- What happens if you’re late to an industrial revolution? America is about to find out
- AI superiority won’t prevent the consequences of the U.S. government’s failure to anticipate the next big economic shift
- Politics, AI, and utilities define success or failure in the new global digital economy
I’m on a Delta flight cruising at 37,000 feet over the Pacific Ocean, flying back to New York after a week spent in Shanghai.
The temperature outside the Airbus A330 is a biting -72 degrees Fahrenheit, but the real chill lies in the economic storm ahead. America is poised to enter an era of prolonged austerity and stagnation — an economic ice age — where growth stalls, opportunities freeze over and the warm glow of prosperity fades to grey.
This is what happens when you’re late to the digital industrial revolution.
Eastern promise
But let’s back up a little. I traveled to China to understand the reasons behind Huawei’s explosive global success in AI, digital industrialization and 5G.
In much of the world, Huawei is now a de facto standard for digital infrastructure. From the Democratic Republic of the Congo to the United Arab Emirates, from Marrakesh to Mumbai to Mexico, everywhere I go, I see Huawei radio masts.
Despite the United States’ best efforts to ban it, Huawei is experiencing hyperscaler-level growth. Its 2024 revenue of $120 billion is equivalent to the combined total of the other Big Five telecom companies.
How is Huawei doing it?
How is it doing this? Huawei’s AI announcement, which took place while I was in Shanghai, is a perfect case study. Eric Xu, Huawei’s rotating chairman, hosted the AI launch in person, almost exactly 10 years to the day since I last interviewed him.
Huawei’s goal is to develop “a new computing architecture to meet long-term demand for computing power sustainably,” he said while introducing Huawei's SuperPOD (data center), SuperCluster (supercomputing) and Unified Bus (network) products.
Cool bits of kit? Sure. But it’s the application of this technology that matters most.
Instead of obsessing over catching Nvidia in a head-to-head chip race (which sanctions make almost impossible), Xu is effectively saying, let’s just invent ways to glue together huge numbers of our chips, build a completely new interconnect fabric that keeps them coherent, and just brute force our way into the same performance envelope.
It’s yet another example of the company's circumvention of Western sanctions through technological innovation and strategic thinking. (See also: Huawei's development of its own 5G chips, which came as a shock to the U.S. following its ban on China using American 5G silicon).
Following Huawei’s AI announcement, Nvidia still holds the edge in per-chip compute efficiency, but Huawei’s breakthrough means China is no longer crippled without Nvidia.
Huawei’s AI announcements also challenge America’s claims to overwhelming superiority in AI — an Nvidia spokesperson told CNBC on Sept. 18, “The competition has undeniably arrived and is gaining momentum.”
AI is supposed to be the U.S.’ unassailable redoubt, a last impenetrable line of defence against the Chinese tech invasion, built on American innovation and tech bro genius. Yeah, not so much.
Speak loudly and carry a small stick
This story isn’t just about China’s success; it’s about America’s failure.
Geopolitics exemplify a self-inflicted wound for the U.S., which has played out in Huawei’s favor in several ways.
Multiple American administrations have tried to pressure Europe into replacing and banning Chinese telecom equipment. European carriers have ignored it.
At a recent event in Finland, Nokia’s new CEO, Justin Hotard, questioned why Europe still allows Huawei and ZTE to sell to it, given that China discourages the use of products from Nokia and others within its own borders.
The answer is simple: because carriers know and like Huawei technology and aren’t swayed by American claims about Chinese “high-risk vendors,” and because the U.S. no longer has the political leverage to force the issue or the goodwill to persuade the EU to do as it wishes.
America’s bizarre President and his cabinet of unqualified toadies and blowhards have finally dissolved America’s reputation as a venerated global force — a reputation hard-earned in the last century with blood, bravery and sacrifice in the Forests of Argonne and on the beaches of Normandy.
Those halcyon days are over, washed away in a tide of ChatGPT-generated tariff bullying; AIPAC-underwritten Congressional support for one of the two worst genocides of the 21st century; and serial trust-breaking exercises with many of America’s oldest allies.
It is within — and because of — this environment that an increasing number of carrier executives in Sub-Saharan Africa, Latin America and the Middle East choose Huawei equipment, not because they are cheaper or better, but because they prefer to build their networks using Chinese products rather than those from a vendor based in the U.S. (This is supported by first-hand conversations; in case you were thinking of picking an “Outraged in Ohio” style fight with me about it).
Lights out
Beyond technology and politics, there’s a third pillar supporting Huawei’s continued growth, and America’s digital industrial dilemma: utilities.
Water and electricity in the form of robust utility infrastructure are essential to the AI economy; Huawei is the world leader in digitizing the networks that support both.
Further, the Chinese government began planning the infrastructure that supports Huawei’s current AI initiatives in 2006, when Americans were still busy signing up for Facebook for the first time and using it to chat about the Hawks’ run to Super Bowl XL.
That’s given China a two-decade head start on the U.S., where the tech industry woke up to the AI opportunity a couple of years ago, and the Trump administration’s AI strategy, announced in July, basically amounted to a press release.
Even if the penny suddenly dropped inside the U.S. government and it rushed through a slate of Roosevelt-style emergency water and grid infrastructure investment, America has left it too late to avert its digital disaster.
It takes a decade to build a power station or overhaul a water treatment plant. It takes two years to build an AI factory. The timelines are out of sync. The U.S. may lead the world in developing next-generation technology, but at present, the only invention that could save it from its impending failure is a time machine.
The stages of U.S. economic grief
The success of China is evident everywhere you look in Shanghai, a city that has undergone significant change since I last visited a decade ago. It’s easy to reduce this to a series of anecdotes about robotic food deliveries and drone-powered courier services, now part of the day-to-day of living for Shanghainese, but the numbers underlying this transformation are more pertinent.
Four decades ago, 80% of China's population lived in extreme poverty. Today, that number is effectively zero, according to the World Bank, marking the most significant societal and economic improvement in human history.
But that’s not China’s end goal; it’s just a halfway point on China’s journey to an economic triumph. The next leg will be travelled over a new digital superhighway connecting all the world’s industries — one to which the U.S. lacks an on-ramp.
So, what happens to America’s economy next? In the short term, not a lot.
The U.S. is currently in the denial stage of its problems. But in two or three years, anger arrives, as the country’s financial institutions and investors finally grasp that America has a new spot a bit further down the global economic pecking order, and blame the political systems that allowed it to be relegated (but not the private capital and Big Tech broligarchy that were equally at fault). Expect a market correction and economic slowdown.
The really exciting stuff comes a couple of years afterwards, on or around 2030, as the infrastructure crisis morphs into a full-blown disaster (brownouts, burnouts, shutdowns), triggering financial Armageddon, with severe selloffs, insolvencies, and economic contraction.
The interconnectedness of financial markets and reliance on AI infrastructure guarantee that the crisis will have long-lasting and far-reaching effects.
And then? Today, the average Bon Jovi-listening, moon-landing-denying, MAGA hat-wearing American is still seven times richer than the average Chinese national, and America accounts for 25% of the world’s GDP. The half-life of that financial hegemony is long, but not indefinite. Clearly, we are living through an accelerated period of human history where anything is possible, including the East overtaking the West in terms of economic dominance. As America wakes up to that possibility, its most likely response is not acceptance, but war – a global militarized land grab for the natural resources to feed its wealth appetite under the guise of delivering freedom.
Happy days.
Steve Saunders is a British-born communications analyst, investor and digital media entrepreneur with a career spanning decades.
Opinion pieces from industry experts, analysts or our editorial staff do not represent the opinions of Fierce Network.