On May 16, Huawei was included in the list of entities of the US Department of Commerce. This means that US companies that sell parts and software to the Chinese manufacturer cannot do so without receiving a license from the US government. Immediately, companies like Google, Qualcomm, Intel, and Micron stated that they had established ties with Huawei. And even companies that are not in the US, such as ARM Holdings in the UK, have left Huawei as a customer because it uses American technology.
Immediately after the announcement that Huawei was essentially isolated from its American supply chain of US. Some of the American companies made noise; After all, in 2018 Huawei spent $11 billion on US supplies and these revenues would not have been replaced. Then, on May 20, the Trump administration announced that it would release temporary three-month licenses that would allow US companies to provide Huawei with the parts and software needed to maintain and support existing networks and equipment and currently fully operational, including software and patch upgrades. In addition, supplies “necessary to provide service and support, including software updates or patches to existing Huawei handsets.”
Now that that three-month period is almost over, Bloomberg reports that Trade Secretary Wilbur Ross says he has not yet made a decision on granting special licenses to 50 US companies. These teams try to resume their business with Huawei. But a large number of candidates may have nothing to do with the delay. You will recall that on June 29, after Chinese President Xi Jinping told his US counterpart that China would buy large quantities 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 in a very different way
But the weak relationship between the US and China collapsed last week. Trump has announced a 10% tariff on other imports of $300 billion from China (including Apple’s iPhone and other consumer electronic products) which will take effect on September 1. Now, this is where the story begins to diverge. The Chinese say it was not until they learned of the new tariffs that they decided not to buy the American agricultural products they had promised, while the Trump administration claims to have imposed the tariffs because the Chinese did not buy what they had promised. However, the Trump administration is apparently upset by China and seeks revenge by continuing to block Huawei from its US supply chain. But as we have already pointed out, this prohibition also applies to American companies, their employees and investors. News on the delay in issuing special licenses had an effect on the share prices of companies like Micron Technologies. Micron’s biggest customer for its memory chips last year as Huawei and with this news today, Micron shares fell 2.6% during the normal trading session.
What makes the administration’s position on Huawei difficult to understand is how Trump handled a similar situation last year with ZTE. Like Huawei, ZTE is a Chinese telephone and network equipment manufacturer that is considered a threat to national security for the US. Last year, the Commerce Department imposed a seven-year ban on the company, preventing it from accessing US parts and software. Does it sound familiar? ZTE was unable to comply with US sanctions for selling products to Iran and North Korea in violation of the sanctions imposed on the two countries.
Instead of letting ZTE turn in the wind, the president sent a tweet urging the trade department to reach an agreement with the company because too many jobs were being lost in China. Therefore, an agreement has finally been reached that requires ZTE to pay the United States a $1 billion fine and put $ 400 million into custody to protect against future violations. Under the terms of the agreement, ZTE had to make some changes to the boardroom and its executive offices.
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