Most lawmakers, tech experts and businesspeople agree that the United States is facing mounting technology competition from China, but what does that competition look like?
But in industries including smartphones, drones and electric vehicles, Chinese companies are gaining ground — or already are far ahead.
China owes its rise to a variety of factors: a skilled and lower-cost workforce, huge government subsidies that have pushed Western rivals out of business, and, unlike many U.S. investors, a willingness to finance expensive manufacturing sectors that sometimes yield lower profits than software ventures do.
Alarmed by the mounting competition, the Biden administration and many members of Congress have called for more government support for domestic research and manufacturing. Even some Republicans have softened their free-market convictions to embrace more government intervention to bolster strategic sectors such as semiconductors, an approach known as industrial policy.
These nine charts illustrate the massive strides Chinese companies have made in many areas and the sectors where U.S. firms still dominate.
Apple, an American company, and Samsung, a South Korean one, are the smartphone brands most Westerners know, together accounting for a bit more than one-third of smartphones sold globally. But in many parts of the world, including Asia and Africa, Chinese brands dominate, helping them secure three of the top five sales rankings globally, according to IDC Quarterly Mobile Phone Tracker.
The U.S. effort to cut off semiconductor supplies to Huawei has hurt that Chinese tech giant’s ability to make smartphones and undermined its sales in recent years, but other Chinese brands have filled that void. In part by scooping up Huawei’s market share, Xiaomi this year overtook Apple to become the second-ranked smartphone globally, with Samsung ranking first.
A number of other Chinese brands that are even less well known in the West have made big inroads in Africa and Asia with low-cost, high-quality handsets, helping Chinese smartphones account for more than half of sales among the top 15 brands globally. The Chinese company Transsion is now the leading smartphone company in Africa, with its Infinix, Tecno and Itel brands, according to IDC Quarterly Mobile Phone Tracker.
Telecom network gear
Chinese technology first came to many Westerners’ notice through the telecommunications sector, where Huawei quickly grew into the world’s biggest manufacturer of the cellphone-tower equipment that transmits cellular signals.
Huawei became particularly dominant in equipment sales for the latest 4G and 5G networks, which are expected to underpin many technologies of the future, providing mobile data connections for driverless cars, automated factories and more.
Huawei’s heavy investment in equipment development and manufacturing helped it rise even as U.S. companies were retreating from the business, discouraged by the heavy capital investment required, and by the fragmented Western market that made it hard for them to gain scale.
As a result, barely any U.S. companies sell telecom network equipment today. Cisco sells switches and routers that reside in the innermost parts of a carrier’s network, but does not compete in the market for the cell-tower equipment that allows cell sites to connect with smartphones and other mobile devices.
As Huawei grew dominant, the United States essentially banned the equipment domestically and pressured allies not to use it, alleging that China could tap into the gear to spy or disrupt networks. That campaign has helped dent Huawei’s market share in recent months, and helped Sweden’s Ericsson and South Korea’s Samsung pick up share.
The commercial drone sector is one of the starkest examples of China’s strength in the hardware business. One Chinese company, DJI, founded by tech entrepreneur Frank Wang, owns the U.S. market for the unmanned aircraft, which are used for agriculture, cinematography, public safety and aerial photography.
U.S. and other Western manufacturers barely register in the sector, with Skydio, an autonomous drone maker in California founded by three MIT graduates, holding just under 1 percent of the commercial drone market in the U.S., according to Drone Industry Insights.
Western manufacturers are expected to benefit from growing apprehension among U.S. federal agencies that Chinese-made drones could aid Chinese espionage.
A 2020 law banned the U.S. military from using Chinese-manufactured drones, while other federal agencies have restricted their use. The Pentagon has called DJI a national-security risk and has instead endorsed five “trusted” drone makers: the U.S.-headquartered companies Skydio, Altavian, Teal Drones and Vantage Robotics and the French company Parrot. In marketing materials last year, Parrot highlighted this tension, asking potential customers “Do you trust DJI drones?”
DJI has pushed back on what it calls the “incessant politically-driven allegations” and said it respects customers’ data security.
Western, Japanese and Korean automakers dominated the global market for gasoline-powered cars. But in the electric vehicle business, Chinese manufacturers are starting to pose more competition — particularly inside China, which is now the world’s largest automotive market.
California-based Tesla continues to have the largest market share globally among electric vehicles and plug-in hybrids, thanks to its strong sales in China, the United States and Europe, according to data from Canalys, which reflects the number of vehicles sold. Volkswagen Group ranks second.
SGMW, a joint venture between General Motors and two Chinese automakers, has rapidly gained market share thanks to its booming sales in China of a tiny electric car that can travel at top speeds of 62 miles an hour. The Hong Guang Mini EV hit the market last year at a starting price of $4,500 and quickly became a top seller with Chinese budget shoppers.
The Chinese brands BYD, Great Wall Motors and Nio are also popular EVs inside China, according to Credit Suisse data.
The Chinese government has spent at least $60 billion to support the fledgling electric-car industry, including research-and-development funding, tax exemptions and financing for battery-charging stations, according to the Center for Strategic and International Studies, a Washington think tank. Chinese brands so far have not made much progress outside China.
