China has set its sights on US PC giant Intel, alleging through a third-party cybersecurity association that Intel's CPU backdoor contains security vulnerabilities potentially posing serious national security risks. This claim has been widely circulated among Chinese media outlets. In a related incident, national security agencies have implied that an unnamed company is engaging in illegal surveying and mapping activities with foreign entities.
In China, national security is a non-negotiable red line. The recent actions taken through various agencies or private industry associations serving as proxies, especially at such a sensitive time before the US elections, send a strong signal to candidates from all parties—a clear warning shot.
US companies targeted by China for national security
In 2023, China's cybersecurity agencies initiated a review of Micron, following previous incidents. After this investigation, Micron CEO Sanjay Mehrotra and senior executives adopted a conciliatory approach, frequently visiting China to lobby for favorable policies.
Amid shifting political winds, local companies like ChangXin Memory Technologies (CXMT) and Yangtze Memory Technology Corp (YMTC) have seized the opportunity to promote domestic replacement strategies. This sends a clear message that even major US-based corporations can be "sacrificed" and easily replaced in China.
The Cyber Security Association of China's recent focus on Intel signals to the US that if it continues to impose sanctions on Chinese semiconductors and levy 100% tariffs on electric vehicles, China can retaliate with a "Python Strategy," effectively blocking US companies from doing business in China. It remains to be seen whether both sides will continue down this path.
In recent years, several domestic CPU manufacturers in China such as Loongson, Zhaoxin, Feiteng, and Hygon have emerged, significantly narrowing the generation gap with Intel. In state-owned agencies and public bidding markets, domestic CPUs now capture over half the market share. Even motherboard and system manufacturers regard these local CPU manufacturers with increased respect.
Loongson achieved a decisive victory in its infringement lawsuit against MIPS licensees, highlighting the growing confidence of domestic firms under various protective policies.
Moreover, technology giants, headlined by Huawei, have demonstrated their capabilities in developing proprietary software operating systems. From smartphones to home appliances, and soon PCs, they are fully transitioning to the native HarmonyOS, completely moving away from Android and Microsoft operating systems.
Since the onset of the US-China tech war in 2018, China has shifted from a passive position to one of strength after nearly six years of self-development, dismantling the walls built by the US one after another.
Interestingly, Tesla may have already been placed on the "watch list" as the next target. National security agencies have yet to name Tesla specifically, using the terms "Overseas Company A" and "Domestic Company B" in their implications. Tesla China quickly responded, asserting that Tesla is fully compliant with regulations.
In a sense, national security is like a sword hanging over a company's head. If one's not specifically named, there might still be some room for negotiation, depending on how much "sincerity" relevant parties can demonstrate in future discussions.
China's contradictory approach
There are always underlying causes for these actions. This situation may also relate to the recent US ban on connected vehicles using Chinese software. At the same time, for Tesla's Full Self-Driving (FSD) to operate in China, data collection, mapping, and searches must comply with local regulations, necessitating collaboration with officially recognized entities like Baidu Maps.
When discussing "national security," sensitive information and data regarding ASML's equipment should also be considered. The embedded US technology in ASML's advanced machines has consistently been used as the reason to justify US export bans. Despite that, China continues to vocally protest its inability to import high-end EUV machines, which seems contradictory to its focus on national security. This raises the question: Do they not worry about the core information of their wafer fabs leaking through these machines?
Whether American, Dutch, or Japanese companies, conducting business in China has indeed become increasingly challenging, as commercial logic appears to have given way to politically charged implications.
