Huawei founder says US underestimates company as Washington grants 90-day relief

US stocks slid Monday. Worries about the fallout from US restrictions on Huawei Technologies stoked fears about a hit to the broader technology sector, sending stocks south.
Reuters reported that Alphabet Inc's Google suspended business with Huawei that requires the transfer of hardware, software and technical services except those publicly available via open source licensing, citing a source familiar with the matter.
Reuters reported that Alphabet Inc's Google suspended business with Huawei that requires the transfer of hardware, software and technical services except those publicly available via open source licensing, citing a source familiar with the matter.PHOTO: REUTERS

BEIJING/WASHINGTON (AFP, REUTERS) - Huawei Technologies founder Ren Zhengfei struck a defiant tone on Tuesday (May 21) against US attempts to block his company’s global ambitions, saying the United States “underestimates” the telecom giant’s strength. 

Mr Ren spoke to Chinese state media days after US President Donald Trump issued orders aimed at thwarting Huawei’s business in the US, capping months of efforts to stop the company’s bid to become the world leader in next-generation 5G technology. 

“The current practice of US politicians underestimates our strength,” Mr Ren said, according to CCTV.  “Huawei’s 5G will absolutely not be affected. In terms of 5G technologies, others won’t be able to catch up with Huawei in two or three years,” he said. 

Last week, Mr Trump declared a “national emergency” empowering him to blacklist companies seen as “an unacceptable risk to the national security of the United States” – a move analysts said was clearly aimed at Huawei.

At the same time, the US Commerce Department announced the effective ban on American companies selling or transferring US technology to Huawei. But the department on Monday issued a 90-day reprieve on the ban on the transfer of technology.

The department said it will allow Huawei to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets. The company is still prohibited from buying American parts and components to manufacture new products without licence approvals, which likely will be denied.

The new authorisation is intended to give telecommunications providers that rely on Huawei equipment time to make other arrangements, US Secretary of Commerce Wilbur Ross said in a statement.

Mr Ren, however, shrugged off the move, saying Huawei can make its own chips and “can’t be isolated” from the world.

The 90-day reprieve by the US suggests changes to Huawei's supply chain may have immediate, far-reaching and unintended consequences for its customers.

"The goal seems to be to prevent Internet, computer and cellphone systems from crashing," said Washington lawyer Kevin Wolf, a former Commerce Department official. "This is not a capitulation. This is housekeeping."

The Commerce Department said it will evaluate whether to extend the exemptions beyond 90 days.

Last Thursday, the US Commerce Department added Huawei and 68 entities to an export blacklist that makes it nearly impossible for the Chinese company to purchase goods made in the US.

 
 

The companies on the list are deemed to be engaged in activities contrary to the national security or foreign policy interests of the US.

Reuters reported last Friday that the department was considering a temporary easing, citing a government spokesman.

Monday's announcement said the authorisation was created as a temporary general licence, in effect until Aug 19.

The licence also allows disclosures of security vulnerabilities and for Huawei to engage in the development of standards for future 5G networks.

Reuters reported on Sunday that Alphabet Inc's Google suspended business with Huawei that requires the transfer of hardware, software and technical services except those publicly available via open source licensing, citing a source familiar with the matter.

Google did not immediately respond to a request for comment on the new authorisation.

Out of US$70 billion (S$96.32 billion) Huawei spent buying components in 2018, some US$11 billion went to US firms including Qualcomm, Intel Corp and Micron Technology Inc.

"I think this is a reality check," said Washington trade lawyer Douglas Jacobson. "It shows how pervasive Huawei goods and technology are around the globe, and if the US imposes restrictions, that has impacts."

Mr Jacobson said the effort to keep existing networks operating appeared aimed at telecom providers in Europe and other countries where Huawei equipment is pervasive.

The move also could assist mobile service providers in thinly populated areas of the US, such as Wyoming and eastern Oregon, that purchased network equipment from Huawei in recent years.

Mr John Neuffer, the president of the Semiconductor Industry Association, which represents US chipmakers and designers, said in a statement that the association wants the government would ease the restrictions further.

 
 

“We hope to work with the administration to broaden the scope of the licence,” he said, so that it advances US security goals but does not undermine the industry’s ability to compete globally and remain technology leaders.

A report on Monday on the potential impact of stringent export controls on technologies found that US firms could lose up to US$56.3 billion in export sales over five years.
The report, from the Information Technology & Innovation Foundation, said the missed opportunities threatened as many as 74,000 jobs.

Mr Wolf, the former Commerce official, said the temporary licence was similar to action taken by the department last July to prevent systems from crashing after the US banned China's ZTE Corp, a smaller Huawei rival, from buying American-made components.

The US trade ban on ZTE wreaked havoc at wireless carriers in Europe and South Asia, sources told Reuters at the time.

The ban on ZTE was lifted on July 13 after the company struck an agreement with the Commerce Department that included a US$1 billion fine plus US$400 million in escrow and replacement of its board of directors and senior management. ZTE, which had ceased major operations as a result of the ban, then resumed business.