Executive order bans Huawei on national security grounds, and prevents it buying vital US parts and components
Huawei Technologies is staring down the barrel after President Trump dramatically racketed up the pressure on the Chinese networking giant.
Yesterday Huawei had pledged to sign “no-spy” deals with any foreign government, but this did not stop President Trump, who as expected, signed an Executive Order that could have a significant impact on the firm.
The order means that Huawei will be excluded from all US 5G networks on national security grounds. It is already excluded from any government contracts. But the part that could really hurt is that Huawei will be prevented from buying any US chips, parts and components.
This hit on Huawei’s supply chain will see firms such as Qualcomm and Broadcom unable to supply the Chinese company with their chips.
Fellow Chinese company ZTE for example was last year brought to its knees by a similar move by the US.
The US had imposed a component ban on ZTE in April 2018 in response to ZTE’s alleged failure to discipline executives who had colluded to evade US sanctions on Iran and North Korea.
The ban effectively put ZTE, one of the world’s largest telecommunications equipment makers, out of business, since it was heavily dependent upon parts obtained from the US.
But in July last year the ban was lifted when President Trump personally intervened, saying he wanted to protect Chinese jobs.
But such was the impact of the component ban, that ZTE’s business operations only fully recovered in August 2018.
This is now the position that Huawei faces after President Trump signed an Executive Order on Wednesday.
The US barring of its equipment from American telecom networks on national security grounds had been widely anticipated, even within Huawei’s management.
But the order also bans the firm from buying vital US technology without special approval, a move that could threaten Huawei’s ability to sell products because of its reliance on American suppliers.
The US and China are in the middle of a trade war.
Earlier in the week President Trump had ratcheted up tariffs in a battle over what US officials called China’s unfair trade practices.
Reading through the Executive Order, it does not name any specific country or indeed companies, but the executive order invoked the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the United States.
Members of Congress said Trump’s order was squarely aimed at Chinese companies like Huawei, Reuters reported.
“China’s main export is espionage, and the distinction between the Chinese Communist Party and Chinese ‘private-sector’ businesses like Huawei is imaginary,” Republican Senator Ben Sasse reportedly said.
“The President has made it clear that this Administration will do what it takes to keep America safe and prosperous, and to protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services in the United States,” said the White House.
“This Executive Order declares a national emergency with respect to the threats against information and communications technology and services in the United States and delegates authority to the Secretary of Commerce to prohibit transactions posing an unacceptable risk to the national security of the United States or the security and safety of United States persons,” it added.
And almost immediately after the White House announcement, the US Commerce Department said it had added Huawei and 70 affiliates to its so-called Entity List, which bans them from buying parts and components from US companies without US government approval.
US officials told Reuters the decision would make it difficult, if not impossible, for Huawei, to sell some products because of its reliance on US suppliers.
The ban will take effect in the coming days.
US suppliers will need to apply for licenses to provide Huawei with anything, and obtaining these licenses will be hugely difficult as they will need to show the transfer of items will not harm US national security.
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