The Commerce Department announced on Friday that it would focus specifically and strategically on Huawei’s acquisition of semiconductors that are the direct product of certain US software and technologies.
The decision announced on Friday by Washington is “arbitrary and pernicious” and will have consequences for a large number of industries in the world, Huawei reacted in a statement.
According to Washington, Huawei has managed to circumvent previous sanctions by resorting to chip and component suppliers in other parts of the world, but which are manufactured with American technology, Huawei insists.
The Trump administration perceives Huawei as a threat to national security, accusing the group of colluding with the Beijing government, which it categorically denies.
These are the latest measures targeting the Chinese tech giant, one of the world’s leading mobile phone manufacturers, also a provider of infrastructure equipment for telecommunications, which the United States says has stolen trade secrets and assisted Beijing in espionage tasks.
To justify their new measures, US authorities say Huawei circumvents the previous restrictions, imposed since 2019. The Chinese group and 114 subsidiaries are on a blacklist, which requires companies to obtain a license to be able to export to the US.
However, Washington has granted a deadline for the application of these restrictions. On Friday, it was renewed for 120 days.
The new measures will inevitably have an impact on our business activities, Huawei President Guo Ping said during a conference. But, he declined to provide estimated figures.
“Now for us, survival is the key,” added Guo, using a term already mentioned by Huawei in response to US sanctions.
“But we are confident that we will soon find solutions,” stressed the Huawei president.
After being relegated by the COVID-19 health crisis, the trade war between the two powers seems to be resuming purely and harshly. It is with relations between the two even more deteriorated by Donald Trump’s accusations of Beijing, precisely because of his supposed responsibility in the pandemic.
The new restrictions announced last Friday by the United States Department of Commerce put Huawei on the ropes. The Chinese telecommunications equipment maker warned on Monday that its survival is at stake as Washington will thwart the company’s access to the international semiconductor market.
During his annual analyst conference, Guo Ping, Huawei rotating president, acknowledged that from now on “we will work hard to figure out how to survive.”
“Survival is the keyword for us,” he acknowledged. Previously, in a statement, the Chinese telecommunications giant branded the decision of the Trump administration to continue suffocating the company as “arbitrary and pernicious”.
The US Commerce Department regulation change requires foreign semiconductor manufacturers using American equipment and components to obtain a license to sell their chips to Huawei. Until now, this rule only applied to US-based companies.
“This new rule will affect the expansion, maintenance, and ongoing operations of networks worth hundreds of billions of dollars that we have implemented in more than 170 countries,” the company said.
Semiconductors are essential for much of Huawei’s products, from its stations and equipment for the development of its 5G networks to its smartphones. The company designs semiconductors for its products through a division of the Chinese company called HiSilicon.
But the actual manufacture of these components is carried out by Taiwan Semiconductor Manufacturing Co (TSMC), a Taiwanese company, which will be one of the most affected by the new US regulations.
Given that, it uses equipment from the United States to create these chips. In fact, according to Nikkei, this entity has already stopped accepting orders from Huawei.
Other suppliers of the Chinese company in Asia such as AAC Technologies, Q Technology Group, Sunwoda Electronic, and Lens Technology, fell as much as 5% or more during the Asian trading on Monday. TSMC, which gets about 14% of its revenue from Huawei, gave up to 2.5%.
The US decision is likely to harm not only Huawei and TSMC but also a group of US companies, such as equipment manufacturers Applied Materials Inc., KLA and Lam Research, analysts at Morgan Stanley.
The disruptions to Huawei production will also have collateral effects between the US customers of Micron Technology, Qorvo, or Texas Instruments.
Morgan Stanley stressed that “any escalation of trade tensions is generally negative.” They were not misguided as Beijing may respond with retaliation against US-dependent Chinese companies like Apple and Boeing.
“China is likely to retaliate, and investors should prepare for a possible escalation of the trade war,” analysts wrote Friday in a research note that was echoed.
Huawei Describes The Us Obstacles As Arbitrary And Pernicious
The Chinese telecommunications giant Huawei assured today that the new restrictions by the United States against it are arbitrary, pernicious, and threaten to collapse the industrial chain of the entire planet.
The company expressed in a statement opposing the White House measures that will prevent it from accessing chips or semiconductors in the global market.
This maneuver will affect third-country manufacturers that use North American technology in the development of products that they then sell to Huawei since Washington will require them to obtain a license from their institutions.
“This new rule will have an impact on the expansion, maintenance and continued operation of networks valued at trillions of dollars and that we deploy in more than 170 nations,” the Chinese company reported.
He emphasized that it goes beyond the alleged security concerns raised by Washington and puts US corporations in a position of advantage over their foreign counterparts.
“This will only undermine the confidence that international companies have in US technology and supply chains. In the end, their interests will be damaged, ” said Huawei, noting that they always complied with northern regulations.
The Chinese Ministry of Commerce yesterday condemned the White House decision, called for it to be reversed, and warned that it is determined to take the necessary steps to protect the rights of national firms.
These practices violate market principles and the conditions of fair competition. The United States thus ignores the basic rules of international trade and threatens the security of the global supply chain.
Sources close to the government told the press about China’s plans to proceed with countermeasures such as the blacklisting of North American companies, the imposition of restrictions, and the opening of investigations against Qualcomm, Cisco, and Apple based on national laws.
Since last year, the White House has led a crusade that implied limitations on Huawei to access key technology such as applications, Android system updates, and different Google services for its devices.
This leads to difficulties, although Huawei activated its operating system called HongMeng OS, with four million monthly active and available users in more than 170 countries.