U.S. stalls on issuing special licenses allowing companies to supply Huawei

U.S. stalls on issuing special licenses allowing companies to supply Huawei
On May 16th, Huawei was placed on the U.S. Commerce Department's Entity List. This means that U.S. companies that sell parts and software to the Chinese manufacturer cannot do so without receiving a license from the U.S. government. Immediately, companies like Google, Qualcomm, Intel, and Micron said that they were cutting ties with Huawei. And even firms not located in the states, like the U.K.'s ARM Holdings, dropped Huawei as a customer because it uses U.S. technology.

Immediately following the announcement that Huawei was essentially cut off from its U.S. supply chain, some of the U.S. firms made noise; after all, in 2018 Huawei spent $11 billion on U.S. supplies and this revenue was not going to be replaced. So on May 20th, the Trump administration announced that it would issue three-month temporary licenses that would allow U.S. companies to supply Huawei with the parts and software "necessary to maintain and support existing and currently fully operational networks and equipment, including software updates and patches." Also allowed would be supplies "necessary to provide service and support, including software updates or patches to existing Huawei handsets."

Now that three month period is almost over and Bloomberg reports that Commerce Secretary Wilbur Ross says that he has yet to make a decision about granting special licenses to 50 American companies. These outfits seek to resume doing business with Huawei. But the large number of applicants might have nothing to do with the delay. You might recall that on June 29th, after Chinese President Xi Jinping told his American counterpart that China would buy large amounts of American agriculture, President Trump announced a truce in the trade war between the two countries. Trump added that " U.S. companies can sell their equipment to Huawei. We're talking about equipment where there's no great national security problem with it."

The Trump administration handled a similar situation with ZTE last year much differently


But the tenuous relationship between the U.S. and China fell apart last week. Trump announced a 10% tariff on another $300 billion of imports from China (including the Apple iPhone and other consumer electronics) that goes into effect on September 1st. Now here is where the story starts to diverge. The Chinese claim that it wasn't until they heard about the new tariffs that they decided not to buy the U.S. agricultural products they promised, while the Trump administration says that they imposed the tariffs because the Chinese didn't buy what they promised to. Either way, the Trump administration is apparently miffed at China and seeks revenge by continuing to block Huawei from its U.S. supply chain. But as we already pointed out, this ban is also affecting U.S. companies, their employees and investors. The news about the delay in issuing the special licenses had an effect on the stock prices of companies like Micron Technologies. Micron's biggest customer for its memory chips last year was Huawei and with this news breaking today, Micron's shares declined 2.6% during the regular trading session.


What makes the administration's hard-nosed stance on Huawei hard to figure out is how Trump handled a similar situation last year with ZTE. Like Huawei, ZTE is a Chinese phone and networking equipment manufacturer that is considered to be a national security threat to the U.S. Last year, the  Commerce Department placed a seven-year ban on the company, preventing it from accessing parts and software from the U.S. Sound familiar? ZTE had failed to follow through on punishments placed on it by the U.S. for selling goods to Iran and North Korea in violation of sanctions placed on the two countries.

Instead of letting ZTE twist in the wind, the president sent out a tweet urging that the Commerce Department reach an agreement with the company because too many jobs were being lost in China. So a settlement was eventually reached requiring ZTE to pay the U.S. a $1 billion fine and place $400 million in escrow to guard against future violations. Under the terms of the settlement, ZTE had to make some changes in the boardroom and in its executive offices.

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11 Comments

1. Nokfan1603

Posts: 72; Member since: Mar 13, 2013

"You might recall that on June 29th, after Chinese President Xi Jinping told his American counterpart that China would buy large amounts of American agriculture." People present during the talks confirmed that such a promise had not been made. And Larry Kudlow, Director of the US National Economic Council admitted the same. The US wanted China to buy large amounts of agricultural goods as a GOODWILL GESTURE. Without having promised this and without being obligated to do so; the Chinese started procedures to buy the agricultural goods. When surprised by the tariffs increase by Trump, they would of course stop these goodwill gestures. At the same meeting at the end of June, Trump gave an interview of over one hour during which Trump suggested he will be reversing his government’s decision to ban American companies from selling products to Huawei. Six weeks have passed without Trump moving ahead with his promise. The US tries to kill Huawei, the most successfull international tech company of China, by cutting its access to Microsoft and Google products and by cutting its access to chips. The excuse for this are American national sanctions, so called long arm jurisdiction, which is of course not internationally binding. The real reason is simply geopolitics, the US tries to contain China in order to stay the World's number one. Imagine the outcry in the US, if China suddenly made its companies stop the production of iphones, in order to kill Apple.

