US adds Huawei to blacklist, spurring Sino-US tech decoupling

Companies on both sides stand to lose big.

credit: DFIC

The United States Commerce Department announced on Wednesday its decision to add Chinese telecoms giant Huawei and its 70 affiliates to the so-called “Entity list.” The statement came just hours after US president Donald J. Trump signed an executive order declaring a national emergency regarding the nation’s “information and communications technology and services.”

The Entity List inclusion will ban the Chinese tech darling and the world’s largest telecoms equipment vendor from buying from US suppliers without approvals from the Bureau of Industry and Security (BIS).

Shenzhen-based Huawei said in a statement to Chinese media that it was “ready and willing” to come up with measures to ensure product security, and added that its exclusion from the US market was an “unreasonable” restriction that would eventually harm “the interest of US companies and consumers.”

“Restricting Huawei from doing business in the United States will not make the United States more secure or stronger,” Huawei’s statement read.

The move of adding Huawei to the “Entity list” is reminiscent of ZTE’s treatment in the US under the Trump administration, where the US Commerce Department’s denial order brought the world’s fifth largest telecoms vendor to the brink of bankruptcy, Chinese tech industry observers told KrASIA.

“It’s a dangerous escalation, Trump will gradually come up with some of the tactics that used to be unimaginable to us,” said Fang Xingdong, director of the Research Center for Internet and Society at the Communication University of Zhejiang.

The US Commerce Department’s decision, which comes amid major setbacks in Sino-US trade talks with both sides hiking tariffs, is ominous news for tech communities in both China and the United States because it shows that the tech decoupling is accelerating, he said.

The Sino-US tech decoupling will hurt both sides because companies from both countries have grown to depend on cross-Pacific business over the past few decades. On one hand, China has not yet acquired core technologies and needs time to develop its own; on the other hand, revenues from China have represented a huge chunk of US companies’ earnings. Take Qualcomm as an example—nearly 60% of the company’s revenue from last year came from China.

“Sino-US tech decoupling will bring immense damages to both China and the United States. It’s hard to say who would be hurt worse,” Fang said.

However, Huawei doesn’t see the US Commerce Department’s decision as a threat to its bottom line. On Wednesday, a Huawei executive said that the company’s global reach will weather any restrictions that the United States government might place on the company.

 

Write to Luna Lin at [email protected]