Can Huawei Defy Geopolitical Gravity This Time?
According to Reuters, the Biden administration is considering excluding Huawei from all US suppliers, including Qualcomm and Intel. The government is working on a new policy aimed at barring Huawei from technologies below the 5G level, including 4G-related elements, cloud-related elements, WiFi 6 and 7, high-performance computing and artificial intelligence, according to Reuters the anonymous sources of report. (AI).
This is not the first time Washington has targeted Chinese telecommunications giant Huawei. In 2019, the giant was paralyzed after it was registered as an entity by the Ministry of Commerce. The list prohibits most US companies from supplying Huawei products and technology without a license. The US Department of Commerce then granted export licenses to vendors such as Intel and Qualcomm to supply technology and products under 5G, but Huawei opted out of Qualcomm's 5G and Intel x86 chips.
The ban has had a negative impact on Huawei as the former 5G smartphone leader was forced to ditch 5G for the new P50 phones. He also lost access to Google Mobile Services. In the last quarter of 2020, Huawei's mobile phone sales fell by 41.1% year-on-year. In late 2020, Huawei Honor sold its smartphone division to Digital China and the local government.
The Biden White House is now considering an outright ban on Huawei in facilities below 5G, a tough move that, if it happens, would once again hit the tech giant hard.
Qualcomm's 4G chip is seen as a technological bottleneck for Huawei. Huawei relies on Qualcomm processors and modems for its fourth-generation smartphones. It also relies on Intel and AMD processors to make its laptops and needs US chips to build its Macrocell base stations. However, the ban will have less impact on US suppliers than before. Most US companies will face modest revenue losses, given that Huawei now accounts for less than 1% of the revenue of companies like Intel.
Possible disconnections are explained by several reasons. CNAS technology expert and former CIA employee Martin Wasser says Huawei is a different company now with different priorities than it was four years ago. To offset the US sanctions, Huawei has shifted its focus to business lines less dependent on chips. It currently provides technical support and services to various industries, including the automotive industry and agribusiness. Huawei's expansion into cloud computing has proven successful. Government connections have helped it win contracts, making it China's second-largest cloud service provider in just a few years.
The CSIS Reconnecting Asia project recently released a report detailing Huawei's strategic shift to cloud infrastructure and e-government services. By exporting its technology to key local government businesses, Huawei has gained market access in developing countries whose role in global networks is growing. In 2020, Huawei's revenue from cloud services increased by 168%. As of 2021, 70 cloud infrastructure and e-government service agreements have been signed between Huawei and foreign governments (or state-owned enterprises) in 41 countries.
The company also complements the provision of physical infrastructure with services using financing from Chinese banks. The authors of the CSIS report, Jonathan Hillman and Mazie McAlpine, are concerned about Huawei's transition from a hardware provider to a service provider, and urge the United States to maintain its lead and not fall behind. US Cyber and Digital Policy Ambassador Nate Feek echoed that sentiment, saying: “We need to look beyond wireless. Huawei's next competitive frontier is likely to be in the data center.”
In some areas, Huawei's expansion has raised suspicions in the US. During the visit of Chinese President Xi Jinping in December last year, Saudi Arabia and Huawei signed a memorandum of understanding in the field of cloud computing and high-tech complex buildings. Washington may be disappointed by the deal, especially after its relationship with Saudi Arabia soured after Biden took office.
In a report aimed at helping Washington win the 5G race with Beijing, the Rand Corporation has warned against Huawei's mobile operating system, saying if it is adopted by consumers it could make it ineffective and blacklist Google's advertising business model. and threat efforts.
Huawei struggled to survive the initial export controls, but thanks to smart strategy and strong government support, it appears poised to recover as it adapts to new circumstances with alternative business priorities. In the first nine months of 2022, the decline in Huawei's hardware business revenue has slowed. On December 30, Huawei expected revenues to be flat in 2022, indicating that the decline in sales due to US sanctions has stopped.
"US restrictions are now our new normal," said Huawei's current president, Eric Xu. "We're going back to business as usual." Previous sanctions are becoming less effective. Meanwhile, Huawei's influence is expanding in developing countries. This explains why Biden was able to take steps toward a narrower primary.
The dramatic nature of the current Sino-US relationship is well illustrated by another reason for the move. Biden is feeling pressure from Republicans who now control the House of Representatives and generally support a "zero" China strategy.
Last month, the House Foreign Affairs Committee, chaired by Michael McCaul, issued a statement naming Huawei. The statement said the commission was "surprised" to learn that the Commerce Department had approved Huawei's license applications worth $60 billion over six months in 2020 and 2021. It demanded that the agency permanently halt the export of vital technology to Huawei. Biden may feel compelled to act tough in the current political climate.
Compared to Donald Trump's messy shutdown, which escalated tensions to gain little strategic advantage in return, Joe Biden knows how to minimize the cost of a U.S. withdrawal. Compete asymmetrically, striking areas where China is most vulnerable with allies. The administration has already introduced a series of export control measures to China that will seriously harm China's ability to produce advanced semiconductors, successfully partnering with the Netherlands and Japan.
Agathe Demara, director of global forecasts at the Economist Intelligence Unit, sees US dominance in microchips as a major trump card in terms of undermining China's ability to develop some advanced technologies. China imports $300 billion worth of semiconductors annually. Meanwhile, the entire upstream part of the semiconductor supply chain is controlled by a handful of American companies.
The restrictive measures aimed at curbing technological threats from China, including a looming policy against Huawei, signal a shift in Biden's China strategy. This new approach is more aggressive and more responsive to the country's turbulent domestic politics. Given the unprecedented influence of the US, its sanctions against Chinese technology companies will be particularly devastating.
