On a Sunday afternoon in July, Spoon, a Korean bistro in a strip mall in Fremont, California, offers a snapshot of Silicon Valley diversity. The restaurant is a jumble of languages, packed to capacity with people of South Asian and East Asian descent digging into bowls of kimchi fried rice and spicy pork belly.
I am here to speak with a young woman who works for a Chinese technology firm with offices in the Valley, about the impact of Trump’s trade war on Chinese American and Chinese immigrant tech workers. Because she’s concerned about protecting her identity, I’ve agreed not to name her employer, and refer to her as Susan. Born in China, Susan is a naturalized American citizen who moved to the Valley as a child in the 1990s when her father came here to work in the chip industry. She considers herself both an immigrant and a Chinese American. And like many Chinese tech workers caught in the crossfire of geopolitical tensions, she is not particularly enthusiastic about talking to a reporter.
But she makes no attempt to hide her exasperation at the current state of affairs.
“I feel angry at the whole situation,” she says.
Relations between the United States and China are rockier than they have been in decades. The Trump administration has tightened visa requirements for Chinese nationals, placed sanctions against Chinese technology companies, and orchestrated an ongoing crackdown on ethnic Chinese scientists at federally funded research institutions that has the entire community feeling under threat. Asian American civil rights activists are up in arms about what they see as a new wave of discrimination targeting American citizens on the basis of their ethnicity. When FBI Director Christopher Wray said in testimony at a Senate intelligence committee hearing in February 2018 that the U.S. faces a “whole-of-society threat” from China, long-buried memories of the Chinese Exclusion Act started to resurface.
In the 18 months since, the rhetoric has only accelerated. In July 2018, Politico reported that President Trump declared to a group of business leaders in the White House that “almost every student that comes over to this country [from China] is a spy,” and in mid-July 2019, Peter Thiel, the Silicon Valley investor and entrepreneur, gave a speech asking whether “Google’s senior management” had been “infiltrated by Chinese intelligence.” Thiel’s accusation of treason was promptly tweeted by President Trump.
In Silicon Valley, the volatile state of affairs is dismaying for both native-born Chinese Americans and more recently arrived members of the Chinese immigrant community. The wide net cast by hostile trade war rhetoric catches everyone with a connection to China, whether they’ve been in the U.S. for generations or arrived in Menlo Park on an H1B visa last year.
“Cutting off ties, both academically and in the supply chains, is about the worst thing you could do to Silicon Valley.”
But it’s doubly troubling for the engineering mindset that dominates the Valley. President Trump’s singularly erratic approach to policy implementation — most recently, his announcement of sanctions against the Chinese technology giant Huawei one day, followed by his suggestion that restrictions might be relaxed as part of trade negotiations on another, and further complicated by mixed signals at multiple administrative levels — is a nightmare for individuals who just want to know what the rules are. For engineers who want to build things, the whole mess is extraordinarily frustrating.
“There are better ways to handle it,” says Susan.
She’s being polite. Other Silicon Valley veterans insist there couldn’t be a worse way to handle it. They believe Trump’s trade war is threatening to smash one of the United States’ crown jewels, an innovation hub that has benefited tremendously from Chinese technical talent and China-based manufacturing facilities.
“It’s terrible,” says Buck Gee, a retired Silicon Valley veteran with stints at Hewlett-Packard, National Semiconductor, and Cisco, who now sits on the boards of several Asian American advocacy organizations. “It is crazy. Cutting off ties, both academically and in the supply chains, is about the worst thing you could do to Silicon Valley.”
The Congressional district that includes Fremont, Milpitas, Cupertino, Sunnyvale, and the northern half of Santa Clara County is the living, breathing heart of Silicon Valley. It is also the only Asian American majority voting district in the continental U.S.
The two facts are not a coincidence. Ever since the relaxation of American immigration laws in the 1960s, the brightest minds in technology have been moving here from around the world. The proof of massive demographic change can be seen everywhere around Silicon Valley, from the movie theater complexes that specialize in films in multiple Indian languages to the long lines at Cupertino’s Haidilao Sichuan hot pot restaurant.
“You look at Google, Facebook, Intel, whatever,” says Gee. “In most companies, engineering is 40 to 50% Asian, and half that is Chinese.”
Statistics compiled by Joint Venture Silicon Valley, a think tank founded in 1993 that serves as a forum for bringing together both public and private stakeholders in the Valley, back up Gee’s off-the-cuff estimate. Immigrants make up 69% of the Valley’s “highly technical workers.” A full 38% of the Valley, which includes four different counties, encompassing nearly 2,000 square miles and 3.1 million people, is foreign-born.
That ethnic diversity has developed hand in hand with a globalized tech industry. For decades, the Valley has been a crucial facilitator in the emergence of global supply chains that weave together venture capital and U.S.-based design and management talent with programmers in India, chip makers in Taiwan, and massive assembly lines in China. One can easily criticize the societal consequences of the tech industry’s concentration of wealth and power, but it’s hard to contest that in terms of relentless technological innovation and creativity, Silicon Valley is the undisputed global champion.
Now Gee and other Valley watchers with ties to the Chinese American community are increasingly worried that the Trump administration’s dogged alienation of both native-born Chinese Americans and immigrant Chinese engineering talent might end up not just weakening Silicon Valley, but, perversely, strengthen the Chinese technological infrastructure at the expense of the United States.
Matt Sheehan, the author of the forthcoming book The Transpacific Experiment: How China and California Collaborate and Compete for Our Future, says his research unearthed what he ended up calling “Silicon Valley’s China paradox.”
For decades, says Sheehan, “the flow of people and money and ideas between Silicon Valley and China was constantly ramping up. More and more Chinese people were showing up to work in the Valley, and more and more Chinese people who worked in the Valley were going back to China and founding startups there.”
