The administration of US President Donald Trump is pulling out the big guns in its push to slow China’s rise, with potentially devastating consequences for the rest of the world.
The White House on Wednesday initiated a two-pronged assault on China: Barring companies deemed a national security threat from selling to the US and threatening to blacklist Huawei Technologies from buying essential components.
If it follows through, the move could cripple China’s largest technology company, depress the business of US chip giants from Qualcomm to Micron Technology and potentially disrupt the rollout of critical 5G wireless networks around the world.
Illustration: Yusha
“The Trump administration action is a grave escalation with China,” Eurasia Group analysts Paul Triolo, Michael Hirson and Jeffrey Wright wrote in a note.
If fully implemented, the blacklist would “put at risk both the company itself and the networks of Huawei customers around the world, as the firm would be unable to upgrade software, and conduct routine maintenance and hardware replacement,” they wrote.
The threat is likely to elevate fears in Beijing that Trump’s broader goal is to contain China, leading to a protracted cold war between the world’s biggest economies. In addition to a trade fight that has rattled global markets for months, the US has pressured both allies and foes to avoid using Huawei for 5G networks that would form the backbone of the modern economy.
“This decision is in no one’s interest,” Huawei said in an e-mailed response. “It will do significant economic harm to the American companies with which Huawei does business, affect tens of thousands of American jobs, and disrupt the current collaboration and mutual trust that exist on the global supply chain.”
The Chinese company would try to take action to mitigate the impact of the incident and “seek remedies” to resolve the matter, it said.
The US notified the Chinese embassy in Washington about the Huawei action shortly before the announcement Wednesday, US Secretary of Commerce Wilbur Ross told Bloomberg TV on Thursday.
While Huawei was not part of US-China trade talks, the US hopes that negotiations between the two nations will mitigate the kind of behavior the US is punishing Huawei for, Ross said.
“@Huawei 5G, RIP. Thanks for playing,” US Senator Tom Cotton, a Republican, wrote on Twitter.
Shares in Asian suppliers, including Sunny Optical Technology Group and AAC Technologies Holdings, dropped as much as 5 percent on Thursday.
In Europe, STMicroelectronics fell, while Huawei competitor Nokia gained 2 percent.
Huawei has said it devotes about one-third of its budget — about US$11 billion annually — to the acquisition of US components. It counts 33 US companies among its top 92 suppliers.
“The negative impact on the global 5G market will be significant,” said Charlie Dai, a Beijing-based analyst at Forrester Research, adding that Huawei is one of the market leaders globally.
“Nokia and Cisco could address the gap to some extent, but the overall adoption will be slowed down, which eventually will be harmful to telco carriers and consumers around the world,” Dai said.
The US Department of Commerce on Wednesday said that it would soon put Huawei on an “Entity List” — meaning any US company would need a special license to sell products to the world’s largest networking gear maker.
Since US companies dominate semiconductors, that could smother Huawei’s production of everything from 5G base stations to mobile phones. It might not even be able to use Google’s Android, the most popular operating system globally for smartphones.
A similar move last year against ZTE Corp — China’s second-biggest telecom equipment company — nearly forced the company out of business.
“This could potentially lead to Huawei’s destruction,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies.
“You can’t underestimate the significance. It’s their most important company and threatening it in this way will generate a massive public response as well as from the Chinese government. The bilateral trade talks were on thin ice and this could derail them entirely,” he said.
At the heart of Trump’s concerted campaign is suspicion that Huawei aids Beijing in espionage while spearheading China’s ambitions of becoming a technology superpower.
The US Department of Justice has also accused it of willfully violating sanctions on Iran and last year engineered the arrest of the eldest daughter of Huawei’s billionaire founder.
Huawei, which has denied those allegations, on Thursday said that it was “ready and willing” to engage with the US to ensure product security.
Restricting it from doing business “will only serve to limit the US to inferior yet more expensive alternatives,” it said in a statement.
The Chinese government said it would take “all necessary measures” to defend its companies.
“We resolutely object to any country, based on their own laws, unilaterally sanctioning Chinese entities,” Chinese Ministry of Commerce spokesman Gao Feng (高峰) told a regular briefing in Beijing on Thursday. “We also object to the generalization of the national security concept and abuse of export control methods.”
The lack of alternatives is one reason that it is far from certain that the US will make good on its threat to cut off Huawei. Observers for months had been dismissing the possibility, in part because it would hurt some of the US’ largest tech corporations.
The Trump administration has also been pressuring allies to bar Huawei equipment from their communications networks for security reasons.
However, the US effort had largely failed, as even the UK declined to join the US call for a boycott.
