airbus 350 was less than half full.

Crossing the border by car was painless. It wasn’t like the chaotic experience I had when I first visited Shenzhen over 20 years ago.

Shenzhen itself looks like it is on its way to becoming another Singapore. It is green, the sides of overpasses have plants and flowers. It is a lot cleaner than it was in the early 2000s.

The modern buildings are impressive. Nothing suggests Shenzhen was once a sleepy fishing village… or Hong Kong’s sweat shop where Chinese cheap labor produced consumer products in assembly line fashion.  

Today it is an economic and technological wonder. Silicon Valley in California no longer dictates where the tech revolution will bring us. Indeed, it seems the Americans have been overtaken, specially in the very crucial and life changing 5-G communications technology… and in fintech too.

Two weeks ago, in the wake of the increasingly paralyzing protests in Hong Kong, the Chinese government unveiled plans to further boost Shenzhen as an alternative to Hong Kong.

A policy paper released in Beijing stated that by 2035, Shenzhen will “lead the world” in overall economic competitiveness. The plan is to make Shenzhen an easy place for international businesses to be based.

But because Shenzhen sits behind China’s “Great Firewall,” which restricts access to news and information, this limits their ambition to become the international business hub that Hong Kong is. I found it ironic that even while I was within the premises of the world’s most advanced telecoms technology company, I couldn’t access my e-mail and social media.

Shenzhen is home to big names in technology, the largest and most significant is Huawei, the controversial telecommunications giant.

In a sense, Huawei, like Shenzhen, started humbly. I am told it started in 1988 with a capital of just US$3,000. It earned US$108 billion last year and has its 187,000 staff scattered all over the world.

Big as it is, it is not publicly listed. Its founding chairman believes being listed will shift their laser sharp focus on research and development to satisfying shareholders with quarterly profits. It spends about 16 percent of revenues on R and D.

Some 25,000 people are working in their scenic European themed R and D campus outside Shenzhen. That includes 2,000 foreigners. Half of all R and D staff work is outside China where Huawei maintains similar R and D units.

I imagine their fast ascent as the world’s number one telcoms equipment supplier is due to this devotion to R and D. According to official data released by the World Intellectual Property Organization (WIPO), Huawei filed 5,405 patent applications in 2018, ranking first among all companies globally.

Of course, they deny allowing Chinese military intelligence access to the technology they sell to the world. Be that as it may, the rest of the world has the right to be paranoid simply because their technology is cutting edge and many years ahead of Western competitors like Ericsson and Nokia.

As their rotating chairman puts it in their latest annual report, “We are confident that the companies that choose to work with Huawei will be the most competitive in the 5G era. And countries that choose to work with Huawei will gain an advantage for the next wave of growth in the digital economy.”

That is also what our own telcos, Globe and Smart have been saying. They bought Huawei equipment in their modernization and expansion program not only because of their competitive pricing, but also because of Huawei’s advanced technology.

It is too bad no US company, not Cisco, Qualcom or Motorola, developed to be a viable competitor to Huawei. At best, they supply components which the Trump administration is now using as leverage in the trade war.

But, as the Huawei executives pointed out to me as we toured one of their factories, they have developed their own. They are buying from the world mostly to maintain relationships built through the years.

Huawei read future trends right. They have made heavy, consistent investment in 5G innovation, alongside large-scale commercial deployment. Huawei is committed to build the world’s best network connections.

Indeed, they are market leaders everywhere. In its carrier business, Huawei launched its latest 5G and SoftCOM AI solutions, focusing on making them as simple as possible to use and maintain.

They have also ongoing innovations in domains like premium home broadband and the Internet of Things (IoT), helping carriers seize new growth opportunities.

In its consumer business, Huawei further increased its share of the global smartphone market, now second to Samsung. It has also enhanced the positioning of its high-end devices.

Their P20 and P30 models use Leica lenses that take really good pictures compared to iPhone. They are quick to point out the software they designed, not just the lenses, make the color and crispness of the photos as great as they are.

My visit into the dragon’s lair was both inspiring and scary.

The dragon’s lair is a booming well-planned city with wide avenues that looks first world. It is also an inspiring research and technology campus where scientists are working on the next big things in tech.

If only the Chinese didn’t have that crazy nine-dash-line, it would have been simpler for us.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

CHINA HONG KONG SHENZHEN
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