In what appears to be a significant offensive in the ongoing “trade war” between the U.S. and China, regulators have now made it more difficult for Chinese companies to obtain microchips. These microchips are composed of various metals including the material used in the production of an aluminum fence. Other metals that are found in these chips include gold, copper, and the metalloid and chemical element called silicon.
One clear impact of this move by the U.S. government is the prohibition on foreign companies on selling microchips to Chinese technology giant Huawei. It also means that no software or technology can be sold to Huawei with a license from the US government. This move effectively limits Huawei’s access to materials that are highly needed for its global business expansion. The said company relies on other firms to provide semiconductors for its various products including those that use 5G telecommunications equipment.
Background of Huawei and Its Founder
Based on open sources, Huawei declares that was officially founded in 1987 by Ren Zhengfei, a former military technologist in the People’s Liberation Army (PLA), the armed forces of China. After leaving the PLA, he formed Huawei and engaged in contract work by selling and maintaining computer server switches. Later on, his company was involved in the construction and data center building of China’s 4G infrastructure. As part of China’s diplomacy strategy in Africa, Huawei was also tapped to establish the telecommunications infrastructure in the said continent. The company is reported to have at least 194,000 employees that work in 170 countries around the world.
In 2005, Ren was voted among the world’s 100 Most Influential People. Today, his net worth is estimated to be at least $1.3 Billion. By 2018, the company was able to sell more than 200 million smartphones across different continents. The following year, in 2019, it revenue of $122 Billion. By mid-2020, Huawei had already surpassed the Korean technology behemoth Samsung, which was until recently the world’s number one in terms of smartphone sales.
Huawei became controversial when various governments issued a ban on the company out of fears that its technologies can be used or are already being utilized for espionage. Some intelligence agencies have warned that the company’s smart devices, software products, and networking technology can be used by Chinese intelligence and military units to eavesdrop on emails, calls, and other forms of communication.
In 2012, the company’s chief financial officer Meng Wanzhou was implicated by U.S. authorities in the sale of technology to Iran, a country that was under U.S. sanction. In 2018, Meng was arrested in Canada based on a request from US authorities after a court issued an arrest warrant. The Huawei executive was charged with multiple counts of bank and wire fraud in relation to the banned, illegal sale of technology to Iran, which her company strongly denied. In May 2020, the proceedings for her extradition from Canada to the US had already began.
In 2019, Huawei was once again embroiled in a controversy when an Australian think tank linked the tech giant and its surveillance technology to the mass detention of the Uyghur people and other minority groups in China.
Early in 2020, the U.S. Department of Justice accused the company of conspiring to steal trade secrets of several U.S. firms and for exploiting computer network backdoors used by American law enforcement agencies. By July 2020, UK authorities expressed concerns about security threats in Huawei’s technology products and announced a ban against 5G technology associated with Ren’s giant corporation.
Trade War to Hot War?
The U.S. and China have both imposed tariffs on each other’s goods, costing billions of dollars upon the shoulders of importers and exporters. So far, the U.S. has imposed a total of $360 Billion in tariff on imported Chinese products while China’s retaliation in terms of tariffs has reached $110 Billion. China has also been accused by US President Donald Trump of practicing unfair trade and for being involved in economic espionage and trade theft. The so-called trade war began sometime in July 2018 and is still on with no end in sight, albeit, negotiations between the two sides continue.
While the ban on Huawei is seen by geopolitical and economic experts as but a part of the trade war, it does have strong reverberations in the business sector. The Chinese firm claims that at least 1,200 U.S. companies will be adversely affected by the ban and at least four billion consumers worldwide would also feel the impact of the technology ban’s ripple effect. Further, Huawei claimed that it owns several patents related to 5G technology and any move against it would also have a negative effect on the rollout of this latest wireless innovation.
Even as the trade war rages, the return of U.S. military forces in Southeast Asia is seen as a form of “muscle-flexing” by America in a region that is fast coming under the influence of China, if some political pundits are to be believed. China’s insistence on its Nine-Dash Line doctrine has made the South China Sea a potential flashpoint in that part of the world. While nobody wants an all-out war to break out, many are now closely monitoring the tensions between the U.S. and China and hopes that diplomacy will prevail and bring the trade war to a close and prevent shooting war in the future.