THE TRUMP ADMINISTRATION has moved to close the remaining loopholes through which Huawei Technologies has been able to acquire US-made semiconductors.
This provides something more akin to a knock-out punch than any blow the administration has landed on Huawei to date. Its goal is to sink Huawei’s smartphone and 5G businesses to their knees. Together they generate 90% of the telecom giant’s revenue.
With its latest measures, the US administration has, in short, rewritten its export control laws by expanding the Foreign Direct Product Rule. Now, not only can Huawei not buy US-made chips but cannot buy chips made by non-US firms that have been developed or produced with US technology, including software.
There was a milder, throat clearing version of this in May, which the China hawks in the administration say gave Huawei scope to go through third parties. In addition, a further 38 Huawei affiliates in 21 countries have been added to the Entity List, taking the total to 152 affiliates since Huawei was first included in May 2019.
The list is the US government’s economic blacklist of companies that need a special licence to do business with US firms; a temporary general licence for Huawei, intended to give its US customers time to transition from Huawei kit, expired last week.
Asian, European and even domestic Chinese chipmakers will now have to pick sides. Sharp falls today in the share prices of some of Huawei’s non-US suppliers provide a pointer to how painful that choice may prove to be.
With the latest blow to Huawei, China can be less confident of dominating 5G than it once looked set to be.
However, the new measures also raise business and compliance costs for all technology companies. They will need to monitor the full-length of their value chains from development to the final sale to end-user. For the increasingly active China-hawks in the White House, that will be the cost of collateral damage.
The outstanding question is whether Beijing will back off its recent restraint in the face of their provocations and unleash meaningful retaliation against US companies operating in China.