US tech companies are exposed to China, from Apple, whose products sell well there, to chipmakers like Nvidia, to Facebook, which derives substantial advertising income from China © Financial Times

The US-China tech war has kicked up a gear. In the space of seven days, the White House has threatened to ban Chinese video app TikTok, launched a campaign to purge Chinese telecoms carriers, cloud providers and apps, and barred US companies and citizens from transacting with WeChat, the Chinese messaging and payments app.

This is a notable escalation. At the start of the Trump administration, Chinese companies were still trying to buy US tech assets. Now even their own apps are being prohibited in the US.

Yet the US tech sector looks remarkably untroubled. Investors are partying like it’s 1999: the Nasdaq Composite minted a new record high this week, up 22 per cent in this plague year.

To all appearances, Silicon Valley is remarkably chilled about the new cold war. But the extent to which the US tech sector has become dependent on China is under-appreciated.

Beneath the rhetoric of each side’s “clean networks” and “great firewalls”, the two tech worlds are connected via a tangle of wiring. The great uncoupling would cause huge economic pain to hundreds of US tech companies.

Apple, on the brink of becoming the world’s first $2tn company after its shares doubled in five months, relies on China for its manufacturing base and, including Taiwan, almost a fifth of its $270bn annual sales. In a world where many homes in the west are cluttered with its devices, China also offers a vital source of fresh customers. Tim Cook, Apple’s chief executive, noted last week that three out of four people in the country buying Mac computers were doing so for the first time; two out of three iPad buyers are new to the product.

Others have even greater exposure. Five US chip companies — Nvidia, Texas Instruments, Qualcomm, Intel and Broadcom — each with a market value of more than $100bn — depend on China for between 25 per cent and 50 per cent of their sales.

And the US internet giants are not immune. Although Facebook’s apps are blocked in China it generates plenty of cash from the country. In its annual report, Facebook acknowledges that the Chinese government could stop it selling ads, the source of “meaningful revenue”. Analysts put that in the billions of dollars; it may even be the biggest contributor after the US.

It is not just the depth of dependence, it is also the breadth. Pick through the latest earnings season and you come across countless examples of US tech company executives highlighting their strength in China.

Take-Two Interactive Software is pleased that its basketball video game NBA 2k Online has attracted 50m registered users there. IPG Photonics is selling more lasers to factories in China, which now accounts for 49 per cent of its sales.

“5G is really kicking off in China. And so we have a great relationship with those customers,” said Kris Sennesael, chief financial officer of chipmaker Skyworks, pointing to Chinese electronic giants Oppo, Vivo and Xiaomi.

Both Skyworks and Qualcomm, the larger US chipmaker that provides technology to smartphones, cited the same statistic: more than 60 per cent of smartphones sold in China now incorporate 5G technology. Qualcomm’s shares, too, are close to an all-time high.

For all the anti-China actions, the market does not believe the US will be willing to completely pull the plug or that China will opt for damaging retaliation. This is too complacent.

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