The US is reportedly considering a total ban on sales by domestic firms to China’s Huawei.
Reports from outlets including Reuters, Bloomberg and the Financial Times indicate that the US has scrapped a licensing scheme that has allowed several US firms – including Intel and Qualcomm – to continue providing products to the Chinese vendor since it was placed on a trade blacklist in May 2019. The scheme was aimed at providing US firms with time to prepare for the shock of cutting Huawei out of their supply chains.
Mao Ning, a spokesperson from China’s Foreign Ministry, said that China was “seriously concerned” about the reports, adding that the move “goes against the principles of the market economy and rules of international trade and finance, hurts the confidence the international community has in the U.S business environment and is blatant technological hegemony.”
According to Reuters, the abolition of the licensing scheme is likely testing the waters for a formal policy banning all shipments to Huawei, including items associated with non-5G technologies such as 4G, Wi-Fi 6, AI and cloud.
The Financial Times quotes Martijn Rasser, Senior Fellow and Director, Technology and National Security Program, as saying that Huawei’s pivot towards such technologies would not have gone unnoticed by US authorities, and likely accelerated the push towards a full ban on sales to the vendor. “The actions by the commerce department are partly driven by the fact that Huawei as a company is a very different animal than it was four years ago when it was focused on 5G”, noted Rasser.
A full ban on US sales to Huawei feels unsurprising at this point. It would be the logical endpoint of what now appears to be a sustained campaign against Chinese networking equipment originally justified by the US on the grounds of national security concerns. However, while China may express concern over the projected losses that such bans may inflict on its vendors, the fact remains that in December 2022, Huawei reported revenue of around US$91.53 billion – around 8% down year-on-year, but nothing like as bad as the drop of nearly one-third following the imposition of US sanctions in 2021.
The US campaign against Chinese vendors may freeze them out of more developed markets, but their substantial footprint in most emerging regions has sustained them throughout blacklisting and trade embargoes. Given Huawei’s increased focus on the cloud – coupled with its penchant for affordability – this is likely to continue as low ARPU markets build out increasingly advanced networks.