Tencent CEO warns companies must keep innovating to survive amid US-China tensions

On Tuesday, Tencent’s usually low-profile founder and CEO Pony Ma made rare comments to weigh in on escalating tensions between the United States and China, calling domestic tech companies to build more self-reliance in a bid to stay competitive.

“China has come to the forefront of development. There is less and less room for taking the best from outside and improving on them. As the ZTE and Huawei cases have intensified recently, we are also constantly watching whether the trade war will turn into a tech war,” said Ma at an event in China’s Yunnan Province per a transcript Tencent provided to TechCrunch.

Ma’s concern is not unexpected. As recent US-China negotiations show, the Shenzhen-based telecommunication and smartphone giant has become deeply entangled in the trade spat. The Commerce Department last week restricted American companies from selling components and other technology to Huawei — which the Trump administration has labeled as posing a national security threat — though it has since scaled back the ban. That would eventually cut Huawei off from certain services from Google, chips made by Qualcomm and Intel, and its other American suppliers.

Despite China’s efforts to lead in global innovation, many of its tech startups and champions still rely heavily on imported technologies to deliver products and services. People have celebrated this level of interdependence as a result of trade, but increasingly they worry decoupling the US and China will hurt companies on both sides and lead to a bifurcation of the global tech economy.

“[China]’s digital economy will be a high-rise built on sand and hard to sustain if we don’t continue to work hard on basic research and key knowledge, not to mention the transformation from old to new forms of drivers or high-quality development,” Ma pointed out.

Jack Ma, founder of Tencent’s arch-foe Alibaba, remarked along the same line following a similar ban placed on the sale of American components to Huawei rival ZTE in April of last year.

“It is the compelling obligation for big companies to compete in core technology,” said Alibaba’s Ma at an industry event per a report from the South China Morning Post.

The latest technology ban from the US has now accelerated Huawei’s efforts to become more technologically independent. That includes designing its own chips and rolling out its own smartphone operating system, though observers and stakeholders, including Huawei’s founder Ren Zhengfei himself, have raised questions on their viability in the short run.

“We will give it a try. Making the operating system isn’t too difficult. What’s difficult is the ecosystem. How do you build an ecosystem? This is a big project, and it will take time,” said Ren during an interview with state media on Tuesday.

When it comes to Huawei’s homegrown chips, Ren said the company is “capable of making American-quality semiconductors, but that doesn’t mean it won’t buy them.” On the other side, chip experts interviewed by Reuters have called out Huawei for its claim, saying it would be difficult for the Chinese company to manufacture network gears without American suppliers.