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HUAWEI will be allowed to do business with U.S. companies again (Updated)
Update, July 3, 2019 (5:18 AM ET): President Donald Trump may have announced that U.S. firms will be allowed to work with HUAWEI once again, but it looks like the Commerce Department hasn’t received the memo.
An internal email to Commerce Department staff seen by Reuters suggests that it’s still treating the Chinese brand as if it’s been blacklisted. “This party is on the Entity List. Evaluate the associated license review policy under part 744,” read an excerpt of the email.
The cited regulations reportedly point to the Entity List and the so-called “presumption of denial” policy.
Reuters notes the “presumption of denial” policy suggests a strict review process and that most company requests reviewed under this policy aren’t accepted. It’s unclear when or if the Commerce Department will receive updated guidelines in this regard to reflect Trump’s announcement.
Furthermore, a HUAWEI spokesperson told the newswire that they “don’t see much impact on what we are currently doing” following Trump’s comments. This suggests that the White House’s stated changes either aren’t relevant to HUAWEI, or that they’ve yet to come into effect.
Original coverage, June 29 2019, (5:37 AM ET): U.S. companies will be allowed to work with HUAWEI again, President Trump announced in a news conference.
It’s a stunning, if not entirely surprising turnaround, coming just weeks after the Trump administration called HUAWEI a major threat to U.S. national security.
On the sidelines of the G20 summit in Osaka, Trump said “U.S. companies can sell their equipment to HUAWEI,” without going into detail. “We’re talking about equipment where there’s no great national security problem with it,” Trump continued. It’s not clear what this means for now, but it’s likely HUAWEI will be able to acquire basic components like Qualcomm processors and Google’s Android OS.
U.S. companies “allowed to sell”
“I said that’s O.K., that we will keep selling that product, these are American companies that make these products. That’s very complex, by the way. I’ve agreed to allow them to continue to sell that product so that American companies will continue,” Trump said, as per Bloomberg. U.S. chipmakers like Intel and Xilinx reportedly lobbied the U.S. government to ease restrictions on HUAWEI. In 2018, HUAWEI spent around $11 billion on chips made by Intel, Qualcomm, and Micron alone.
Earlier this week, the WSJ reported China would make lifting of the HUAWEI sanctions an essential condition for any trade agreement with the U.S..
HUAWEI is still on the Entity List
For now, HUAWEI is still on the so-called “Entity List” of companies that the U.S. Department of Commerce bars from dealing with American entities. A formal decision has not been made yet, and the discussions between U.S. and China are ongoing. Trump also said that HUAWEI is still a security risk in the U.S. government’s view.
“HUAWEI is very much in play in terms of our country and in terms of intelligence and the intelligence community — we know a lot about HUAWEI — but I don’t want to mention that right now. I just think it’s inappropriate. We’re not making it other than what I told you… We’re going to save that for later.”
U.S. and China appear to have reached a breakthrough in talks to resolve their trade war. The latest round of tariffs that were due to go into effect in the next days has been suspended, while China agreed to buy more agricultural products from U.S. farmers.
“We had a very good meeting with President Xi of China, excellent, I would say excellent, as good as it was going to be,” Trump said, according to the BBC. “We discussed a lot of things and we’re right back on track and we’ll see what happens.”
White House economic advisor Larry Kudlow later clarified the situation in an interview with Fox News (via CNBC), reaffirming that HUAWEI is still on the Entity List. The advisor added that the Commerce Department intends to grant more licenses to U.S. companies to allow them to do business with HUAWEI.
He also stressed that Trump’s move wasn’t a “general amnesty” and that trading with HUAWEI was only being permitted in areas where no security risk was present. For example, Kudlow said some U.S. chip makers sell components that are “widely available” in other countries, suggesting HUAWEI would be able to access alternatives despite the U.S. trade ban.
Back to normal?
Depending on how fast the U.S. government moves to lift the ban on HUAWEI, the company could be back in business in as little as a few days. Before the ban went into effect in mid-May, the company reportedly stockpiled critical components that would allow it to continue to operate for up to three months.
Even if the ban is fully lifted next week, its effect on HUAWEI and the broader industry will be lasting. The company said its 2019 revenue will be $30 billion below estimates due to the disruption caused by the ban, and that’s without accounting for the damage done to its brand. HUAWEI was widely expected to beat Samsung for the first place in the smartphone market within the next year, a longtime goal that may now take longer.
For owners of HUAWEI devices, the news should come as a relief. While HUAWEI promised it would bring Android Q to several high-end devices, the situation was anything but clear. If HUAWEI and Google can continue to work as before, users will be able to rest assured that their phones will continue to get security and system updates.
HUAWEI sent us a brief no-comment answer on Trump’s comments:
We acknowledge the US president’s comments relating to HUAWEI yesterday and have no further comment at this time.
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