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Cisco boss rejects fears of ‘technology cold war’

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Chuck Robbins, the chief executive of Cisco, has dismissed fears of a breakdown in the technology sector’s global supply chains, despite pressure from the Trump administration on US companies to cut ties with China. 

Speaking to the Financial Times, the telecoms equipment company boss said that the technology of the future would be built by American, European and Chinese providers — rejecting the idea of a “decoupling” or separation between the western and Chinese digital economies. He was also optimistic about the prospects for an agreement between Washington and Beijing to ease trade tensions. 

“I actually think that both of our governments understand the economic value of getting something done, and I think they also understand the future economic value of not Balkanising digital infrastructure,” Mr Robbins said. “We will figure it out. Everybody’s going to figure it out.”

His remarks came as deputy-level Chinese negotiators were preparing to meet with their US counterparts in Washington starting on Thursday to lay the groundwork for crucial high-level talks in early October. 

Mr Robbins said he supported the idea of an interim deal in which China would increase its purchases of farm goods in exchange for the freezing of US tariffs, or possibly the rollback of some, even if a comprehensive agreement remained elusive. “In any negotiation or disagreement, making small progress can sometimes lead to bigger progress,” he said. 

The executive made the remarks in a joint interview with Nobuyuki Hirano, the chief executive of MUFG, the Japanese bank, at the US Chamber of Commerce as they presided over a gathering of US and Japanese executives. Both were optimistic about the prospects for an easing of trade tensions between the US and Japan, with an agreement possibly ready to be announced next week at the UN General Assembly. The proposed pact would allow more US farm goods to be exported to Japan, in exchange for a reduction of some industrial tariffs on the US side.

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It would also include a separate agreement on the digital economy, but would fall short of a comprehensive deal covering other sectors, which the US has said would be accomplished in a second stage. 

With US and Japanese officials still haggling over the final details, Mr Hirano warned that the US would have to provide reassurances that Japanese cars and car parts would not be hit by new tariffs on national security grounds later this year. “Whether it’s a part of the initial agreement or some other type of assurance, through a joint statement or whatever — we would like to have some sort of reassurance,” he said.

Mr Hirano added that Tokyo would rebuff any US efforts to impose quotas or other restrictions on its automotive exports. 

Mr Robbins’ confidence that the US and China can avoid a confrontation on technology comes despite the Trump administration’s growing suspicion of US companies doing business with Chinese partners. Washington has banned US companies from selling their products to Huawei, a Chinese telecoms equipment maker, expanded export controls for US companies selling to China and heightened scrutiny of Chinese investment into the US.

Last month, President Donald Trump stepped up his rhetoric, tweeting: “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”

Members of the administration later clarified there was no formal executive order to cut Chinese supply chains. Nevertheless, technology executives say they have intensified their planning for what might happen if there was.

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This has led experts to warn of an incipient “technology cold war” between the two countries, which could lead to the world being split between two completely different digital communication systems.

Mr Robbins’ comments reflect an acknowledgment that technology supply chains are already so integrated it is difficult to break them apart.

Earlier this year, Cisco announced it was cutting back how much manufacturing it does in China in response to escalating tariffs. But since then, its head of supply chain has said the country would remain an important manufacturing base for years to come.

“Our supply chain spans 13 different countries,” Mr Robbins told the FT. “Our [supply chain] teams are constantly adapting that based on economics, based on risk, based on components, based on trade laws. It’s an incredibly complicated thing, and our teams are constantly assessing every element to that around the world.”

He also had a warning for countries such as the UK, which is planning to allow Huawei to build parts of its superfast 5G broadband infrastructure, despite claims from Washington that the company’s equipment could be used by Beijing for spying.

The UK government has said it was planning to inspect Huawei’s products before allowing them to be installed in British networks, but Mr Robbins, whose company competes with Huawei in selling some 5G equipment, said this would be almost impossible to achieve.

“This technology that we all build has millions and millions of lines of code, so it’s incredibly complicated,” he said. 

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“It would be in my view impossible for anyone to believe that you can inspect code and then have a level of comfort. There’s new releases coming out monthly, customers are running in some cases 10, 20, 30 different releases. So understanding all those dynamics is virtually impossible.”

He added: “I’m not suggesting that the UK can’t have experts who can do it. I just think it’s a tall order.”

Via Financial Times

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