STEVE INSKEEP, HOST:
The summit here between President Trump and China's President Xi may help their countries do more business, but there's a reality below the surface of that - companies in each country are having to learn to do business without the other country. We heard yesterday about a U.S. company seeking rare earth minerals independent of China. Today, we visit a Chinese company trying to do business independent of American chips. The company is Huawei, which the U.S. targeted for years. Its headquarters is south of here in the giant city of Shenzhen. When we went to that city, we saw little outward sign of the long U.S. campaign.
Now out here on the street, we can see what a high-profile company Huawei is. The founder is a legendary Chinese entrepreneur. One of his daughters is here on a billboard endorsing a brand of baijiu - Chinese alcohol. We toured Huawei's flagship store, which looks like a combination Apple store and auto dealership. They sell phones and laptops and self-driving cars. Huawei does not have its own car brand, but sells the sensors, radar and cameras for many other companies' cars. An employee rode along with us on a test drive.
UNIDENTIFIED PERSON #1: And to activate the automatic driving, I just pressing this button.
INSKEEP: OK.
The car drives smoothly and accelerates only a little over the speed limit.
Oh, so it will go 20% over the speed limit, but not more than that. The employee - who the company asked us not to name because she's not an authorized spokesperson - offered to have my car seat give me a massage.
I can get a massage from this car?
UNIDENTIFIED PERSON #1: Yeah, yeah, yeah. (Speaking Mandarin).
INSKEEP: She gave an instruction, the chair activated, and it felt like a knuckle in my back. As the knuckle moved, she explained why she was not giving the car instructions in English.
UNIDENTIFIED PERSON #1: Currently, the AI assistants only understand Chinese.
INSKEEP: Oh, OK. Because you're focused on the Chinese market.
That's one market the United States can never close to Huawei. Inside the store, an employee showed us other cars with sensors on the doors.
UNIDENTIFIED PERSON #2: I'm going to show you some features - like, usually, you're going to open the door by your hands. But for this one - ever saw "Star Wars" before?
INSKEEP: Yeah.
He says, you can use the force.
You reached out your hand without touching the door.
UNIDENTIFIED PERSON #2: Yes.
INSKEEP: And just kind of waved, and it opened.
When I last visited Huawei seven years ago, the company was reaching out to dominate the telecommunications world. Its buildings were so ornate, they brought palaces to mind. Some were literally designed to look like old European squares and chateaus. Today, the buildings are still breathtaking, but U.S. pressure altered what goes on inside, as we heard from an independent analyst, Dan Wang, at Stanford University's Hoover Institution.
DAN WANG: Huawei is China's most important technology company, bar none.
INSKEEP: From the 1980s onward, it grew into an internet company that dominated Wi-Fi and sold smartphones. The first Trump administration accused Huawei of being a front for the Chinese army. Investigations revealed no proof, but the U.S. pushed Huawei out of America and lobbied other countries to reject it too. The U.S. denied all Chinese companies high-end computer chips.
WANG: At its worst, Huawei's revenues collapsed by, I think, something like 30%, and Huawei had a significant problem acquiring the chips for its smartphones using Google's Android software system in its smartphones, as well as running into supply chain issues of all sorts because at the end of the day, United States is still a leading technologist.
INSKEEP: How did they try to recover from that?
WANG: By focusing more on the Chinese market.
INSKEEP: Remember the car that only speaks Chinese? China's auto industry is less exposed to U.S. sanctions. Huawei also had to design its own, often inferior, chips.
WANG: As well as taking advantage of the leakiness of U.S. controls because they are still able to acquire chips from abroad.
INSKEEP: Above all, Huawei invested. It's in a country where conditions encourage that. The company kept up research and development spending. It built a new campus where engineers research artificial intelligence. Huawei has not trumpeted this story. Its founder rarely does interviews anymore. But when we visited, the company put a long-time executive on the record. Alan Fan, their chief intellectual property rights officer. He recalled when the U.S. cut off chips from the Taiwanese maker TSMC.
ALAN FAN: TSMC was basically the foundry of the world. So that was a big deal. So at the time, I think many of our products cannot be shipped because of that.
INSKEEP: And we're talking about even just basic things like a phone. You need really good chips for a phone.
FAN: Phones are not basic things.
INSKEEP: OK.
FAN: Phones are small (laughter), but it's very, very complicated.
INSKEEP: Yeah.
FAN: Has thousands of parts. Some core components of phones cannot be supplied. Because they are designed by Huawei, they cannot be manufactured by TSMC, so we had a little problem.
INSKEEP: How are you making phones or other consumer products without the chips that normally would be running those products?
FAN: We can't. We couldn't.
INSKEEP: Until they developed phones that ran on inferior chips. Sometimes Huawei phones overheat, but they include flashy features like folding screens.
FAN: We still have to compete, and we try to focus on the things that we can, you know, still make a difference.
INSKEEP: More than chips or software, Alan Fan talked of ecosystems. When Huawei worked with Google, it had access to an ecosystem of companies and products and services surrounding Google. Now it's had to develop its own.
Is it important to your country that this company succeed?
FAN: I think it will be a sign. You know, if Huawei is successful, then it's a sign that the Chinese supply chain is robust and independent.
INSKEEP: Dan Wang, the analyst at Stanford, says Huawei definitely suffered, but its revenue has gradually recovered.
WANG: It is a hungrier company. It is a more Chinese company and really desperate to succeed because it has suffered some pretty serious insults at the hand of the U.S. Department of Commerce.
INSKEEP: Did the U.S. sanctions on Huawei ultimately work from the U.S. point of view?
WANG: Well, this is a tangled debate, and I think that there is a view that U.S. government sanctions on Chinese companies have worked writ large in a way because China is obviously behind on artificial intelligence. But there is a longer-term view that one can see, which is that 10 years from now, 20, 30 years from now, what we will see is that U.S. actions triggered this giant spurt of enthusiasm among Chinese companies, and the U.S. government, by denying these products to the Chinese, really forced them into creating credible alternatives to American supply.
INSKEEP: Tech companies here in China have not yet built that alternative. President Trump came here for the summit with American CEOs, including the head of an AI chipmaker. His presence is a visual reminder to President Xi of what the United States still has and that China still wants.
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