US Steps Up Trade Blocks on Huawei
According to the Financial Times, the US Department of Commerce has told a number of companies that it will no longer issue US technology export licenses for equipment sold to China’s Huawei (pvt), further deepening the rift between the company and the US government, and escalating tensions between China and the US, likely of Taiwan. The beleaguered company, once the largest global smartphone brand and largest telecom equipment supplier, has been on the receiving end of much anti-China sentiment and political rhetoric over the potential for the Chinese government’s rules that could allow it to force the company to use its equipment to monitor voice and data traffic, something all Chinese companies are subject to. Huawei has been further accused of placing backdoors in its equipment just for that purpose, although there is little evidence that such software is more than just typical shortcuts or sloppy coding.
The focus of restrictions placed on Huawei, which was added to the US ‘entities’ list in 2019 by former President Trump, has seen a gradual tightening of trade restrictions, that began with a ban on the use of Huawei equipment in government organizations. This grew to a ban on the use in all public networks, to that equipment’s physical removal, while restrictions on semiconductor equipment have also been escalating. Tools needed for 5nm node processing were banned early on, keeping the company from producing its own smartphone processor silicon, and moved further to all tools needed for designing and processing less sophisticated chip designs. That said, the US Department of Commerce still issued licenses to companies that could document that they were not supplying Huawei with technology related items that could be used to advance the country’s military efforts, such as AI or 5G (not sure how much 5G helps the military), at least until now. It seems the US has taken an even harder line and is no longer issuing licenses for any technology to be sold to Huawei.
Details of the escalation are still unclear, but US Under Secretary of Commerce for Industry & Security, Alan Estavez, indicated a few month back that “The threat assessment is always changing,” and that, “We are appropriately doing everything in our power to protect our national security and prevent sensitive technologies with military applications from being acquired by the People's Republic of China's military, intelligence, and security services,” sort of a blanket statement that left open the door toward the increased trade regulations we are hearing of currently.
Earlier this month we noted Huawei’s push toward self-sufficiency, with the company’s recently released Mate 50 Pro smartphone containing ~90% locally sourced components, but also noted that a number of key components were produced and sourced by US companies, particularly the 4G processor, which is supplied by Qualcomm (QCOM) and a number of other components. We point out that the phone is not equipped with the Android operating system, as Huawei’s ability to access the Google (GOOG) store for Android updates and applications, was taken away years ago, and the company has had to rely on its own OS, which has far less appeal to users. While the list below is not conclusive, here are a few of the non-Chinese companies that provide other components for the Mate 50 Pro and have the potential to be unable to obtain export licenses to sell to Huawei going forward as an example of just one Huawei product.
Qualcomm - 4G processor, power management, audio codec, RF transceiver, Wi-Fi, & power amplifier
SK Hynix (000660.KS) - Memory
Samsung (00930.KS) - Memory
Micron (MU) – Memory
HiSilicon (pvt) - Memory.
Qorvo (QRVO) - RF front-end silicon,
ST Micro (STM) - encryption protection,
NXP (NXPI) - NFC, audio power amp, and battery charging management
Maxim (ADI) – Sensors, etc.
IDT (IDT) - Sensors, etc.
Skyworks (SWKS) - Sensors, etc.
Broadcom (AVGO) - Sensors, etc.
The focus of restrictions placed on Huawei, which was added to the US ‘entities’ list in 2019 by former President Trump, has seen a gradual tightening of trade restrictions, that began with a ban on the use of Huawei equipment in government organizations. This grew to a ban on the use in all public networks, to that equipment’s physical removal, while restrictions on semiconductor equipment have also been escalating. Tools needed for 5nm node processing were banned early on, keeping the company from producing its own smartphone processor silicon, and moved further to all tools needed for designing and processing less sophisticated chip designs. That said, the US Department of Commerce still issued licenses to companies that could document that they were not supplying Huawei with technology related items that could be used to advance the country’s military efforts, such as AI or 5G (not sure how much 5G helps the military), at least until now. It seems the US has taken an even harder line and is no longer issuing licenses for any technology to be sold to Huawei.
Details of the escalation are still unclear, but US Under Secretary of Commerce for Industry & Security, Alan Estavez, indicated a few month back that “The threat assessment is always changing,” and that, “We are appropriately doing everything in our power to protect our national security and prevent sensitive technologies with military applications from being acquired by the People's Republic of China's military, intelligence, and security services,” sort of a blanket statement that left open the door toward the increased trade regulations we are hearing of currently.
Earlier this month we noted Huawei’s push toward self-sufficiency, with the company’s recently released Mate 50 Pro smartphone containing ~90% locally sourced components, but also noted that a number of key components were produced and sourced by US companies, particularly the 4G processor, which is supplied by Qualcomm (QCOM) and a number of other components. We point out that the phone is not equipped with the Android operating system, as Huawei’s ability to access the Google (GOOG) store for Android updates and applications, was taken away years ago, and the company has had to rely on its own OS, which has far less appeal to users. While the list below is not conclusive, here are a few of the non-Chinese companies that provide other components for the Mate 50 Pro and have the potential to be unable to obtain export licenses to sell to Huawei going forward as an example of just one Huawei product.
Qualcomm - 4G processor, power management, audio codec, RF transceiver, Wi-Fi, & power amplifier
SK Hynix (000660.KS) - Memory
Samsung (00930.KS) - Memory
Micron (MU) – Memory
HiSilicon (pvt) - Memory.
Qorvo (QRVO) - RF front-end silicon,
ST Micro (STM) - encryption protection,
NXP (NXPI) - NFC, audio power amp, and battery charging management
Maxim (ADI) – Sensors, etc.
IDT (IDT) - Sensors, etc.
Skyworks (SWKS) - Sensors, etc.
Broadcom (AVGO) - Sensors, etc.
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