U.S. delay to Huawei ban gives tech sector time to adjust
Joe McDonald, The Associated Press
Published Tuesday, May 21, 2019 5:42AM EDT
Last Updated Tuesday, May 21, 2019 11:25AM EDT
BEIJING -- The United States is delaying restrictions on U.S. technology sales to Chinese tech powerhouse Huawei in what it calls an effort to ease the blow on owners of its cellphones and smaller U.S. telecoms providers that rely on its networking equipment.
The Trump administration insists the sanctions are unrelated to its escalating trade war with China, and many analysts see it as aimed at pressuring U.S. allies in Europe to accede to Washington's entreaties to exclude Huawei equipment from their next-generation wireless networks, known as 5G.
The U.S. government says that the ban on selling technology to Huawei, the world's biggest maker of mobile network gear and the No. 2 smartphone brand, will be delayed by 90 days. Shares in tech companies rose Tuesday on the news.
The U.S. claims Huawei is a cybersecurity risk and has targeted it against the backdrop of a wider battle with China over economic and technological pre-eminence that has included tariffs on billions worth of trade and limits on business.
The founder of Huawei sought to put a brave face on the situation, saying Tuesday that the company has "supply backups" if it loses access to American components.
Huawei Technologies Ltd. relies on Google's Android operating system and U.S. components suppliers for its smartphones, which are the second-biggest sellers globally.
"I should say this impact will be very big, but Google is an extremely good company," Ren Zhengfei told Chinese reporters. "We are discussing emergency relief measures," he added, without giving details.
Industry analysts say Huawei might struggle to compete if it cannot line up replacements for Google services that run afoul of the U.S. curbs.
Google says its basic services still will work on existing Huawei handsets. However, the company would be barred from transferring hardware or software directly to Huawei. That would affect maps or other services that require the American company's support.
In Brussels, a senior Huawei European representative lashed out at the actions of the Trump administration and warned that other companies around the world should be worried, too.
"This is dangerous. Now it is happening to Huawei. Tomorrow it can happen to any other international company," Abraham Liu, Huawei chief representative to the European Union's institutions, told reporters.
China's government repeated its promise to defend Chinese companies abroad but gave no details of what Beijing might do.
The 90-day grace period announced Monday by Washington could be extended. The Commerce Department said it would allow rural U.S. telecom operators that depend on Huawei equipment for "critical services" time to make other arrangements. Companies including Google that supply software can continue to provide updates and co-operation in global 5G network standards planning can also continue.
"This license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks," Secretary of Commerce Wilbur Ross said in a statement.
In a report, the global risk assessment firm Eurasia Group said that if the sanction process helps persuade European network carriers to also shun Huawei equipment, a full ban on purchases of U.S. technology products and services could be avoided.
The move to delay the ban on Huawei may follow a familiar script with the Trump administration, which in its attempt to change the U.S.'s trade relations with major economies like China and Europe has often announced restrictions or tariffs only to delay their implementation. That increases pressure on the other side but also gives them an incentive to negotiate.
It hasn't always worked. The U.S. has announced new tariffs on European and Chinese goods several times, only to see them retaliate with tariffs on U.S. goods. That has raised the stakes in the trade wars, hurting global commerce and economic growth.
As China looks to respond to President Donald Trump's move against Huawei, Apple makes a prominent potential target for retaliation.
Apple is Huawei's main American rival in smartphones and its iPhones are assembled in China. The country is also Apple's No. 2 market after the United States.
Attacking Apple might be politically awkward for Chinese leaders who have accused Washington of mistreating Huawei. Business groups say Chinese officials are trying to reassure American companies they are welcome despite the tariffs war.
But regulators have an array of tools including tax and safety inspections that can hamper a company with no official acknowledgement it is targeted.
Huawei's U.S. sales collapsed in 2012 after a congressional panel told phone carriers to avoid the company and its smaller Chinese competitor, ZTE Corp., as security threats.
Despite that, Huawei's sales elsewhere have grown rapidly. The company reported earlier its global sales rose 19.5% last year over 2017 to 721.2 billion ($105.2 billion).
Huawei smartphone shipments rose 50 per cent over a year earlier in the first three months of 2019 to 59.1 million, while the global industry's total fell 6.6%, according to IDC. Shipments by Samsung and No. 3 Apple declined.
AP researcher Shanshan Wang in Beijing and AP writers Lorne Cook in Brussels and Frank Bajak in Boston contributed to this report