The relationship between technology and China is getting complicated

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The relationship between technology and China has had its ups and downs for decades. Between geopolitical issues, Covid lockdowns and now allegations of espionage, the relationship is probably at its lowest point. Unfortunately, this is forcing companies to make significant strategic changes to both their supply chains and business models that that makes the relationship more complicated. 

Over the past 30 years, China has proved itself a technology manufacturing powerhouse. Just about every system has some sub-component that is manufactured and/ or assembled in China. Much of that was driven by lower labor rates and China’s ability to provide high volume and stable output.

Unfortunately, the relationship between technology and China has been hot and cold for some time. The shutdowns due to Covid pushed it to the edge with companies forced to evaluate moving supply chains and manufacturing to other countries such as the Philippines, Malaysia and Vietnam. Moving supply chains is expensive, time-consuming and can introduce quality problems. In today’s world where customer experience reigns king, this creates yet another wrinkle in the fabric.

The latest allegations of espionage by both the US and UK governments are creating a situation that puts an even darker cloud over technology in China. Whether the allegations are true or not, the fallout is already starting to take hold.

In addition to moving supply chains, we are already starting to see companies ending support for technology made by Chinese-based companies. One example is systems that perform automatic license plate reading (ALPR) technology are ending support for Chinese-made camera systems in favor of those made in other countries.

Regardless of the allegations, companies must protect their ability to produce products. Customer experience depends on it. Stability and flexibility are becoming the norm which brings into question if the days of just in time (JIT) manufacturing are over. In short, JIT doesn’t go away. However, companies will need to change the way they manage JIT.

Looking further afield, in EMEA and the US, companies are starting to report their stance on environmental, social, governance (ESG) and sustainability. Part of that reporting looks at the entire supply chain, not just those of the company. Bring China into the mix and it adds a bit more challenge to the reporting.

So where does this leave things for the future relationship of technology in China? In two words, it’s complicated. For companies, it means rethinking how best to work with the currently climate. For China, it means rethinking how they work in the global marketplace. Both perspectives will need to rethink their approach for success.

For the CIO, it adds further complications to an already complicated IT spectrum. In addition to changes in their company’s supply chain, IT organizations will need to rethink purchase, deployment, support, architecture and staffing strategies. For their company’s supply chain, both direct and indirect, companies will need to rely more on data and real-time analysis to increase the velocity and accuracy of business decisions.

At a minimum, it is going to be a bumpy ride with many twists and turns. Flexibility, communication and keeping close tabs to the changing dynamics are key.

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