As of May this year, the Chevrolet Bolt ranked third among electric vehicles in the United States, behind the Tesla models Y and 3, according to Credit Suisse. The Ford Mustang Mach-E ranked fourth.
The success of TikTok shows China gaining ground in software, a sector the U.S. has long dominated.
TikTok’s U.S. user surge continued even after the Trump administration sought to ban the app, saying that it threatened national security by collecting “vast swaths” of user data that Trump said the Chinese Communist Party could tap for unspecified nefarious purposes.
The Biden administration reversed that ban order, in part because federal courts had temporarily blocked it from proceeding, saying that it appeared to exceed the bounds of the law. But TikTok and other Chinese apps might not be out of the woods, yet: the Biden administration said it remained concerned about the security of Chinese-owned apps and would review them.
China is not just a large market for mobile gaming. It is also a growing developer of the games, which are played on smartphones.
Consumer spending on the games is huge, reaching $22.3 billion in the U.S. alone last year, through in-app purchases, according to Sensor Tower.
The U.S. company Activision Blizzard held the top rank in the second quarter of this year, grabbing 10 percent of U.S. consumer spending on the top 25 mobile-game companies, with offerings including “Call of Duty: Mobile” and “Candy Crush Saga.” Zynga, the U.S. developer behind “Words With Friends,” also drew a large chunk of the spending.
Chinese developers include Lilith Games, which held 2 percent of the same market in the quarter through its “AFK Arena” and “Rise of Kingdoms” games, and MiHoYo, which held another 2 percent through games including “Genshin Impact.”
Chinese companies are also big investors in gaming companies based in the United States. Tencent, the tech giant headquartered in Shenzhen, China, owns 40 percent of Epic Games, the U.S. developer of the global hit “Fortnite.” It has also fully acquired Riot Games, a Los Angeles-based developer responsible for the game “League of Legends.”
The United States still dominates global sales of semiconductors, the computer chips that power most modern electronics, from airplanes and smartphones to cars and vacuum cleaners. In 2020, U.S.-headquartered companies accounted for almost half of the nearly $500 billion in global chip sales, according to IC Insights.
Yet many U.S. companies that sell chips do not actually manufacture them. They design the semiconductors — much of the value is in the innovative design — and outsource the production to big manufacturers such as Taiwan’s TSMC.
About 13 percent of semiconductor manufacturing capacity is in the United States, versus 16 percent in China, 20 percent in Taiwan, 19 percent in South Korea and 17 percent in Japan, according to a study commissioned by the Semiconductor Industry Association.
When it comes to the highest-tech logic chips with the tiniest transistors of sizes below 10 nanometers, Taiwan manufactures 92 percent and South Korea the rest.
The United States is a big manufacturer of chips at the next level down of complexity, while China so far manufactures mostly older-tech chips, giving it a modest 4 percent share of global semiconductor sales.
Despite years of investment, China has had a hard time developing and producing the most modern semiconductors, which require intricate designs and production know-how. Still, China is investing billions in its chip companies to try to catch up.
Partly out of concern about China’s rising technological prowess, the Biden administration and a bipartisan group of lawmakers are pushing to re-shore some chip manufacturing to the United States. The Senate recently approved $52 billion in federal subsidies for domestic chip manufacturing and research. The measure still must clear the House.
Lithium-ion batteries are central to the emerging green economy, powering electric vehicles and storing solar and wind energy for later use. China is way ahead in producing them, and that gap is expected to continue.
China has been bolstering its battery and electric-vehicle companies with tens of billions of dollars of state support, including research and development funding, subsidies for manufacturers and financing for battery-charging stations. It has also driven demand by subsidizing consumer purchases of electric vehicles, and by making buyers of gasoline-fueled cars wait much longer for a license plate.
Thanks to its federally funded universities and national labs, the United States has some of the best early-stage battery research in the world. It also has Tesla, an electric-car leader with big plans for domestic battery production. General Motors, too, is investing heavily in battery manufacturing.
The Obama administration offered some support for battery manufacturers and electric vehicles, and California has adopted many incentives and regulations to boost those sectors, but overall the United States has largely left it to the free market.
Global demand for solar panels is booming as countries scramble to harness more renewable energy sources. And China is by far the biggest supplier of the technology.
China’s dominance of the industry is even bigger when considering that much of the production happening in Malaysia and Vietnam is controlled by Chinese companies.
China’s regional and central governments heavily subsidized solar manufacturers with low-cost land, electricity and financing, helping sustain them even when they were losing money, according to the Information Technology & Innovation Foundation, a D.C. think tank. The surge in Chinese production drove down panel prices globally and forced many Western manufacturers out of business.
Human-rights researchers have delivered a blow to China’s solar industry lately by reporting that some factories are using forced laborers from the persecuted Uyghur minority. U.S. Customs and Border Protection this summer began blocking imports of some solar panels on these grounds, causing some panel buyers to scramble for U.S. suppliers, instead.
First Solar, headquartered in Tempe, Ariz., has benefited from this shift, selling out its production run through 2022. Congressional lawmakers are now considering tax breaks and other measures to support domestic manufacturers, and are discussing provisions to potentially block Chinese components from federally funded renewable energy projects.
Eva Dou and Pei Lin Wu contributed.