If Washington acts to block
tech exports to Chinese buyers, US companies would face an uncertain future
By CHRISTOPHER SCOTT
On Wednesday, the US Commerce
Department announced that Chinese telecommunications giant Huawei will be
placed on an export control list, which could pave the way for a ban on US
sales to the company.
The
announcement was overshadowed by an executive order signed by
President Donald Trump that restricts Huawei from doing business in the United
States. But the decision to place Huawei on the so-called “Entity List,” has
the potential for significantly more far-reaching consequences.
Contrary to a conception
widely held among Trump administration officials and lawmakers, the
consequences may be more catastrophic for US technology companies than for
Huawei, experts say.
The move is different from the
Trump administration’s punitive ban on exports to Chinese telecoms firm ZTE,
which was enacted and then repealed last year, and does not immediately
prohibit the sale of US components to Huawei. Once the listing is officially
published, US companies will be required to obtain a special license to sell to
Huawei.
Unintended consequences
“Huawei has been stockpiling
some US components for the last few weeks, which suggests that there are some
[US components] it will be unable replace,” Jim Lewis, senior vice-president
and technology specialist at the Center for Strategic and International Studies,
told Asia Times.
But, he added: “I don’t think
this will be a ZTE near-death-like experience since I expect Commerce to
license some US technologies, at least for a while.”
It is also distinct from the
ZTE ban – which threatened to put the company out of business – in that experts
see Huawei as resilient even to an outright export ban.
According to Jimmy Goodrich,
vice-president of global policy at the Semiconductor Industry Association,
Washington runs huge risks with such a move.
“There’s really no segment of
the industry that’s dominated entirely by US companies … If the US acts
unilaterally in this space, then they’re really just going to end up hurting
innovation in the US and China’s still going to get the technology that they’re
concerned about,” Goodrich said at a recent panel discussion in Washington.
“We have to think about the
unintended consequences,” he added. “Going back a year ago, we all know what
happened with ZTE. Not out of coincidence, China announced several hundred
million dollar programs to accelerate the localization of a lot of the 5G
components. And so, are we going to just drive them to be better, more
independent of us because of that?” Goodrich asked.
Washington in the dark
While some semiconductor
industry insiders in the US are wary of the danger export bans pose to domestic
companies, Washington has been slow to comprehend the extent of strides already
made by China.
According to a
recent analysis from Japanese research firm Techanalye, Huawei is
already on par with Apple in terms of 4G chip design for smartphones. The
research suggested that Huawei may already or soon be capable of rivaling US
semiconductor-maker Qualcomm in mobile chip design. For the moment, Qualcomm is
the still arguably the world leader in mobile chips, but that is thanks in
large part to the 65% of its revenue that comes from China.
But the Trump administration
and lawmakers on both sides of the political aisle have not gotten the memo.
Republican Senator Marco Rubio
said he enthusiastically supports the Commerce Department’s decision to issue a
“denial of export privileges against Huawei.”
“Huawei is a state-directed
instrument of national power used by the Chinese government to destroy their
international competitors,” Rubio said.
Tom Cotton, a Republican
Senator who co-sponsored a bill earlier this year that would, if passed, place
an outright export ban on Huawei, sees the Commerce Department’s decisions as a
death sentence for Huawei.
“@Huawei 5G, RIP. Thanks for
playing,” he wrote on Twitter.
.@Huawei 5G, RIP. Thanks for playing. https://www.reuters.com/article/us-usa-china-huaweitech/chinas-huawei-70-affiliates-placed-on-u-s-trade-blacklist-idUSKCN1SL2W4?feedType=RSS&feedName=topNews …
Implications for trade war
A tepid official reaction from
Beijing – and from Huawei – is more evidence that figures in Washington such as
Rubio and Cotton who think this represents a crushing blow are wrong in their
assessment.
“The trade talks face a number
of challenges – a new licensing requirement for Huawei is a minor one,” Derek
Scissors, a China specialist at the American Enterprise Institute, told Asia
Times.
“Because the Department of
Commerce can either be lenient or strict in licensing, it does provide the US
with a bit more leverage in the talks. But only a bit, given all the other
issues involved,” he said.
Chinese foreign ministry
spokesperson Lu Kang said that “we ask our companies to follow the laws and
regulations on export control and fulfill our due international obligations. We
ask our companies to observe local laws and policies when doing business
overseas.”
But, Lu added, China urges the
US to “stop its wrong practices.”
Huawei said in a statement
that “restricting Huawei from doing business in the US will not make the US
more secure or stronger.”
“This will only serve to limit
the US to inferior yet more expensive alternatives, leaving the US lagging
behind in 5G deployment, and eventually harming the interests of US companies
and consumer,” the statement went on.
Goodrich of the Semiconductor
Industry Association, for his part, urged policymakers in Washington to rethink
their approach.
“At the end of the day, do we
want American chips over there or do we want Chinese ones?” he asked.
If the US blocks its own chip-makers
out of the Chinese market, asking that question will be a fruitless exercise.
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