How a Washington crackdown on Huawei could backfire for everyone

Acting tough on Chinese firms might seem like a good idea to the Trump administration, but it could come back to bite the US tech industry in the long-term.

A full-on tech trade war between the United States and China just got another step closer after Washington opened an investigation into whether Huawei broke US sanctions on Iran. The US Department of Justice has already slapped tariffs on $60 billion worth of Chinese steel and aluminium, with China raising tariffs on US goods in response, but punishing Huawei could have more serious repercussions.

Imagine the panic in US tech boardrooms if the world’s number one manufacturer of electronic components decided to ban or restrict exports to America. All bets are off in this new high-stakes geopolitical stand-off. In the longer term, these retaliatory measures could even accelerate China’s metamorphosis into a self-sufficient tech powerhouse.

 

Will Huawei suffer the same fate as ZTE?

The Justice Department investigation into Huawei recalls a similar probe into whether Shenzhen rival ZTE broke US sanctions by exporting devices containing American components to Iran. ZTE was found guilty last year not only of breaking the sanctions, which resulted in an $892 million fine, but of breaking the settlement deal’s terms by failing to punish those involved. The resulting seven-year ban on US firms selling to ZTE will severely hamper its growth efforts because it relies on chips and other components from the likes of Qualcomm and Micron Technology.

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The probe of Huawei, which is said to have been ongoing since early 2017, could result in similar punishment if the firm is found guilty of breaking sanctions. Washington has belatedly realized that China is supplanting the US as the world’s pre-eminent tech superpower, resulting in increasing efforts to corral the number one telecom equipment maker and third-largest smartphone maker in the world. National security concerns have been used to keep Huawei down, first in 2012 when it and ZTE were de facto banned from the US telecoms infrastructure market after a damning congressional report, and more recently when AT&T and Verizon were compelled to drop plans to sell the latest Huawei smartphones, and Best Buy stopped selling its devices.

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