But even as those flows accelerated, says Sheehan, Chinese and U.S. companies both encountered difficulties in penetrating each other’s domestic markets. U.S. security concerns blocking Chinese technology companies, combined with Beijing’s bureaucratic resistance to American companies, fueled a growing “tension,” according to Sheehan. For years, there was hope that eventually both sides would figure out how to solve the market access problem. Instead, says Sheehan, “we ended up with war on all fronts.”
The growing divide between the U.S. and Chinese tech industries is nowhere more visible than in the drop-off in Chinese investment. Inflows of Chinese venture capital, which started significantly ramping up after 2012, have dried up drastically in the last two years. Big names like Sinovation Ventures, an A.I. startup incubator led by the veteran Chinese American computer scientist Kai-Fu Lee, are reportedly “reevaluating” their U.S. investment strategies.
Bookable revenue looks poised to be the next casualty. While the dominant narrative is of Chinese companies manufacturing products for American tech firms like Apple, scores of Silicon Valley hardware companies also sell vast amounts of products to Chinese tech giants. Exhibit A: the optical chip maker NeoPhotonics, which makes half its annual revenue from just one company: Huawei. When the Trump administration announced its initial sanctions against American companies selling to Huawei, NeoPhotonics was forced to immediately alert investors that the action would have a “material impact” on the company’s future revenue outlook.
Though individuals of Asian descent account for a large proportion of Silicon Valley workers, they’re half as likely as whites to hold executive positions.
One stated aim of Trump’s trade war was to bring manufacturing back to the U.S., but while his policies are already having a significant impact on global supply chains, it hasn’t necessarily been to the United States’ advantage. The New York Times reported in April that a growing number of multinationals — including the camera maker GoPro, the toy maker Hasbro, and the Taiwanese computer maker Aten — were moving production out of China to new locations dotted around the globe. At the same time, China is increasing its own foreign investment spending, building manufacturing capacity in Southeast Asia and elsewhere.
The third link in this failing chain is the human factor. As Sheehan notes in his book, even before Trump started ramping up the administration’s recent anti-China rhetoric, structural factors have historically discouraged Asian American entrepreneurship in Silicon Valley. Asian American tech workers have reported being frustrated by a “bamboo ceiling” preventing them from advancing to top executive levels: Though individuals of Asian descent account for a large proportion of Silicon Valley workers, a 2015 report suggests they’re half as likely as whites to hold executive positions.
Anecdotal evidence is mounting that the trade war is now encouraging Chinese immigrants to return home. In late July, Huawei announced it was laying off 600 U.S.-based employees, including an as-yet-undetermined number at its Silicon Valley research and development hub. The result of this drumbeat of bad news, said Rui Ma, an entrepreneur and investor with deep ties in the Chinese technology community, is that “many [engineers] are considering coming back to China.”
“The ones with Chinese citizenship or visas, that is,” she adds, making a key distinction. While native-born Chinese Americans are clearly feeling targeted by the high-profile crackdowns on Chinese researchers and scientists, there doesn’t yet appear to be much enthusiasm on their part for moving from Trump’s America to Xi Jinping’s increasingly authoritarian China.
Of course, any kind of rupture with China might well be seen as a victory by supporters of current U.S. trade policy. If one assumes that the U.S. is being taken advantage of by China — whether in terms of stolen intellectual property, outright industrial espionage, or the loss of jobs that could be filled by American citizens rather than immigrants on H1B visas — then the decoupling of the Chinese and U.S. economies might be something to applaud.
Gee disagrees. In his view, making Silicon Valley uncomfortable for immigrants, and by extension, Chinese Americans, can only work against Silicon Valley’s best interests. China is already graduating vastly greater numbers of engineers than the U.S. Though historically China’s research environment hasn’t been as conducive to big creative breakthroughs as in the U.S., Gee believes that’s changing.
“Ninety percent of technology, 90% of innovation,” says Gee, “is just the little tweaks, the incremental fixes that solve the little problems that make things work a little bit faster, or make things a little bit smaller. That’s 90% of the progress. If we don’t have those Chinese engineers here working on those tweaks, we are just speeding up the rate that China is going to catch us.”
“If they want China to catch up with the U.S., this is the biggest thing they can do.”
In Fremont, Susan says she had yet to feel any direct personal impact from trade war pressures. But she says that the profound diversity of the Bay Area insulates her from racial tensions that might be growing in the U.S. at large. And she looks forward to the possibility that a change in administration in 2020 could lower the rhetorical temperature before things get even worse.
But Frank Wu, a law professor at San Francisco’s UC Hastings College of the Law and the current president of the Committee of 100, a Chinese American advocacy group, warns that the growing antagonism between the U.S. and China transcends any single administration. He believes that over the last decade, a bipartisan consensus has emerged in which both Democrats and Republicans have concluded that China is a primal threat to U.S. hegemony. The U.S. business community’s growing frustration at China’s unwillingness to adhere to international norms on intellectual property, argues Wu, has provided key support for this new consensus.
“This is not an anomaly or a blip,” says Wu. “This is a basic adjustment.”
“This isn’t just about students and scientists,” says Wu. “This isn’t limited to federal government funding of sensitive research. China has lost support in all quarters. It’s lost support from Republicans, from Democrats, from businesspeople, from human rights activists.”
Neither Wu nor Gee denies that the Chinese government is engaged in espionage or that Chinese businesses actively steal intellectual property. Any wrongdoings, says Wu, should be prosecuted. But he believes the larger threat is that the United States will fall behind China on tech innovation, and that xenophobic trade policies will only hasten that decline.
“Let’s suppose, overnight, all the Chinese and all the ethnic Indians vanish from Silicon Valley,” says Wu. “It would mean the immediate collapse of the tech capital of the world.”