For months, the U.S. has been trying to force European allies to ban Chinese telecommunications giant Huawei from their 5G networks, but major powers like the U.K. and Germany have been dragging their feet.
On Wednesday, the Trump administration made an announcement that could take that decision out of their hands.
While most of the attention was focused on Donald Trump’s bombastic executive order to ban any company that “poses an unacceptable risk to the national security” from doing business in the U.S., it was a much quieter announcement by the Commerce Department, made hours later, that will have the greatest impact on Huawei.
The Commerce Department announced that the company and 70 of its affiliates have been added to its Entity List, meaning that no U.S. corporation can sell its technology to Huawei. Officials said the move was pegged to Department of Justice charges brought against Huawei in January, alleging the company committed fraud, obstructed justice, and stole trade secrets.
The U.S. has been campaigning hard to get its allies to ban Huawei completely from their 5G networks.
Huawei is the recognized leader in 5G technology globally, and has signed a slew of deals in Africa, Asia, and Europe to build these networks so any anything that slows or delays these roll-outs will have a huge impact on the company.
For all of Beijing’s claims that Huawei is a shining example of how a Chinese company can become a dominant global business, Huawei’s products rely heavily on components from U.S. companies, which would be difficult — if not impossible — to replace quickly.
In November, Huawei released a list of its 92 “core suppliers” for the first time. Thirty-three were American, and the list included American giants like Microsoft and Intel.
The new ban would therefore delay Huawei from fulfilling its orders to build 5G networks globally, or prevent it from doing so entirely. “If their products are dependent on American suppliers, then they are not going to have the products,” Bryan Ma, vice president of devices research at IDC, told VICE News.
While Huawei relies on American suppliers, its biggest customers are in Asia, Africa, and Europe where it has signed 23 contracts with major carriers like Vodafone, Deutsche Telekom, and Telefonica.
“[The ban] will have immediate global implications for any company utilizing Huawei’s products or services. European carriers, in particular, are likely to be affected quickly,” analysts at Eurasia Group said in a note Thursday.
The U.S. has been campaigning hard in recent months to get its allies to follow its lead in banning Huawei completely from their 5G networks, and while some like Australia and New Zealand have followed suit, major powers like the U.K. and Germany have yet to make a final decision about Huawei.
Trump’s executive order did not name Huawei or China specifically, but it will escalate tensions in the increasingly bitter trade war developing between the two countries. On Thursday, Huawei responded to its inclusion on the Entity List by warning that Trump’s actions will leave the U.S. “lagging behind” in deploying next-generation 5G technology.
“Restricting Huawei from doing business in the U.S. will not make the U.S. more secure or stronger; instead, this will only serve to limit the U.S. to inferior yet more expensive alternatives,” a spokesperson told Vice. “In addition, unreasonable restrictions will infringe upon Huawei’s rights and raise other serious legal issues.”
The administration has long claimed the company is a threat to national security pointing to its close links to the Chinese government — claims Huawei has always denied. Huawei said Tuesday it was willing to sign a “no-spy agreements with governments” concerned about Beijing using Huawei equipment for surveillance.
Cover: In this Friday, May 3, 2019 file photo, President Donald Trump speaks during a meeting in the Oval Office of the White House, in Washington. Trump issued an executive order Wednesday, May 15, 2019, apparently aimed at banning equipment from Chinese telecommunications giant Huawei from U.S. networks. (AP Photo/Alex Brandon, File)