Don't let that 90-day reprieve fool you
, the Trump Administration still doesn't trust Huawei. According to AFB, Acting Secretary of Defense Patrick Shanahan says that Huawei cannot be trusted because of how close it is to the communist Chinese government. Shanahan commented about the pressure it has put on allies not to allow Huawei networking equipment to be used on 5G networks being built. "When I look at that situation, it's too much risk...You can't trust those networks are going to be protected," the Acting Defense Secretary said. The risk he mentions has to do with the possibility that Huawei's gear contains a back door sending information to the Chinese government; according to the laws of the country, the government can ask Huawei to spy at its behest at any time.
Meanwhile, Bloomberg reports
that China is fighting back. The country announced yesterday that it has created a blacklist of foreign companies and individuals that won't supply or deal with China, especially Huawei. The second largest smartphone manufacturer in the world and the global leader in networking equipment was placed on the Commerce Department's Entity List last month. That means that the company cannot source parts from the U.S. without a government license. That led a number of important members of the company's U.S. supply chain (on which it spent $11 billion last year) to cut ties with the manufacturer. Important suppliers like Google, Qualcomm and Intel will stop selling to Huawei (some will honor the 90-day reprieve) and even foreign firms with slight ties to the U.S. like chip designer ARM Holdings will steer clear of the company.
Because the iPhone is made in China, it probably will not be on China's blacklist
Those companies and some others outside of the U.S. could be on China's blacklist. And in a twist, a spokesman for China's Ministry of Commerce says that the list will include firms and individuals that "pose a threat or potential threat to (China's) national security." Gao Feng says that the Ministry will take the necessary measures against those on the list. Feng adds that these measures, along with the names on the list, will be publicly announced soon.
Apple most likely won't be blacklisted by China
Don't expect to see Apple on China's blacklist. The country is an important market to Apple and hurting iPhone sales there would seem like the perfect move for revenge-minded Chinese officials. And Apple would no doubt recapture second place in the global smartphone market jumping over a crippled Huawei. However, there are a couple of things to remember. One, Apple doesn't do business with Huawei. And two, the majority of iPhones are manufactured in China by Chinese companies using Chinese employees. A serious cutback in iPhone production would have a major effect on China's economy.
"Surely companies that have announced cutting supplies to Huawei, such as Panasonic and Toshiba, would be under threat. It could be very damaging to multinational companies.’"-Michelle Lam, Greater China economist, Societe Generale SA
News about the blacklist comes as the U.S.-China trade war continues on with no end in sight. Both countries are taxing products imported from the other. While smartphones are not yet a casualty of the war, the next tier of Chinese products that the U.S. plans to tax is expected to include handsets. Since Apple has the iPhone assembled in China, it is considered an import from the country. Unfortunately, U.S. companies and consumers are being hurt by the tariffs since those firms affected by the extra tax can either eat the cost of the tariff or pass it on to consumers. For example, iPhone cases and the leather case
for the iPad are being hit by the 25% tariff. However, Apple is eating the extra cost allowing the retail price of these accessories to remain the same.