Huawei gets a reprieve
The future of Huawei, the Chinese telecommunications company, remains uncertain following its addition to an American “entities list” due to worries about cybersecurity and as part of the ongoing trade war between the two countries.
Huawei has a global presence and is arguably the leader in 5G network technology which will be the future of communication – but being placed on the entities list hit the company hard; under the new restrictions, American companies are not allowed to trade with Huawei.
Mobile phones and communications networks require hundreds upon hundreds of parts sourced from all over the world including key components which are only made in America. Huawei will have large stockpiles, but they cannot last forever and, if the bans are still in place once they run out, the company will have to find alternative sources if it wants to stay in business. In addition, software such as Google’s ‘Android’ operating system is also not accessible to Huawei under the new restrictions which is a big problem.
However, it is not just Huawei that is feeling the pinch. There are two sides to every trade war, and it seems like the American tech companies which have lost one of their biggest customers have won some significant concessions to protect their businesses.
Wilbur Ross, US commerce secretary, confirmed this week that Washington would issue licences to companies who wish to sell to Huawei as long as the transactions did not include any threats to national security. “Within those confines we will try to make sure that we don’t just transfer revenue from the US to foreign firms. Huawei itself remains on the entity list, and the announcement does not change the scope of items requiring licences from the commerce department, nor the presumption of denial,” said Ross.
In other words, micro-processors and operating software are fine, ballistic missile guidance technology and blueprints for nuclear power plants are not – much the same situation as existed previously.
This relaxation follows a temporary truce announced following a meeting between Presidents Trump and Xi at the recent G20 summit in Osaka. It also serves to highlight the reality of a globalised economy.
Unilateral sales bans can never really be watertight on such a large scale, especially when it concerns technology. Many US-based companies produce their hardware abroad and this loophole had allowed them to sell to Huawei without breaking the rules – a situation which gave some American companies a huge advantage over others. Likewise, software updates do not really pay attention to borders, so in reality there was nothing stopping Android developers from the rest of the world continuing to produce Apps which could be used on Huawei devices. Again, this put American companies at a disadvantage which, presumably, is the opposite of what you intend when starting a trade war.
It is unclear at present how long this reprieve will last for Huawei, but it gives the company some much-needed breathing room at a time of crisis. Whether it is a sign of things to come or only a temporary respite, only time will tell.