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Global Times

New US rules against Huawei draw backlash

Global Times

By GT staff reporters Source: Global Times Published: 2020/8/18 20:22:17

The US government's latest crackdown on chip supplies for Huawei Technologies Co sparked widespread backlash from Chinese officials and industry leaders on Tuesday, underscoring the force of mounting opposition against an increasingly erratic US administration whose reckless words and deeds could cause deep disruptions and losses for global industries and commerce.

In Beijing, Chinese officials harshly criticized the new US rules that essentially seek to cut off Huawei from foreign chip suppliers, and vowed to take "necessary" measures to protect Chinese interests. On the island of Taiwan, share prices of major chipmakers tanked as companies weigh up on potential impacts from the new rules. In the US, industry leaders expressed "concern" and warned of "significant disruptions" to the US semiconductor industry.

Huawei was noticeably silent as of press time on Tuesday. Industry insiders said that while the move could deal a major blow to the Chinese telecom giant, it will not be existential as the US intended. For starters, the company had time to draw up contingency plans for such a scenario; also, the US government left open the possibility of reprieve for certain US suppliers, as no detailed action plan was given, experts noted.

Still, Chinese experts said that Huawei might have to make drastic decisions, including cutting its burgeoning handset business. Also, powerful countermeasures from China are warranted to exert pressure on the US administration to send a clear signal that its intensifying crackdowns on Chinese tech firms from Huawei to TikTok and WeChat won't go unchecked.

Widespread backlash

The US Department of Commerce on Monday issued new rule that would prevent Huawei from acquiring chips developed or produced with US technology and software, in a move that analysts say essentially cuts off supplies of key components for smartphones to Huawei. The new rule was an extension of an earlier ban imposed in May to bar companies from using US technology and software to make chips designed by Huawei.

At a routine press conference on Tuesday in Beijing, a spokesperson for the Chinese Foreign Ministry harshly criticized the US' latest move with a lengthy scathing statement that calls the US move a "naked act of hegemony" and accused the US of being the "real empire of hacking."

"We urge the US to immediately correct their wrongdoing, stop slandering and smearing China and halt cracking down on Chinese companies," said Zhao Lijian, the ministry's spokesperson. "The Chinese government will continue to take necessary measures to protect the legitimate rights and interests of Chinese companies."

At Huawei's headquarters in Shenzhen, South China's Guangdong Province, there was no palpable anxiety felt in the workplace while a large number of employees arrived at the office in the early morning of Tuesday.

Though the latest US ban on Huawei has put the company's major businesses - telecom equipment and smartphones - in a highly uncertain situation as it may cut off whole supply of American-made chipsets; the Chinese company has been operating normally and steadily moving forward in spite of tremendous pressure.

In stark contrast to the calm atmosphere at Huawei's headquarters, chipmakers in the island of Taiwan and the semiconductor industry in the US were put on edge by the US move as their multi-billion dollar business with the Chinese firm could be at risk.

In Taiwan, major chipmaker MediaTek's shares plunged by 10 percent on Tuesday following the US ban. The company reportedly signed an agreement with Huawei as early as this month to sell about 120 million chipsets, accounting for 60 percent of Huawei's total demand.

MediaTek said on Tuesday that it is paying close attention to the changes in US export control rules and consulting external legal counsel to obtain the latest regulations in real time for legal analysis to ensure compliance with the new rules, according to a report from yicai.com.

In the US, the Semiconductor Industry Association (SIA), which represents 95 percent of the US' semiconductor industry, also voiced concern over the new US rule. "We are still reviewing the rule, but these broad restrictions on commercial chip sales will bring significant disruption to the US semiconductor industry," SIA CEO John Neuffer said in a statement.

Experts said that the new rules, if implemented, could also affect chipmakers in South Korea and other places, posing a serious threat to the global supply chain of semiconductors, including US companies like Qualcomm and Intel, as they would lose a huge client of Huawei.

In 2018, Huawei spent $70 billion on component procurement, of which $11 billion went to US companies such as Qualcomm, Intel and Micron, according to Reuters. Qualcomm is reportedly lobbying the US government to sell chips to Huawei.

That adds to pressure on the US government to refrain from taking further reckless measures after it fails to shut down the Chinese firm with a multi-year global campaign, experts said.

"The new rule also means that the US' previous tricks didn't work on Huawei and the US has basically played all its cards against it," Ma Jihua, a veteran industry analyst and close follower of Huawei, told the Global Times on Monday night.

Impact on Huawei

The US' "final card" will unlikely pose existential threat to Huawei, which had a global sales revenue of 858.8 billion yuan ($129.01 billion) in 2019, despite the potentially profound disruptions it may bring, experts noted.

"Given the current inventory, there won't be a huge problem for Huawei in near future, but this buffering period would only last for two or three years, during which hopefully, it would find a way out," Jiang Junmu, chief writer at telecom industry news website c114.com.cn, told the Global Times on Tuesday.

Huawei has spent over $23 billion on stockpiles of essential components, including chips, in anticipation of a US ban, according to media reports in March.

Some experts said that given the mounting pressure within the US, the US government might allow certain domestic suppliers to continue selling chips to Huawei, experts said.

"It's also possible that the Trump administration could offer leeway for US firms such as San Diego-based Qualcomm, while banning all its competitors to supply Huawei, for the upcoming presidential election," Ma said.

Even if that does not happen, the worst case scenario for Huawei would be shutting down some consumer businesses, while continuing on its core business of telecom equipment, particularly for 5G, some analysts noted.

Despite the US crackdown, Huawei remained the world's largest supplier of 5G equipment, with a market share of nearly 40 percent in the first quarter of 2020.

Still, the US' new rules, following a series of recent clampdown measures against a growing list of Chinese apps, including TikTok and WeChat, might call for concrete countermeasures from the Chinese government to send a clear signal, experts said.

"If the US forces Huawei into a corner, the Chinese government will retaliate without hesitation," Ma said.

While Zhao stopped short of mentioning any countermeasures at the press conference, a source close to the Chinese government told the Global Times in May that China was ready to take a series of countermeasures against the US, including targeting US firms like Qualcomm, Apple, Boeing and Cisco, if the US moves to cut off chip supplies to Huawei.



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