BEIJING: Last Wednesday (May 15), US President Donald J Trump shocked many when he signed an executive order declaring a national emergency and created a US trade blacklist that would ban certain technologies and services that were deemed “foreign adversaries".
Although the order did not list specific companies, and senior White House officials initially said no country or company was targetted, it is commonly understood that the order was aimed at Chinese communications giant, Shenzhen-based Huawei Technologies.
The US Commerce Department added the leading smartphone maker to a trade blacklist on Thursday, forbidding the company from buying parts from US firms without permission from the US government.
The new restrictions also led to other foreign companies to walk away, including Germany-based chipmaker Infineon Technologies, which has suspended shipments of US products to Huawei suppliers.
That’s a huge hit to Huawei. But companies like Infineon may soon have to confront a bigger impact to its bottom line, since the company enjoys reportedly US$100 million in annual sales to the Chinese company.
Tensions rose further as Alphabet’s Google announced on Monday that it would halt the transfer of hardware, software and technical services to Huawei.
BROAD SUPPORT FOR HUAWEI IN CHINA
By reviewing recent events, one might conclude dark days are on the horizon for Huawei, but the Chinese company has been accustomed to misunderstanding, since suspicions that the company spied for the Chinese government and exported technologies to sanctioned countries like Iran swirled last year, following the arrest of Chief Executive Officer Meng Wanzhou.
In fact, the Huawei ban has emboldened the company. It enjoys huge support from the Chinese population, who see the US’ move as an effort to keep China down in reaction to the country’s growing economic heft and emergence as a technological power.
Sales of smartphones by Huawei have surpassed Apple since 2017, and each iteration of its smartphone have made leaps in technology, especially in camera technology.
For the Chinese, to purchase a Huawei no longer symbolises a value-for-money proposition but a representation of China’s technological success and coming-of-age story.
This narrative has found broad-based support within China. Even residents in Hong Kong voice overt support for Huawei in what they perceive as a bullying move by the US to blunt the company’s growth.
A 5G RACE
Huawei’s founder Ren Zhengfei is also helping to keep the spotlight on Huawei’s growth and continued development as a formidable tech titan.
“The current practices of US politicians underestimates our strengths,” news reports quoted Ren as saying on Tuesday.
Huawei’s 5G will absolutely not be affected. In terms of 5G technologies, others won’t be able to catch up with Huawei in two to three years.
He has also framed Huawei as a casualty caught in the duel between two major countries. “We have sacrificed ourselves and our families for our ideal, to stand on top of the world. To reach this ordeal, soon or later there will be conflict with the US,” he added.
Ren’s reference to 5G may be the very reason the White House has imposed a ban on the company. President Trump administration had announced earlier in April the US’ intentions to become a global leader in 5G, and that the 5G race is one America “must win”.
“We cannot allow any other country to out-compete the United States in this powerful industry of the future. We are leading by so much in so many different industries of that type, and we just can’t let that happen,” he said.
Yet at this moment, Silicon Valley stands behind Huawei and other Chinese companies based in the Greater Bay regions – in which a radical vision of 5G is currently being test-bedded and piloted.
The introduction of 5G networks is expected to revolutionalise the Internet and wireless technology applications with increased speeds and memory that will spark major breakthroughs in innovations in artificial intelligence, the Internet of Things, robotics and addictive manufacturing.
Huawei had poured in over US$15 billion of funding in recent years in research and development in the development of 5G networks and has signed numerous contracts with companies in China and overseas to construct smart cities.
It is on the cusp of becoming a global tech behemoth.
Because the US ban poses a significant risk that could reasonably derail Huawei’s growth, the Chinese company has already announced a Plan B.
Many insiders say they had already expected Washington to implement restrictive laws on them some time back, so the tech titan has worked with other Chinese companies to construct its own mobile operating system (OS) that counters the iOS-Android duopoly.
Huawei is banking on Kirin 980 processor chips as a replacement to US chipmakers. The EMUI 9 user interface, rolled out on older devices including the Huawei Mate 9 and P10 can serve as a substitute to Android-based systems.
The good news is the company wasn’t caught blindsided by the White House move, but the not-so-good news for Huawei users is that there may be hitches to the company’s supply chains and users may face glitches on their current smartphones as Google decouples its programmes from Huawei’s mobile devices after 90 days.
WHAT’S AT STAKE? THE TONE OF THE BILATERAL RELATIONSHIP
Still, most Huawei smartphone users in China understand that their “made-in-China” smartphones will experience some intermittent issues during this period as the trade war brews but accept some temporary discomfort.
It is unlikely that they will switch to a Samsung or Apple device over the next few months.
But many are likely to direct their impatience at the US, where concerns that such moves aimed squarely at Huawei may have been motivated by lobbying from Silicon Valley giants like Apple. This is a prevailing narrative many Chinese buy into, and I do not rule out ground-up Chinese campaigns to boycott Apple in the coming months.
The Chinese will not take kindly to any perceived attempts by Silicon Valley to corner the technology market. It should come as no surprise that media reports are saying Chinese investors have stopped funding start-ups and tech firms based in California for the time being.
In short, the Chinese will not take kindly to further perceived moves by the US to squeeze Huawei or other Chinese tech companies.
After the arrest of Meng Wanzhou, Washington’s steps over this past week have led China to the conclusion that it must show resolve and stand up against the US.
Otherwise, China risks setting the wrong tone for the bilateral relationship in which the US feels it can throw its weight around and put China down.
Tom McGregor is a commentator on Asia-Pacific affairs based in Beijing.