Tuesday, December 10, 2019

U.S. approves first licenses for tech sales to Huawei

Nov 21. 2019
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By The Washington Post · Jeanne Whalen, Joseph Marks, Ellen Nakashima

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The Trump administration announced Wednesday that it has begun issuing licenses allowing some companies to restart U.S. tech sales to China's Huawei, months after adding the telecom company to a trade blacklist.

The licenses, which will benefit U.S. tech companies and Huawei, come as the United States struggles to secure a wider trade deal with China.

The Commerce Department approved roughly one-quarter of the nearly 300 license applications it received from companies, according to an industry official who declined to be named to discuss non-public information. One-quarter of applications are receiving denial notifications, the official said, and no action has been taken on the rest.

The Commerce Department declined to comment Wednesday on the number of applications approved. In an emailed statement, the agency said it was authorizing only "limited and specific activities which do not pose a significant risk to the national security or foreign policy interests of the United States."

It said it is notifying some companies that it intends to deny their license applications. Those companies will have 20 days to appeal before the denial is official.

The denial notifications involve firms that build communication network equipment, whether 5G, radio or other components, the industry official said. The licenses that were approved related to consumer products that were deemed non-controversial and having no potential security threat.

Semiconductor companies, which manufacture the silicon chips that are critical to electronic devices, are among the license recipients, according to the Semiconductor Industry Association, which said it couldn't name individual recipients.

Many U.S. companies have reported losing significant sales from the trade ban on Huawei, which said it spent $11 billion on U.S. tech in 2018, before the ban. Among the companies reporting a sales hit in recent quarters were semiconductor makers Micron Technology of Boise, Idaho; Skyworks Solutions of Woburn, Massachusetts; and Qorvo of Greensboro, North Carolina.

The Commerce Department said that the granting of some licenses did not change Huawei's inclusion on the department's so-called Entity List of companies considered national security risks, and that the granting of some licenses did not change a temporary 90-day reprieve that the Commerce Department issued this week intended primarily to benefit rural telecoms dependent on Huawei equipment.

It wasn't immediately clear whether the license approvals indicated any change in the Trump administration's wider trade negotiations with China. The United States blacklisted Huawei in May after calling it a security threat, saying the Chinese government could tap into Huawei telecom network gear installed abroad to spy on the West or disrupt infrastructure. But President Donald Trump has also suggested he could ease up on Huawei as part of a larger trade deal.

China has said relief for Huawei is essential if Beijing is to agree to any trade deal.

The U.S. tech industry has lobbied hard for the chance to restart some sales, arguing it should be allowed to supply Huawei with parts for consumer technology products that don't hurt U.S. national security, such as smartphones and laptops. The Chinese company is one of the world's largest manufacturers of telecom network gear and smartphones.

Intel chief executive Bob Swan told CNBC in July that the company had submitted "quite a few" license applications to sell products including general-purpose computing chips, which he said shouldn't be "worrisome" for national security. Intel didn't immediately respond to a request for comment Wednesday.

"We welcome the administration's approval of export licenses for commercial semiconductor technologies that do not pose national security concerns," the Semiconductor Industry Association said in an emailed statement.

"Sales of these non-sensitive commercial products help ensure the competitiveness of the U.S. semiconductor industry, which is essential to national security," the group said. "We hope license approvals continue to proceed in an appropriate and timely manner."

In an interview Tuesday on Fox Business Network, Commerce Secretary Wilbur Ross said there had been "290-something requests" for licenses to sell tech to Huawei.

He also defended the 90-day reprieve, the third one the administration has granted since the May ban was imposed. The reprieve will allow a limited number of transactions with Huawei to continue, largely to help rural U.S. telecom companies maintain networks that use Huawei equipment, Ross said.

"You can't cut the local people in the rural communities out of telephones," he said.

Adding Huawei to the trade blacklist was part of a broad U.S. push against the Chinese company, which the United States also accuses of violating U.S. sanctions on Iran.

The Trump administration has banned federal agencies from buying Huawei gear, and pressured allies to exclude Huawei equipment from their 5G wireless networks, with mixed results.

"The Commerce decision on licenses for Huawei isn't a surprise and reflects a compromise solution between the business and national security communities," said Eric Sayers, a vice president at Beacon Global Strategies, a consulting firm. "Neither will be entirely happy, but it's a temporary middle ground for now that puts limitations on Huawei's 5G business while allowing U.S. companies to continue to sell to Huawei's non-5G business lines."

The "real question," he said, is whether the United States can persuade Japan, Taiwan and South Korea also to restrict their sales of components that enable Huawei's 5G network buildout.

The Senate and House are negotiating the final text of the annual national defense authorization that will "at the very least keep Huawei on the entity list," he said, "but could also go further by giving Congress the ability to override decisions on specific licenses for sales to Huawei in the future."

On Friday, the Federal Communications Commission is expected to vote on a proposal to block U.S. telecom and Internet companies from receiving federal subsidies if they buy foreign equipment from companies deemed to pose a security threat, including Huawei and fellow Chinese equipment maker ZTE. Rural telecom companies rely on these subsidies to make ends meet.

The FCC will also discuss a new proposal to require subsidy recipients to remove any existing Huawei or ZTE equipment from their networks.

 

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