Reports from Bloomberg said that after the Trump administration blacklisted Huawei for five months, Huawei’s development still seems to be vibrant, and US companies still do not know whether they can cooperate with the Chinese company.

In May, the US Department of Commerce added Huawei to the so-called entity list, which prevented US companies from selling parts to Huawei. The United States accused Huawei of posing a threat to US national security. Huawei has repeatedly denied these claims.

Although the United States took these actions, Huawei released a financial report last week, saying that as of the third quarter of 2019, the company achieved sales revenue of 610.8 billion yuan, an increase of 24.4%; the smartphone business maintained steady growth, and shipments in the first three quarters exceeded 185 million units, an increase of 26% year-on-year. At the same time, there are signs that the United States has not played a major role in hindering Huawei’s participation in 5G construction on a global scale: Huawei said that so far, the company has signed more than 60 5G commercial contracts worldwide.

License

Entity lists require US companies to obtain a government license to sell products to blacklisted companies, which creates problems for US companies.

In the past few months, technology company executives and their lawyers have been holding closed meetings with Trump government officials and said that blacklisting one of their largest customers, Huawei, is not conducive to their business development. Several people familiar with the matter said that many industry executives were confused about the government’s ultimate goal. Despite much discussion with the government, they still couldn’t figure out when the license was approved.

US President Trump said at the G20 summit in June that US companies are allowed to continue exporting certain products to Huawei. A few weeks later, Trump said he would speed up the licensing process, but so far no license has been approved. According to informed sources, Trump approved the approval of the license at a meeting with some consultants this month, but no official announcement has yet been made.

The US Commerce Department said in a statement that it has received more than 200 license applications for Huawei and its affiliates. The statement said: “In view of the complexity of this matter, inter-agency processes are underway to ensure that we can correctly determine which licenses can be safely approved. In addition, the temporary general license is still valid and has recently been extended.”

 Sales impact

Sanjay Mehrotra, CEO of Micron Technology, said in September that the ambiguity in the approval of license applications could lead to further declines in sales in the coming quarters. The company gave a disappointing quarterly profit forecast last month and noted that part of the reason was due to the Huawei ban. In June this year, Broadcom also significantly lowered its annual revenue forecast, citing the Sino-US trade war and the disruption of its business with Huawei.

One of the main reasons why the telecommunications industry allows Huawei to sell non-national security-sensitive products is that Huawei can purchase some of these components from other competitors around the world, including South Korea and Japan.

Robert Atkinson, president of ITIF, Washington think tank, said: “Unless the ban can successfully kill ‘Huawei,’ the result will be to reduce the US’s global market share in many technology areas, which will damage rather than help the US’s technological competitiveness.”

Workaround

Some companies even resumed shipments to Huawei even if the US government did not rule on the license application. After May, these companies carefully studied the ban rules and they determined that they could continue to provide products under the export control laws. If a company can prove that less than 25% of its technology source is from the United States, then the product or service is not subject to the physical list.

In June, Micron said it has resumed shipments of some of its storage chips. As the largest chip maker in the United States, Intel has plants in Oregon, New Mexico, and Arizona. The company also has factories in Ireland, Israel and China, enabling it to claim that most of the intellectual property in its chips was not created in the United States.

Samm Sacks, a think-tank researcher at New America, said: “We know that many US companies continue to ship to Huawei through other countries or third-party workarounds. Is the Huawei ban helping US national security is doubtful that the pile of new problems is troublesome.”

James McGregor, chairman of consulting firm APCO Worldwide Greater China, said he focused on the unintended consequences of the White House action.

James McGregor said in an interview with Bloomberg Television on Monday: “I am worried that over time, technology companies will withdraw some of their business from the United States and decouple from the United States. They must be wary of long-term disruption of their business.”

Robert Atkinson warned that it should not over-interpret Huawei’s sales figures because the company had previously expected the US to take action and thus have a period of supply reserves.  He said that sales in the fourth quarter will more accurately reflect the impact of the export ban, or whether the company largely circumvented the export ban.

Ren Zhengfei, founder and president of Huawei, said in an interview with CNBC recently that Huawei’s revenue decline this year may not exceed 10 billion US dollars, lower than previously expected data. “The impact of US ban on us has greatly reduced.”