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The US ban on Huawei will cripple the global semiconductor industry

Written by KrASIA Writers Published on 

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Gilmore Glen, a mayor emeritus in the US and an educator at Rutgers University, says that the tech industry depends on a free-flowing global market.

Glen Gilmore believes that the US ban on Huawei will cause numerous companies to lose confidence in the global (semiconductor) supply chain.

Gilmore Glen is a mayor emeritus in the US and an educator at Rutgers University. He provides long-term consulting services for various Fortune 500 companies. In his view, the tech industry depends on a free-flowing global market, and the Trump administration’s ban on Huawei undermines its foundation.

Mr. Gilmore said, “I think the move is unfortunate for the US, China, and our supply chain companies”.

This “unfortunate” event began on May 15, when the Trump administration announced new rules that banned foreign semiconductor manufacturers using US software or technology from supplying Huawei without prior approval. The move could sever ties between Huawei and suppliers that provide the company with chips used on cellular base stations, servers, and phones.

Publicly, the Trump administration has said the measure was implemented due to “national security” concerns. According to Mr. Gilmore, using national security as an excuse “makes the Trump administration’s rules difficult to oppose”. However, no clear evidence has been provided to show that Huawei’s equipment has any security risks. In addition, tests by the UK’s National Cyber Security Centre (NCSC) have proven that there are no backdoors in Huawei’s equipment. This May, Huawei obtained the world’s first Common Criteria Evaluation Assurance Level (EAL) 4+ certificate for 5G products.

The 5G revolution

Analysts generally believe that the US move is intended to stall China’s competitive advantage in 5G. 5G has the potential to connect all people and devices worldwide to the Internet, bringing about an unprecedented technology revolution. At this early stage of 5G development, it is clear that China is leading the way.

In the long run, the US, and even the world at large, will suffer from the US move.

The ban will “severely harm” the US semiconductor industry, Mr. Gilmore said. Without the Chinese market, US semiconductor companies’ revenue and market share will be severely affected, hindering US companies’ ability to make large-scale investments in innovative research and development. This will disrupt the innovation cycle on which the US semiconductor industry depends and result in the eventual loss of its industry leadership.

“Huawei has invested billions of dollars into US products and non-sensitive US technologies,” said Mr. Gilmore. “And the consequence of this entity list is that US suppliers are going to lose billions of dollars in sales, which will certainly have an impact on jobs as well.”

Boston Consulting Group study

On March 9, 2020, Boston Consulting Group (BCG) published a report titled, How Restricting Trade with China Could End US Semiconductor Leadership, which supports Mr. Gilmore’s views. This report estimates that if the US were to completely end bilateral technology trade, US R&D investment into semiconductor technologies would be cut by at least USD 12 billion, and 124,000 jobs would be lost in US businesses.

Only through competition can there be technological innovation. The Trump administration’s ban is likely to fragment the world’s supply chain, while technological exchanges between countries will be severely disrupted. This will negatively affect both innovation and progress in the technology industry. As Mr. Gilmore said, this will shake the confidence in the entire global supply chain.

“Other companies in other countries rightfully fear whether or not they may find themselves on that list in the future,” he said. “This is why I think we need to explore different avenues to address our differences so that global free trade continues to thrive, particularly at a time like this when we rely so much on technologies.”

Rebuilding the society after COVID-19

In another article, ICC UK Secretary General Chris Southworth points out that rebuilding society in the wake of the pandemic will require extensive input from the tech industry. This includes the semiconductor sector, which provides services such as telecommuting, distance learning, and telemedicine. However, the US ban will slow the recovery of the world economy. Mr. Gilmore maintains that it’s a time in which technology is too important to disrupt.

“In today’s world, we are interdependent when it comes to keeping our borders open and trade flowing,” Southworth noted. “In this context, ‘exterritoriality’ undermines our common goals to share prosperity, address disparities, and ensure trade benefits everyone. This will cause us all to suffer losses.”

The free flow of information, markets, and capital has been critical to advances in technology for half a century. Now that the world finds itself in crisis because of the pandemic, countries should respond by forging closer ties. In times of crisis, fools build walls, while the wise build bridges. Everyone should make informed decisions at this turning point in history.

“There will have to be a resolution, because in the end, that’s the win-win that comes from free trade. That’s the win-win that comes from collaborating on technologies as opposed to weaponizing technologies,” said Mr. Gilmore. “And that’s something we all have a vast interest in.”

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