Huawei now faces tougher restrictions on chipsets, in a move that could trigger a retaliation from China.
Background: In May 2019, the US Department of Commerce (DoC) put Huawei on the Entity List, which imposes restrictions on companies trading with US businesses. The DoC motivated its decision with reasons of national security. Since then, any sale or transfer of US technology to Huawei is subject to a licence issued by the Bureau of Industry and Security within the DoC. The move has ended up harming not only Huawei, but also US companies supplying it, such as Google, which can no longer provide the full Android OS to new Huawei mobile devices. Despite the restrictions, Huawei continued to use US technology in semiconductor designs, because manufacturers were still able to sell to Huawei if the material was made outside the US.
The DoC closes the loophole: On 15 May 2020, the DoC renewed the inclusion of Huawei on the Entity List. This time, the DoC included semiconductor designs produced by Huawei, that are the direct product of certain U.S. Commerce Control List (CCL) software and technology; and chipsets, when produced from the design specifications of Huawei, that are the direct product of certain CCL semiconductor manufacturing equipment located outside the United States. This will now restrict Huawei’s ability to do what it has done during the last year. However, the restriction will come into effect 120 from now, so that manufacturers can still sell to Huawei any equipment that they have already started to produce.
The temporary general licence is renewed: At the same time, the DoC also extended Huawei’s Temporary General Licence (TGL) for a further 90 days. This means US operators can continue to use Huawei’s equipment for the time being, to the benefit of rural carriers which can continue to provide their services without having to quickly replace network equipment. So far, the DoC has always renewed the TGL upon expiry, but the mood is different this time with suggestions that it would be for the last time.
China could retaliate: The DoC’s decision to tighten the screws on Huawei, despite the 120 day grace period and the renewal of the TGL, is prompting China to react. The Chinese government is reportedly planning to add some US companies, including Apple, Cisco, and Qualcomm, to its ‘unreliable entity list’, imposing restrictions or launching investigations into those firms. Huawei also made a statement against the “arbitrary and pernicious” decision which will impact networks rolled out in more than 170 countries.
