Yesterday, November 13, 2018, tech stocks rallied on the news that Kudlow said Navarro was wrong about his comments against Wall Street because Trump had been soliciting advice from Wall Street, including Wall Street banks, to get their input on the trade war with China.

QQQ stock chart showing intraday surge on news of US China trade war

Tech pulled up the entire market briefly before profit takers sold in late day trading.

The trade war between China and the US has expanded from a clash over the widening trade deficit, to a battle to protect the IP of US tech companies as China seeks to become the number one global tech superpower.

The Trump administration is trying to prevent China from overtaking the US in key technologies such as 5G communications, artificial intelligence, robotics, self-driving vehicles, and more.

Even if China agreed to reducing the trade deficit to zero, the Trump Administration would could to focus on China’s theft of tech IP as China cheats its way past the US in key technologies to become the dominant global tech leader.

In addition to theft of IP, China also uses its tech leadership to spy on the US and its allies. Last year, the US banned Hangzhou Hikvision Digital Technology Co, the world’s largest manufacturer of video surveillance products, from supplying to US government entities. Hikvision makes internet-enabled cameras that have been installed in more than 100 countries.

In early October, Bloomberg shocked the world with a report that China had embedded microchips into motherboards that were installed inside servers operated by some of the world’s largest tech companies, including Apple and Amazon.com. ­The embedded microchip can act as a trojan horse. Both Apple and Amazon have denied the allegations saying that they have checked their equipment and found no such trojan horse chip in their servers.

Microchips are used in PCs, smartphones, tablets, speakers, cars, microwave ovens, washing machines and more. China cannot overtake the US without first taking over semiconductor companies. If the US were to cut China off from acquiring its chips, China would remain in second place behind the US.

Chinese communications giant Huawei Technologies dominates the networking gear business in Asia because it successfully copied the technology of US giant ­Cisco Systems. Now, China is trying to do the same with semiconductors, starting with memory chips.

China imported $260 billion worth of semiconductors last year making it the largest market for semiconductors in the world. China has lured large chipmakers such as Samsung, Intel, and others through government subsidies, cheap labor costs, and tax incentives. Global chipmakers have become wise to China’s game and use mostly older technology in China to safeguard their IP.

After the Trump Administration blocked Chinese companies from buying chip companies in the US, China pivoted to make their own memory chips. Chinese tech firms are poaching employees from other firms. Micron has accused UMC and Fujian Jinhua of stealing its IP and trade secrets, and is suing some of its former employees who are now working for the Chinese.

Tsinghua Unigroup has poached employees from Japanese memory chip firm Elpida, which was acquired by Micron three years ago. As Micron piles on legal suits against Chinese chipmakers, in July, Fujian Jinhua countersued Micron in China and swiftly got a local court to rule against the American memory chip giant. The entire Chinese government is geared towards stealing IP from semiconductor companies so that they can become the number one technology leader on the planet.

China In The News