Thu, Jun 27, 2019 - Page 10 News List

US tech firms resume sales to Huawei

‘DE MINIMIS’:One expert said the companies had examined the law and found that sales could continue of items whose US-origin technology does not exceed 25 percent

Bloomberg

US technology companies have resumed selling certain products to Huawei Technologies Co Ltd (華為) after concluding that there are legal ways to work with the Chinese telecom giant in spite of its inclusion on a blacklist of US President Donald Trump’s administration.

Micron Technology Inc, the largest US maker of computer memory chips, on Tuesday said that it had started shipping some components to Huawei after its lawyers studied export restrictions.

Intel Corp, the largest microprocessor maker, has also begun selling to Huawei again, a person familiar with the matter said.

It was not clear how many other suppliers have reached the same conclusion.

The US Department of Commerce last month added Huawei to what is known as an “entity list,” a move designed to bar the Chinese company from buying US components and software.

The Trump administration said that Huawei helps Beijing in espionage and represents a security threat — charges the company has denied.

Officials at the department and the White House have been frustrated that companies have resumed Huawei shipments, another person familiar with the matter said.

The White House did not immediately respond to a request for comment.

The chipmakers are taking advantage of certain exceptions to the export restrictions. Even when companies have headquarters in the US, they might be able, through ownership of overseas subsidiaries and operations, to classify their technology as foreign, Cross Research analyst Steven Fox said.

For example, if less than 25 percent of the technology in a chip originates in the US, then it might not be covered by the ban, under current rules, he said.

“It took them weeks to figure this out,” Fox said. “What they did was look at the laws and the rules and applied them to their business.”

Micron has operations all over the world, some added through acquisitions, and it owns plants in Taiwan, Singapore and Japan.

Intel has factories in China and Ireland, and a major design center and production facility in Israel. The company declined to comment.

Companies like Micron and Intel can legally continue some shipments to Huawei under what is known as the de minimis rule, said Kevin Wolf, former head of the department’s export control section.

“Commodities made overseas from US-origin technology are only subject to the entity list prohibitions if the technology and commodity are sensitive items controlled for ‘national security’ reasons,” Wolf said.

“But a commodity made overseas from less sensitive US-origin technology is not subject to the entity list prohibitions,” he said.

The de minimis threshold is 25 percent, the department said.

If Huawei’s US suppliers can resume some sales, that might avoid the detrimental financial impact many have been anticipating.

Micron’s stock surged as much as 11 percent on Tuesday in extended trading.

Even though these companies have found ways to legally keep exporting some of their products to Huawei, they are prohibited from providing post-sale support like software updates, repairs or installation help.

For example, that means that while an item in a box can be shipped from Taiwan to China, the US company would still be unable to provide information on software repairs or assistance from Silicon Valley.

Wolf said that, in his experience, that can be a significant handicap.

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