Government

Huawei comes back: Trump allowed US companies to make business with it

Donald Trump stated that his government would allow US companies to sell products to Huawei.

Huawei China United States Trade War

At the G-20 summit, US President Donald Trump met with the president of the People’s Republic of China Xi Jinping intending to advance in the solution of the trade conflict that both countries have maintained since last year.

As one of the results of this meeting, Donald Trump stated that his government would allow US companies to sell products to Huawei, a Chinese technological giant that was banned last May by the White House.

“We sell a tremendous amount of products to Huawei,” said Donald Trump after the meeting with Xi Jinping.

A breath for Huawei

This news will be a relief for the company led by Ren Zhengfei, who a few weeks ago told the press that Huawei’s phone sales fell 40% outside of China after the sanction imposed by the United States government.

Ren Zhengfei also commented that Huawei’s production would be reduced by $ 30B, one third less than in 2018.

“In 2021 we will recover our vitality to serve humanity,” said the Huawei CEO before the announcement by the president of the United States.

US companies affected by Huawei ban

But the veto that Donald Trump imposed on Huawei affected not only the Chinese company but also an entire industry that has the Chinese manufacturer as one of its main customers.

Micron Technology, which sells memory chips, said it had lost $ 200M for the veto. Huawei represents 13% of its sales.

Broadcom, a producer of cellphone chips, also reported that the ban on Huawei reduces its sales forecast by $ 2B. This company has sold one billion dollars in electronic components to Huawei only in this fiscal year.

Semtech, developer of chips for smartphones and optical components for communications, says the Chinese company accounted for 16% of its revenues last year.

The smaller companies are the most affected, such as the manufacturer of optical components NeoPhotonics. In 2018, 46% of this company’s revenues came from sales to Huawei.

In recent days, the technology industry in the United States expressed concern that the damage caused by Donald Trump’s policy is irreversible due to the loss of confidence of Chinese companies towards American distributors, who could redouble their efforts to design their own chips or to buy from neighboring countries such as Japan, South Korea or Taiwan.

Walden Rhines, executive director emeritus of Mentor, a unit of Siemens, said for the New York Times that “the United States runs the risk of becoming the seller of last resort for China.”

Income from intellectual property, also at risk

The development of the intellectual property has also been at risk due to Trump’s veto. In 2018, Huawei paid more than $ 6B in royalties to take advantage of the intellectual property of other companies, of which 80% were American firms, as the company mentioned in the document “Respecting and Protecting Intellectual Property: The Foundation of Innovation,” published this week.

Now, American companies have also lost the confidence that their Chinese partners had for the development of new products, as has been the case of Efficient Power, a company that makes chips with the same semiconductor used for LED lights.

This company, which aspired to obtain 80% of its income from China, has had to face a new problem with its customers, who continue to buy their products, but prefer not to ask for chips with technical specifications that can create a dependency relationship to long term with the company.

Intellectual property should not be politicized

Song Liuping, legal director of Huawei, expressed a few days ago his concern about the politicization of intellectual property:

“Intellectual property is the cornerstone of innovation, and its politicization represents a threat to global progress.”

Song warned that if intellectual property is used as a political weapon, confidence in the patent protection system will be at risk. The executive also mentioned that “If some governments selectively block the way for companies in intellectual property issues, they will negatively impact global innovation.”

Song recalled that in the past 30 years, no court has found Huawei guilty of intellectual property theft. These statements are a response to US allegations that blame Huawei for corporate and political espionage.

Huawei, a player that promotes innovation

Song Liuping stressed the vital role that Huawei has played in innovation. At the end of 2018, the company reached 87 805 patents, 11 152 of these are used in the United States. The company’s legal director emphasized Huawei’s commitment to “share our technology with the world. That includes 5G and American businesses and consumers. Together, we can make our industry advance and develop the technology that we all need. “

Huawei owns 20% of the patents that revolve around the 5G network. These patents, which are about 2 570, include chips, terminals, and infrastructure. The possible delay of the 5G network worldwide was one of the most mentioned consequences after the veto, but because of the weight that Huawei has in the development of new technologies, this technological delay can affect other industries, such as self-driving cars, as commented in United States media.

However, Huawei Technologies’ global vice president, Ken Hu, reaffirmed Huawei’s commitment to expanding 5G technology: “I can clearly say to everyone that in the 5G issue we will not be affected at all, neither in the contracts that we have signed or in which we are going to sign”.

At the Mobile World Congress in Shanghai, the executive mentioned how the technology giant has managed to sign 50 commercial contracts for 5G, 28 of them in Europe, 11 in the Middle East, 6 in the Asia Pacific, 4 in America and 1 in Africa.

Donald Trump’s announcement at the G20 summit, allowing US companies to sell again to Huawei, puts an essential piece of telecommunications innovation back on the board. However, tension and uncertainty still do not disappear. Trump refused to say that he would remove the blacklisted company from the US Treasury’s list.

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