Chinese technology companies at CES say the US-China trade war has had a negative impact on their business, but despite lower margins, the US market remains important


The CES, the world's largest consumer electronics trade show, held every year in Las Vegas, has always been a business event for big names such as Sony, Samsung and Huawei. small suppliers based in Shenzhen, to introduce their technology, products and services – usually to an enthusiastic crowd.

It has even been called a "Chinese Electronics Show" in recent years due to the growing presence of participants from China.

But for Chinese suppliers hoping to use the event as a way to get new business opportunities, the times are tough in 2019, due to the trade war between the two countries and the escalation conflict between Washington and Beijing on leadership in various advanced technologies. and innovations such as artificial intelligence and 5G mobile networks.

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The United States and China, the world's two largest economies, have each claimed billions of dollars in tariffs, sparking markets and commentators over the long-term consequences for US-China relations.

But at the Design and Source tent, where component suppliers exhibited their products, the situation was quieter than usual. Rows of Chinese vendors occupying small stands stood sadly in front of the product displays, striving to hold the attention of passersby in the living room. hope to trap a sale.

Chinese companies that the To post All agreed that the trade war between the US and China had a negative impact on their relationship with US customers, but all said that, despite lower margins, the US market remains extremely important. .

"We are definitely affected by the tariffs. In fact, one of our major US customers is shifting their manufacturing operations out of China to Vietnam to avoid an increase in transaction costs, "said Yuki, a Dongguan-based Ruiheng Electronic salesperson. Co. Ltd., which manufactures power adapters and printed circuit boards.

"Some US customers have already abandoned us as a supplier," she said, pointing out that she expects more companies to do so if fares go up.

Multinationals, many of which are headquartered in developed Asia, have been watching Vietnam closely since September, when the United States levied tariffs on China's exports of $ 200 billion. US dollars, the largest movement recorded to date in the trade dispute.

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Before the trade war, Vietnam was an attractive supply chain for foreign investors because of its cheap labor, pro-business policies and proximity to China. The ability to avoid US tariffs is now an additional incentive.

The majority of Ruiheng's customers come from the United States, a particularly lucrative market for the company, which is both an original equipment manufacturer and an original designer manufacturer, Yuki said.

"Margins in China are extremely thin, it's hard to survive if you only sell in China," Yuki said. "But now, we are considering creating our own brand to sell products online, in order to fight the decline in sales."

However, the company will continue to supply US companies – despite tariffs – instead of focusing on other markets, as the United States is still a massive source of potential profits, she said.

Inside China Tech: Live CES 2019 in Las Vegas

The United States remains the largest consumer market in the world, spending $ 12.5 trillion in 2017, nearly three times more than China, according to the Capstone Advisory Group. This has been for years in the United States a large draw for Chinese companies, a staging in their quest for globalization.

The White House has seized Beijing's "Made in China 2025" political plan, which aims to transform the country into an advanced manufacturing power by targeting 10 emerging sectors, including information technology, robotics, and vehicles. clean energy and biotechnology. unfair intervention.

While China views the blueprint as essential to achieving its long-term goals, the White House argued that the state-led approach violates the rules of the World Trade Organization. and could create an unfair playground for foreign investors. At the same time, US President Donald Trump has accused China of indulging in unfair trade practices and stealing American intellectual property for years.

The two countries are now in the midst of a 90-day truce, under which the United States temporarily agreed to no longer raise tariffs on Chinese goods worth $ 200 billion. dollars until further negotiations take place. China has also agreed to purchase a "very substantial" amount of agricultural, energy, industrial and other US products under this agreement.

A driveway down Ruiheng Electronic was a Shenzhen-based company called Luckystar Technology Co. Ltd., which manufactures tablets, laptops and projectors for customers. Like Ruiheng, Luckystar also felt an impact on revenues from the 10% increase in tariffs levied on Chinese imports to the United States, including electronic products.

"We are looking at different solutions to this problem, especially if the trade war is intensifying," said Rock Zhang, a member of the company's export sales team.

