This report just out in The New York Times
BEIJING — The Trump administration has
filed criminal charges against Huawei for stealing technology. It has all but
snuffed out the Chinese tech giant’s sales in the United States, calling the
firm an espionage threat. And it has tried to convince other governments to do
similarly.
But Washington had not taken a straight
shot at Huawei’s ability to do business anywhere in the world until late
Wednesday, when the Commerce Department announced restrictions on the company’s access to
American technology.
American companies including Qualcomm,
Intel and Broadcom sell Huawei microchips and other specialized parts that go
into its smartphones and telecom equipment. Google’s Android software powers
its phones. Of the $70 billion that Huawei spent on components and other
supplies last year, $11 billion went to American companies, a Huawei spokesman,
Joe Kelly, said.
If
Huawei is cut off from these suppliers, the effect could be catastrophic for
the millions of people who use Huawei smartphones — and for the mobile
networks, across a wide swath of the planet, that run on Huawei gear.
It would be “the trade equivalent of a
nuclear bomb,” said Kevin J. Wolf, a partner at the law firm Akin Gump Strauss
Hauer & Feld and a former assistant secretary of commerce under President
Barack Obama.
Much remains unclear, however, about
the scope and potential impact of the Commerce Department’s move. The
department says it is putting Huawei on its “entity list” of firms that need
special permission to buy American components and technology. How it decides to
grant such permissions, and how broad a range of products the policy covers,
will determine how badly Huawei’s business is disrupted.
Given the spiraling tensions between
China and the United States on tariffs, the move against Huawei may also be
short-lived. Talks to resolve the trade fight have stalled, and
both sides are digging in their heels. The pressure is on to find common ground
ahead of a potential meeting next month between President Trump and China’s top
leader, Xi Jinping, in Japan. Washington’s campaign against Huawei could become
a bargaining chip.
“In every other administration, the
entity listing was purely a tool of law enforcement and national security,” Mr.
Wolf said. “The thing to watch is whether this will become a tool of trade
policy and used as leverage in the negotiations.”
In a statement on Thursday, Huawei said
the Commerce Department’s move was “in no one’s interest.”
“It
will do significant economic harm to the American companies with which Huawei
does business,” the company said, and “affect tens of thousands of American
jobs.”
China’s Ministry of Foreign Affairs and
Ministry of Commerce condemned Washington’s decision in regularly scheduled
news briefings on Thursday.
“We urge the United States to stop
these wrongful practices and to create favorable conditions for normal
cooperation between the two nations’ companies,” said Gao Feng, a spokesman for
China’s Commerce Ministry.
Tensions between the Trump
administration and Huawei escalated after American officials arranged the
arrest of Meng Wanzhou, the company’s chief financial officer and a daughter of
its founder, in Canada late last year. The company and Ms. Meng face criminal
charges in the United States in connection with alleged theft of industrial
secrets and violations of sanctions against Iran. Ms. Meng remains in Canada
while officials there decide whether she will be extradited.
Washington’s action this week against
Huawei puts the company in the same position that ZTE, a much smaller Chinese
rival in telecom equipment, found itself in a few years ago.
The Commerce Department added ZTE to the entity list in 2016 after
determining that it had violated United States sanctions by selling
American-made goods to Iran. Eventually, the department relented, and ZTE agreed to a hefty fine. But a year later, the Commerce
Department said ZTE had failed to comply with the terms of the agreement, and
American technology companies were barred outrightfrom selling to the company.
Cut off from American microchips and
other parts, ZTE halted production and was near collapse until President Trump intervened
and softened the punishment to appease the Chinese leadership.
The
episode galvanized China’s government and business
community. It revealed the extent to which the country’s growing technological
prowess had been built on American know-how, and how important it was for China
to innovate on its own if its economy was to thrive.
Huawei also got a stark demonstration
of the power Washington wielded over it.
The company has since stockpiled
components “for uncertain times,” Guo Ping, a Huawei deputy chairman, told
reporters in March. The firm has also worked to build up a geographically
diverse network of suppliers, Mr. Guo said.
“Huawei has made sustained and deep
investments over the past 30 years, and I believe that has been of great help
to Huawei’s global supply,” he said.
In particular, the company has invested
for many years in producing its own microchips, a key area in which most
Chinese firms are laggards. Sravan Kundojjala, an analyst based in Hyderabad,
India, with the technology research firm Strategy Analytics, estimates that
three-quarters of the smartphones that Huawei ships today contain chips
developed in-house.
Mr. Kundojjala acknowledges that he was
skeptical when Huawei’s semiconductor unit, HiSilicon, began building its own
high-end smartphone chips.
“Initially, I thought this was not
going to work out,” he said. “It’s maybe a pet project. Maybe they just want to
play games with their suppliers.”
Instead, HiSilicon has become a
formidable asset for Huawei, with chip technology that analysts say rivals that
of market leaders such as Qualcomm.
Yet Huawei still depends on American
suppliers for enough critical components that an all-out export ban from
Washington would create a sizable headache, even if it does not lead to
near-ruin as it did for ZTE.
“When
you’ve got something as complicated as router or a cellphone, even if there’s
one part you’re not able to get, you can’t deliver, because you don’t have that
widget to make the cellphone or router function,” Mr. Wolf, the lawyer, said.
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