The tech rivalry between the United States and China has long been a defining feature of the 21st century, with both nations vying for dominance in the most critical technological fields. This competition reached a significant inflection point with the imposition of U.S. sanctions on Huawei, one of China’s most prominent tech giants. The sanctions were largely justified on grounds of national security concerns, particularly regarding Huawei’s potential ties to the Chinese government and the implications this could have on global telecommunications infrastructure. What followed was a severe set of restrictions that threatened to dismantle the core of Huawei’s operations. However, what was initially perceived as a crippling blow to the company has ultimately become a fascinating story of resilience, innovation, and collaboration within China’s tech ecosystem.

Before the sanctions, Huawei had become a symbol of China’s technological prowess, particularly in the fields of telecommunications equipment and smartphones. The company had made significant strides in global markets, competing directly with established giants like Apple and Samsung in the smartphone industry, while its telecommunications infrastructure business made it one of the largest suppliers of 5G technology. But when the U.S. government restricted Huawei’s access to vital components—especially semiconductors—and effectively shut it out of Western markets, the company’s trajectory changed dramatically.

At first, Huawei’s operations were thrown into disarray. The chip shortage was the most immediate issue. With its access to vital microchips blocked, particularly from American suppliers like Qualcomm, Huawei’s smartphone business, once its crown jewel, saw its production and sales plummet. Compounding this were restrictions on Huawei’s operating system, leaving its smartphones unable to use Google’s Android platform, which was critical to the company’s appeal in global markets. In addition, its telecommunications equipment business, which had been expanding rapidly, also faced disruptions due to its dependence on Western technologies and components.

In the face of these challenges, Huawei’s leadership went into damage control mode. For a time, the company’s financial reports painted a grim picture of declining revenue and shrinking market share. In 2019, Huawei's revenue was RMB 858.8 billion, but it only slightly increased to RMB 891.4 billion in 2020, thanks to legacy projects and forward-looking investments made before the sanctions hit. However, by 2021, revenue had dropped dramatically to RMB 636.8 billion, and the outlook for the company appeared bleak. The years following these blows to Huawei’s core business were marked by uncertainty, with the company even stating that its primary goal at that time was simply "survival."

Yet, in the face of adversity, Huawei began to shift its focus and explore new avenues of growth. By 2023, the company’s revenue had increased again to RMB 704.2 billion, and forecasts for 2024 suggested a potential recovery that could exceed RMB 800 billion. This recovery is nothing short of remarkable, given the magnitude of the challenges Huawei faced. The question arises: How did the company manage such a swift rebound?

The answer lies not just in Huawei’s internal adjustments, but also in the collaborative efforts of China’s broader tech ecosystem. In the wake of the sanctions, a number of Chinese tech companies, both large and small, came to Huawei’s aid. The first key area where this collaboration made an impact was in semiconductor development. Unable to rely on U.S.-made chips, Huawei turned to domestic Chinese manufacturers to create alternatives. This shift in focus led to significant progress in China’s chip industry, with companies like SMIC (Semiconductor Manufacturing International Corporation) and others developing and supplying chips tailored to Huawei’s specific needs. This development was part of a larger push by China to reduce its reliance on foreign technology in key industries.

Simultaneously, Huawei pivoted to software, with a specific emphasis on building its own operating system, HarmonyOS, to replace Android. The company also partnered with a range of Chinese software firms to create a fully integrated ecosystem that would allow Huawei devices to function independently of Western software. This move towards greater technological autonomy was crucial not just for Huawei’s survival but also for setting the stage for long-term innovation in China’s tech sector.

While Huawei’s journey of resilience is noteworthy, the rise of DeepSeek, a Chinese-developed AI model, highlights another area of China’s growing technological capabilities. DeepSeek represents a powerful shift in the balance of technological power, particularly in the field of artificial intelligence. Developed under an open-source model, DeepSeek’s rapid rise has been supported by a range of Chinese tech giants, including Huawei, Tencent, Alibaba, and Baidu. These companies, recognizing the potential of DeepSeek, have integrated the model into their cloud platforms, offering a range of AI-powered services for businesses and developers.

Tencent Cloud, for example, has embraced DeepSeek by offering a "Developer Package," which makes it easier for developers to integrate the AI model into their applications. Alibaba Cloud has also rolled out its own DeepSeek-based platform, PAI, which allows businesses without a coding background to build AI-driven data analytics tools. This democratization of AI technology is a significant leap forward in China’s push to dominate the global AI market. What makes DeepSeek even more remarkable is its efficiency: According to analysts, the model is able to train AI systems at just 10% of the cost of comparable models from the U.S., thanks to its algorithmic optimizations. This cost advantage could give Chinese companies a crucial edge in the rapidly evolving AI space.

The open-source nature of DeepSeek is particularly important because it reflects China’s growing emphasis on collaboration within its tech sector. In the past, Chinese tech companies were often seen as copying or imitating Western innovations. However, the success of DeepSeek and the collaborative ecosystem surrounding it marks a new chapter in the development of Chinese technology. Instead of simply trying to catch up, Chinese firms are now driving innovation and contributing to global technological advancement.

Mark Anderson, the founder of A16z, one of Silicon Valley’s most influential venture capital firms, has praised DeepSeek as a "gift to the world," acknowledging its potential to reshape the competitive dynamics between the U.S. and China in AI. The founder of ScaleAI, a leading AI company, echoed similar sentiments, remarking that DeepSeek could significantly alter the future of AI research and development. For many, this shift signals the beginning of a new phase in the tech rivalry between the U.S. and China—one in which China is no longer merely a challenger but a formidable contender in the global AI race.

China’s massive domestic market of over 1.4 billion people further amplifies its ability to nurture companies like Huawei and DeepSeek. With such a large population and an increasing focus on innovation, China has the potential to generate colossal firms capable of leading global industries. DeepSeek’s emergence exemplifies this possibility, showcasing China’s ability to not only catch up with the U.S. but to lead in key areas of technology.

In conclusion, the ongoing tech rivalry between the U.S. and China is not merely about economic competition but also about the broader question of technological sovereignty and global influence. Huawei’s resilience in the face of severe sanctions, along with the rise of DeepSeek as a symbol of China’s growing capabilities in AI, underscores the shifting dynamics in the global tech landscape. With increasing collaboration between Chinese companies and a concerted focus on self-reliance, China is positioning itself as a leader in crucial technological domains. The question now is not whether China can catch up to the U.S., but how soon it will overtake it in key sectors of the global technology market.