Who’s Winning the Tech Cold War? A China vs. U.S. Scoreboard

The U.S. has created the most valuable technology companies in the world, with the leading players in software, smartphones, e-commerce, search and social networking. Indeed, the top five are the most highly valued in any sector. China’s technology sector has surged in the past five years, with Tencent and Alibaba making their way into the top ranks of global companies. Capitalization is not only a measure of how the market values those companies, it also shows how much financial heft they have to make acquisitions, hire talent, raise capital and invest in new technologies.

The U.S. was long the biggest and most important internet market in the world. But China’s larger population allowed it to surpass the U.S. The Asian giant now has four times as many mobile users as the U.S., providing opportunities for domestic businesses in everything from e-commerce and messaging to games and digital payments.

While China has the advantage in raw user numbers, U.S. consumers have far more spending firepower, generating almost seven times the economic output per person as their Chinese counterparts. That gives U.S. tech companies a target-rich environment for generating revenue, whether for use in developing the next big product or simply booking profits.

The U.S. invented the venture capital business and used the model of private capital to create many of the world’s most powerful technology companies. It still retains an edge. But China has essentially closed the gap in terms of money. That has led to a surge in the number of $1 billion startups in China, with roughly as many so-called unicorns created there as in the U.S. They include Bytedance at $75 billion last year.

Semiconductors are the raw computing power at the heart of the technological revolution. U.S. companies have the advantage now, controlling most of the top intellectual property and dwarfing their Chinese competitors in output. Huawei’s chip unit, HiSilicon, China’s largest semiconductor company, had revenue of $7.6 billion last year, according to estimates from Sanford C. Bernstein. That is about one tenth of the revenue booked by U.S. chip giant Intel. Chinese semiconductor companies also require software from U.S.-based Cadence and Synopsys for design, and equipment from Applied Materials and Lam Research to make physical chips.

While Alexander Graham Bell invented the telephone and made the U.S. the world’s telecommunications pioneer, those days are long gone. American makers of communications equipment have lost ground in the last two decades, and the industry is dominated by a trio of overseas suppliers. Huawei is clearly the strongest, dominating the development of the fifth-generation technology that carriers around the world are beginning to deploy.

When it comes to the most sought-after AI experts, China is still playing catch-up. As of the end of 2017, the United States led the world with more than 28,000 people, compared with about 18,000 in China, according to estimates by Tsinghua University School of Public Policy and Management. However, the gap may be closing. The World Economic Forum said in a report that in 2016, China had 4.7 million recent graduates from the science, technology, engineering and mathematics (STEM) field, while the U.S. only had 568,000.

In the last two decades, Apple and other leading U.S. technology companies have followed traditional manufacturers in shifting production and assembly to China. Foxconn Technology Group, the leading iPhone maker, for example, employs about 1 million workers at peak season. U.S. workers are more productive per hour and continue to handle sensitive technologies, like aerospace products. But even accounting for the value added during manufacturing, China has far outstripped the U.S.