If the US handicaps Huawei by cutting off suppliers, countries and telecom carriers around the world that are already spending billions to build 5G networks might have to resort to pricier equipment from Nokia and Ericsson.
Tying up a chunk of the world’s 5G gear supply would slow the build-out of a technology that underpins future services from self-driving cars to smart homes and advanced medicine.
Huawei appears to have anticipated this possibility. It has been developing and designing its own chips for years, which it now uses in many of its own smartphones. It is reportedly even developing its own operating software to run smartphones and servers.
For now, though, it remains heavily reliant on US technology.
Huawei’s base station, smartphone, server and maritime cable businesses simply cannot run without Qualcomm baseband and processor chips. There are alternatives — but from US peers such as Intel Corp, Micron and Broadcom Corp.
It also depends on smaller US suppliers in key areas: Lumentum Holdings for optical cable; Amphenol for fiber-optic connectors; Inphi Corp for analog chips; Qorvo and Analog Devices for radio-frequency semiconductors in both 4G and 5G; and Western Digital Corp for storage. Texas Instruments Inc supplies it with digital signal processing chips. Huawei even uses Oracle Corp software in products sold to state-owned companies.
ZTE provides a roadmap for what might happen next. Huawei’s much smaller rival in 2017 ran afoul of the US Department of Commerce for violating the same Iranian sanctions and then lying about it.
The subsequent ban on US exports pushed the company to the brink of extinction, before Trump intervened as part of trade negotiations with Beijing.
A blanket ban would hurt not just US companies, but also alienate US allies around the world.
Many have resisted Washington’s attempts to steer them away from Huawei, for reasons ranging from economics to just the simple fact that the Shenzhen-based company’s 5G technology is for now considered superior.
That is why some observers, including the Eurasia Group, argue that the White House is unlikely to bring the full force of a blacklist to bear. Instead, the Trump administration is likely to issue export licenses to all of its US companies while retaining the option to pull them if needed, it said.
Shanghai-based Roger Sheng (盛陵海) at the market research firm Gartner drew parallels with the Chinese fable of the Monkey King, whose powers are constrained by a magic circlet that his handler constricts — painfully — when the deity misbehaves.
“The US is putting a circlet around the head of Huawei,” Sheng said.
“The impact goes well beyond its 5G ambitions, because without American suppliers like Qualcomm and Marvell, it can’t even maintain normal operations,” Sheng added.
As strategic tensions escalate across the vast Indo-Pacific region, Taiwan has emerged as more than a potential flashpoint. It is the fulcrum upon which the credibility of the evolving American-led strategy of integrated deterrence now rests. How the US and regional powers like Japan respond to Taiwan’s defense, and how credible the deterrent against Chinese aggression proves to be, will profoundly shape the Indo-Pacific security architecture for years to come. A successful defense of Taiwan through strengthened deterrence in the Indo-Pacific would enhance the credibility of the US-led alliance system and underpin America’s global preeminence, while a failure of integrated deterrence would
It is being said every second day: The ongoing recall campaign in Taiwan — where citizens are trying to collect enough signatures to trigger re-elections for a number of Chinese Nationalist Party (KMT) legislators — is orchestrated by the Democratic Progressive Party (DPP), or even President William Lai (賴清德) himself. The KMT makes the claim, and foreign media and analysts repeat it. However, they never show any proof — because there is not any. It is alarming how easily academics, journalists and experts toss around claims that amount to accusing a democratic government of conspiracy — without a shred of evidence. These
The Executive Yuan recently revised a page of its Web site on ethnic groups in Taiwan, replacing the term “Han” (漢族) with “the rest of the population.” The page, which was updated on March 24, describes the composition of Taiwan’s registered households as indigenous (2.5 percent), foreign origin (1.2 percent) and the rest of the population (96.2 percent). The change was picked up by a social media user and amplified by local media, sparking heated discussion over the weekend. The pan-blue and pro-China camp called it a politically motivated desinicization attempt to obscure the Han Chinese ethnicity of most Taiwanese.
On Wednesday last week, the Rossiyskaya Gazeta published an article by Chinese President Xi Jinping (習近平) asserting the People’s Republic of China’s (PRC) territorial claim over Taiwan effective 1945, predicated upon instruments such as the 1943 Cairo Declaration and the 1945 Potsdam Proclamation. The article further contended that this de jure and de facto status was subsequently reaffirmed by UN General Assembly Resolution 2758 of 1971. The Ministry of Foreign Affairs promptly issued a statement categorically repudiating these assertions. In addition to the reasons put forward by the ministry, I believe that China’s assertions are open to questions in international
RSS