2. Dr.Phil

Posts: 2488; Member since: Feb 14, 2011

It’s not confusing. Part of brokering a deal is extending a gesture of good will. Hence ZTE was spared from punishment as an effort to promote a future deal. It’s the equivalent of sitting in the office of a car dealer salesman and commenting on how nice his family looks in a picture on his desk before discussing the price you’re willing to pay for a car. Some say you shouldn’t treat huge multilateral trade deals like a business transaction, others say let’s do it. And that is the political climate of the US right now with 50% of the country split down the middle with half calling Trump an idiot while the other half praise him like a god. However, to say it’s “confusing” just shows how inept you are at knowing what is going on. I’d rather read about why you think it’s a bad idea than for you to say you don’t understand what’s happening.

3. mootu

Posts: 1541; Member since: Mar 16, 2017

The US - China trade war had not started at the time of the ZTE punishment. And Trump does not do good will.

5. BearHug

Posts: 29; Member since: Jan 27, 2017

At the time of ZTE punishment, there were early signs that Trump would proceed with a trade war. ZTE was a warning shot. Beijing figured they were dealing with yet another spineless President who wouldn't follow through and ignored all the signs. Furthermore, Trump does not owe anyone, not least the Chinese, any good will. China needs to do something to earn that goodwill. At the moment, they haven't, even though they sell to the US more than they buy, and commit verifiable economic espionage against US companies. Per the author, stick to the tech aspect of the news; don't misrepresent the economics. If you can't understand what's happening, don't comment on it until you do.

10. mootu

Posts: 1541; Member since: Mar 16, 2017

"At the moment, they haven't, even though they sell to the US more than they buy" China doesn't need to do anything, the US orders those goods, they are not forced on the US in any way. China not buying US goods is a US problem, offer them something that they want to buy and the deficit would reduce.

11. dimas

Posts: 3422; Member since: Jul 22, 2014

Man, you really got to get out of your "China is the victim" bubble. You think china is an angel? They've been screwing agreements with south east asian countries here and there. Always breaking promises, they keep building military posts out of other country's territories. If i have to choose sides, i'm taking the U.S. of A. At least they're keeping china from becoming the next big fat bully of martial power. And i am fucking glad US is impaling huawei a little bit to make huawei reminded to keep their foot on the ground. It's time china pay for the intellectual and technological infringement they've been doing for decades.

12. mootu

Posts: 1541; Member since: Mar 16, 2017

Spoken like a true Philipino. And where did i state China is a victim?.

6. Macready

Posts: 1830; Member since: Dec 08, 2014

Split down the middle in dr. Phil's fantasy land.

4. ShadowSnypa786

Posts: 626; Member since: Jan 06, 2017

Good If China can go back on goodwill then Trump can go back on whatever he said. China didn't want to play ball now the balls in Trumps court. Ban Huawei sales and let Samsung, Apple, Sony, LG all sell more :D

8. tangbunna

Posts: 491; Member since: Sep 29, 2016

i dont support china but i happy to use the product that are not made in usa if possible.

9. MihaiRO

Posts: 31; Member since: Jun 07, 2019

If Trump doesn't block the ascent of Huawei citing false reasons,Huawei ,this year could be the number 1 ,especially after Mate 30 Pro.Unfortunately for them, Trump disagrees, does not support the negative balance of Apple,and try at any cost to stop Huawei.Now Samsung doesn't bring innovation,maybe at every 2 or 3 years...Apple ,expensive products and old tech...that's why MR. T-rump it doesn't play a fair game!

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