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US eases restrictions on Huawei; founder says US underestimates Chinese firm

Founder says reprieve means little because firm prepared

By Reuters - May 21,2019 - Last updated at May 21,2019

A man talks on his mobile phone beside Huawei's billboard featuring 5G technology at the PT Expo in Beijing, China, on September 26, 2018 (Reuters photo)

NEW YORK/SHANGHAI — The United States has temporarily eased trade restrictions on China's Huawei to minimise disruption for its customers, a move the founder of the world's largest telecoms equipment maker said meant little because it was already prepared for US action.

The US Commerce Department blocked Huawei Technologies Co. Ltd. from buying US goods last week, saying the firm was involved in activities contrary to national security.

The move came amid an escalating dispute over trade practices between the United States and China. The two countries increased import tariffs on each other's goods over the past two weeks after US President Donald Trump said China had reneged on earlier commitments made during months of negotiations.

On Monday, the Commerce Department granted Huawei a licence buy US goods until August 19 to maintain existing telecoms networks and provide software updates to Huawei smartphones.

The Chinese company is still prohibited from buying American-made hardware and software to make new products without further, hard-to-obtain licences.

The reprieve is intended to give telecom operators that rely on Huawei equipment time to make other arrangements, US Secretary of Commerce Wilbur Ross said in a statement on Monday.

"In short, this licence will allow operations to continue for existing Huawei mobile phone users and rural broadband networks," Ross said.

Huawei founder Ren Zhengfei on Tuesday said in a series of interviews with Chinese state media that the reprieve bore little meaning for the telecom gear maker as it had been making preparations for such a scenario.

"The US government's actions at the moment underestimate our capabilities," Ren said in an interview with CCTV, according to a transcript published by the Chinese state broadcaster.

 

Pervasive 

 

The temporary licence suggests changes to Huawei's supply chain may have immediate, far-reaching and unintended consequences for its customers.

"The goal seems to be to prevent Internet, computer and cell phone systems from crashing," said Washington lawyer Kevin Wolf, a former Commerce Department official. "This is not a capitulation. This is housekeeping."

The reprieve also appeared aimed at telecom providers in countries where Huawei equipment is pervasive, said Washington trade lawyer Douglas Jacobson.

The Commerce Department said it will evaluate whether to extend the licence period beyond 90 days.

 

Google suspension 

 

Huawei is currently on the receiving end of a US government accusation that it engaged in bank fraud to obtain embargoed US goods and services in Iran and move money via the international banking system. Huawei has pleaded not guilty.

Adding to its US troubles on Thursday, the US Commerce Department placed Huawei and 68 entities on an export blacklist, making it nearly impossible for those listed to purchase goods made in the United States.

On Sunday, Reuters reported citing a person familiar with the matter that Alphabet Inc.'s Google suspended business with Huawei that requires the transfer of technical service, hardware and software except what is publicly available via open-source licensing.

Monday's temporary licence is likely to allow companies such as Google to continue providing service and support, including software updates or patches, to Huawei smartphones that were available to the public on or before May 16.

Google did not respond to a request for comment on the licence.

The licence also allows Huawei to engage in the development of standards for fifth-generation (5G) telecom networks.

 

Apple praise 

 

Ren put up a strong front on Tuesday, reiterating claims that the restrictions will not hurt Huawei's prospects and that no other company will be able to catch up with Huawei in 5G technology in the next two to three years. 

China was nevertheless still "far behind" the United States in technology, he said.

Chip experts have called out Huawei on its claims that it could ensure a steady supply chain without US help, saying the technology the Chinese telecoms network gear maker buys from American companies would be "hard to replace".

Nearly 16 per cent of Huawei's expenditure on components last year went to US firms including Qualcomm Inc., Intel Corp. and Micron Technology Inc., analysts said.

Ren said Huawei was at odds with the US government, not US firms, and in a comment that trended on Chinese social media, he praised Apple Inc.'s iPhones, saying that he gifted the American firm's devices to family members.

"Apple has a good business ecosystem... We cannot think narrow-mindedly that loving Huawei equals loving its phones."

US firms could lose up to $56.3 billion in export sales over five years from stringent export controls on technologies involving Huawei or otherwise, the Information Technology & Innovation Foundation said in a report. Missed opportunities threatened as many as 74,000 jobs, the foundation said.

John Neuffer, president of the Semiconductor Industry Association which represents US chipmakers and designers, called on the government to ease Huawei restrictions further. 

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