According to Zhang, one of the solutions that some Chinese companies use as a workaround to US tariffs is to ship products to another country before sending them to the United States as a final destination, a practice known as transhipment.

At the same time, many Chinese gadget companies, already selling to the United States or monitoring the market, said higher tariffs may have to be passed on to tariffs.

The CES 2019 started this week with about 20% fewer Chinese exhibitors than the previous year, according to data provided by the organizer of the event, the Consumer Technology Association (CTA). The total area occupied by Chinese merchants was about the same as in the previous year, thanks to greater space for larger suppliers and less space for the smaller ones.

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"The US market remains one of the top priorities of Chinese private companies, all of whom hope that the trade war can be resolved properly and that both parties will agree on an agreement," said Cheng Maiyue, founding director of Chinese think tank Wuzhen Institute and senior fellow of Rocky Mountain Institute in the United States. "I would not read too much the decline in the number of Chinese visitors, some companies having chosen to reduce their marketing expenses due to a slowdown at home."

Remo Technology, based in Shenzhen, which presented an artificially intelligent camera called Obsbot Tail at CES 2019, said the US market remains a major target.

"US consumers are more willing to buy high-end technology gadgets," said Liu Bo, general manager of Remo Technology, who said the estimated price of $ 450 for his new product could be too expensive for Chinese consumers .

Liu added that although Remo has not yet been affected by the tariffs [since it has yet to ship] the company could be forced to raise its prices in the future if more tariffs are applied to Chinese imports to the United States.

"For many Chinese technology companies using high-end devices, the United States is an important market because customers tend to be less price-sensitive and adopt technology early," said Reynold Wu, director products of Rokid artificial intelligence company based in Hangzhou.

"Even though businesses may be affected by tariffs, consumers ultimately suffer," Wu said. "A trade war means that many things become more expensive, including electronics. . "

Liu Jingkang, general manager of 360-degree camera maker Insta360, said that if tariffs continued to come into effect, the company could consider increasing the prices of accessories to offset the losses resulting from the rising costs.

According to Liu of Insta360, most of the Chinese companies in the sector will be affected, so the prices of electronic products made in China will probably increase for all consumers.

For companies based in Xiaomi, Shenzhen-based 1More, which produces headphones and is called "Answer of Beats of China", the United States is its second largest market after China, about half of its domestic market.

"If the US-China trade war intensifies and tariffs [on Chinese imports] we may be considering outsourcing our production to countries like Vietnam and India, "said Patrice Chen, 1More's executive.

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However, Chen said that outsourcing the manufacturing of its products to the United States would be a last resort because China's manufacturing industry is still one of the best in the world.

Even for artificial intelligence, one of the most sensitive technology sectors in the standoff between the United States and China, Chinese players are brave.

iFlyTek, the national voice recognition champion in China, is preparing to launch a smart recorder abroad, including the United States, in the third quarter. The device, due to be launched in April on the national market, includes a touch screen displaying the results of real-time transcription, with features such as fingerprint authentication and file encryption to protect confidentiality.

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"Without a doubt, iFlyTek will be aiming for globalization," said Li Chuangang, vice president of the Hefei-based company, on the sidelines of an overview of the product presented at CES 2019 this week. "As a leading language technology provider, we are looking to appeal to overseas Chinese, major English-speaking countries and all major markets."

The message of the CES 2019 is therefore clear: as the world's largest consumer market and the world's largest economy, the United States is still too important to be ignored by Chinese companies and the trade war is an obstacle to a giant "No entry".

"The trade war between the United States and China may still be underway, but it will end one day," said Steven Liu, sales manager at Shanghai-based Lineprinting Materials, which manufactures large touch screens, blackboards and wireless chargers. "It does not make sense that the two greatest superpowers in the world face each other forever in the battle."

"Customs tariffs can be painful now and affect our margins, but in the end we can not just decide to withdraw from the US market," Liu said. "We need to continue to grow our business here so we can [will benefit] once the trade war is over. "

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