White House Allows Contractors More Time for Huawei ban

Huawei is getting a short lease of life in the United States, as The White House Office of Management and Budget (OMB) has requested more time for companies to comply with a federal ban on contracts involving the Chinese telecom company. Last year, U.S. President Donald Trump declared a national emergency over the use of foreign technology. This executive order paved the way for the Commerce Department to place Huawei on a list of banned vendors. Congress followed up by barring the government from purchasing Chinese technology, and Huawei specifically, in the annual National Defense Authorization Act.

Since that series of political losses, Huawei began to lose commercial partners. All American companies are barred from exporting technology to Huawei and 70 of its subsidiaries. Taking it a step further, any company that licenses technology from the U.S. – even foreign businesses – have to halt all use of Huawei’s technology.

Naturally, this complicated Huawei’s business situation, as Google removed its Android certification and other suppliers dropped the tech giant instantaneously. Broadcom, Intel, Qualcomm, and ARM all ceased business operations and cancelled partnerships in light of the U.S. ban. Seemingly overnight, the tables turned on the world’s number two smartphone maker. Now, in order to even sell a phone in China, it must be built from scratch, by developing both its own operating system and networking chips.

If that sounds like a daunting task, that’s because it is. Even a longtime chip producer such as Intel struggles with modern chips that have low yields and tight variances. It’s harder for Huawei to rapidly develop and efficiently produce a mobile chip that can compete with British-owned ARM or Samsung’s Exynos.

The network operations side of Huawei’s international business are faring slightly better, as they are still bringing in deals with Russia. Russia’s MTS mobile carrier has given the company a contract, being swayed by the fact that Huawei is one of the few companies capable of deploying both fast and cheap 5G networks.

Revenue might still trickle in from US government agencies and contractors as the OMB prepares policies for how they should remove themselves from a reliance on Chinese technology. As it stands, the NDAA calls for government contractors to cease purchasing Huawei equipment in two years, but that’s simply not enough time for them to find suitable alternatives and begin implementing those contingency plans.

“This is about ensuring that companies who do business with the US government or receive federal grants and loans have time to extricate themselves from doing business with Huawei and other Chinese tech companies listed in the NDAA,” said Jacob Wood, a spokesman for the OMB.

Trump continues to pressure U.S. allies to abandon Huawei over allegations of potential espionage. Previously, he had threatened that US intelligence agencies might stop sharing information with other members of the Five Eyes network – Canada, the UK, Australia, and New Zealand – if they continue to use the banned technology. During his last meeting with outgoing British Prime Minister Theresa May, however, he mentioned that this would not happen to the UK.

Both the UK and Canada have yet to make decisions on Huawei’s fate in their countries. Huawei was represented at a hearing on Monday in front of the House of Commons. John Suffolk, the company’s cybersecurity and privacy officer, testified that there is no requirement by the Chinese government that mandate the company turn over its customers’ private information.

Canada is continuing its investigation into the security of the implications of using Huawei network gear, some of which is already deployed on its various networks. The country sparked controversy last year when it arrested Meng Wanzhou, Huawei’s chief financial officer at the United States’ request.

Trump has hinted that US policy toward Huawei could change based on the ongoing US- China trade war. By adding this pawn to the chess game, Trump is dangling a carrot out to provoke the Chinese to more favorable trade terms. It’s Trump effectively saying: “Look what my government can do, and that’s just one company.” By demonstrating that the US government can cripple companies it perceives as national security threats, Trump wields more power.

Finally, by taking away American technology and global expertise, Trump can then restore them and give Huawei its life back, should trade negotiations prove successful. In this way, he would be giving only what he took, and it costs him nothing.