Both Cisco and Tesla, two of the worst-performing US tech stocks this week, faced tough competition from Chinese companies. During the week of April 21, Tesla lost over 12% while Cisco lost over 8.1%.
Chinese electric vehicle manufacturer BYD announced an $11,400 electric vehicle, posing a challenge to Tesla’s lowest-cost offering priced at around $33,000.
In addition, Huawei, which competes with Cisco in various communications technology, revealed that it had shifted to its own enterprise resource planning (ERP) software due to US sanctions in 2019 that cut off its access to American systems.
The move showcases the growing competition between Chinese and US tech companies in the global market as the clash of technological prowess and strategic maneuvers is nothing short of a spectacle
At the recent Shanghai auto fair, BYD’s Seagull EV stole the show with its impressive specs: a 300-mile range and 0 to 60 mph acceleration in just five seconds, all at a base price of 78,000 Yuan ($11,400).
This makes it the world’s cheapest electric vehicle, potentially becoming the Ford Model T of the 21st century, priced at half of what Nissan Leaf or Chevy Bolt offer. BYD has ambitious plans to export 300,000 vehicles this year, marking a significant six-fold increase compared to 2022.
China’s automotive sector is a global powerhouse, with the country producing a staggering 27 million cars in 2022, surpassing production numbers of the United States, Japan, India, South Korea, and Germany.
With nearly $3 trillion in revenues, it is the world’s largest manufacturing industry. China’s car manufacturers are also leading the way in Fourth Industrial Revolution technologies, with a dominant presence in electric vehicle batteries, providing a competitive advantage.
The combination of robotics, artificial intelligence (AI), and 5G technology is transforming automotive production, and China is at the forefront of this revolution.
Huawei, a major player in 5G technology, has already installed 6,000 dedicated 5G networks in Chinese factories, enabling high information capacity and quick response times for AI applications in manufacturing.
The company is also introducing an enhancement known as 5.5G, which increases information throughput by a third to meet the growing demands of AI applications.
This technological advancement is poised to revolutionise quality control, preventive maintenance, and other aspects of automotive production, giving China an edge over the rest of the world in this sphere.
The BYD Seagull: A Symbol of Change in the Automotive Industry
The automotive industry is undergoing a significant transformation, and the BYD Seagull is a prime example of this change. With the average cost of a new car in the US reaching $48,000, equivalent to the average annual disposable income, the $11,400 price tag of the BYD Seagull is a game-changer.
This affordable offering from BYD is priced slightly below the average disposable income in China and slightly above the $7,000 disposable income in Brazil, making it accessible to average families in the Global South.
One of the driving forces behind this shift is Industry 4.0 manufacturing, which has the potential to significantly reduce the cost of entry-level vehicles. This could make car ownership feasible for more families in developing regions, similar to how Henry Ford’s assembly line made the Model T affordable for the average American family in 1907.
China’s export market is also booming, with a 14% year-over-year increase in exports in March. The digital and physical infrastructure sectors are leading the way, with a 35% rise in exports to Southeast Asia.
If China successfully lowers the cost structure of manufacturing, its export market is likely to continue expanding, along with increased corporate operations overseas. For instance, BYD is actively seeking to take over Ford’s abandoned Bahia plant in Brazil, showcasing China’s growing presence in the global automotive industry.
The BYD Seagull serves as a symbol of change in the automotive industry, highlighting the potential for affordable and accessible vehicles for average families in the Global South.
With the advancements in Industry 4.0 manufacturing and China’s expanding export market, the landscape of the automotive industry is rapidly evolving, and the BYD Seagull is at the forefront of this transformation.
China’s Economic Scale and Technological Advancements Pose Risks for Developed Markets in the Auto Industry
China’s massive economies of scale and technological advancements are positioning it to potentially challenge developed markets in the auto industry. Notably, China is catching up with the United States in areas where the U.S. has traditionally held excellence, such as enterprise software.
A significant example of China’s technological progress is Huawei’s recent announcement of its homegrown ERP (Enterprise Resource Planning) system, called “MetaERP.”
Previously reliant on American software until 2019, Huawei now has a competitive system that can directly compete with established players like Oracle from the United States and SAP from Germany, potentially capturing market share from these companies.
In fact, Huawei recently held an award ceremony at its Dongguan facility to honor the MetaERP team, under the theme of “Heroes Fighting to Cross the Dadu River,” according to a company press release.
A reference to the 1935 Battle of Luding Bridge, where outnumbered Communist forces defeated the Nationalist Army during the Long March, highlights China’s determination and progress in developing cutting-edge technologies.
The implications of China’s advancements in the auto industry and enterprise software are significant. With its vast economies of scale and rapidly improving technology, China may pose a risk to the auto industry in developed markets.
As companies like Huawei continue to develop competitive homegrown technologies, the landscape of global markets and industry dynamics may undergo significant changes.
The rise of China as a technological powerhouse is reshaping the competitive landscape and posing challenges for established players in the auto and software industries.
China’s Semiconductor Industry Poised for Dominance, Drawing Analogies to China’s Civil War
Analogies to China’s civil war are emerging in the country’s business writing, particularly in relation to its semiconductor industry, which has been a key target of technology controls imposed by the United States.
According to “Observer” columnist Chen Feng, China’s semiconductor industry is expected to dominate the production of mature nodes, specifically those with a size of 14 nanometers and wider.
By outperforming the West in this segment of the market, China aims to position itself for a potential challenge in the high-end segment.
In a column written in February, Chen Feng stated, “Mid-to-low-end chips are still profitable, but China will not be satisfied with this market segment. Instead, it will rely on mid-to-low-end chips to bootstrap high-end chips.
“China’s steel industry, which crushes the world, was built in this way. Whether it was the era of the Revolutionary War [China’s civil war] or the world economy, encircling the cities from the countryside was China’s most successful experience.”
The comparison to China’s civil war suggests that China’s semiconductor industry is strategically positioning itself to gradually gain dominance in the market by starting with the production of mid-to-low-end chips and using that success as a foundation to compete in the high-end segment.
This approach mirrors China’s historical experience of encircling cities from the countryside during its civil war, as well as its economic strategy of gradually building a formidable steel industry.
China’s aspirations in the semiconductor industry and its potential to challenge established players in the West are drawing attention and analysis, with implications for the global technology landscape.
