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Policy Summary
On May 15, 2019 the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce placed the Chinese technology giant Huawei Technologies Co. Ltd. on the Entity List, effectively banning United States companies from doing business with it.  This action stems from information the Commerce Department claims to have that concludes that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest.  On Saturday June 29, 2019 at the G20 summit in Osaka, Japan President Trump announced some easing of these restrictions. These have not been reflected in the Commerce Department’s website. The company is also under US indictment for fraud and theft of US trade secrets. Huawei’s CFO Wanzhou Meng is awaiting extradition to the US in Canada.

Analysis
Huawei, the 2nd largest manufacturer of mobile devices in the world and a leading internet infrastructure equipment supplier is a relatively unknown name in the US. This is largely due to a ban of it’s networking and smartphone equipment from as far back as 2012 over concerns that the company, with close ties to the Chinese government, could be building backdoor access into its products. This access would allow surveillance of the networks that its equipment services. This has not stopped the company from selling its equipment in foreign markets and playing a major role in the development of 5G wireless networks outside of the US. Huawei’s addition to the Entity List would ban US companies, particularly large chip manufacturers, from selling their products to the company.

The effect of Huawei’s addition to the Entity List removes a lucrative market from US microchip manufacturers such as Intel, AMD and Micron.  These companies are avoiding this ban to some extent by selling their products through overseas subsidiaries. 

 It would also remove a significant market for Google’s Android operating system which now runs on Huawei smartphones, threatening the rise of a rival less secure base operating system.  US software developers would presumably not be allowed to sell their products to Huawei. 

The whole effort appears to be an uncoordinated attempt by the Trump Administration to prevent Chinese companies from “stealing” US technologies. It effectively, however, creates a barrier for US chip makers and others to cashing in on the very lucrative market to roll out 5G wireless networks and threatens US based jobs – contrary to a major goal of the Trump Administration to protect American jobs.  The longer this market uncertainty remains, the more likely Huawei will turn to other non-US chip makers and software developers to service their supply chain.

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Photo by Lin Zhizhao

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