Business

Trump does not ‘want to do business’ with Huawei

As Huawei’s initial reprieve period - in which it may continue buying from US companies - comes to an uncertain end, US President Donald Trump has told reporters that he does not want to work with the company.

The Shenzhen-based company – which is the world’s largest telecommunications manufacturer – has found itself at the centre of trade tensions between the US and China, which have involved hundreds of billions of dollars of tariffs being slapped on imports. In January, US prosecutors announced 23 indictments against Huawei, including violating trade sanctions against Iran and trade theft.

The US government has also applied diplomatic pressure on its allies, including the UK, in an effort to persuade them to exclude Huawei from building 5G infrastructure. The US government has alleged that Huawei is a natural security threat, as its equipment could be used as a tool for espionage by the Chinese government. No evidence has been publicly presented to support the claim, which Huawei has repeatedly denied.

In May, Trump added Huawei to the ‘Entity List’ by executive order, preventing US companies from working with Huawei without a special permit. The provocative action – if sustained – could force Huawei to make dramatic changes, particularly to its consumer electronics business given that its well-reviewed handsets use Google’s Android OS and chipsets from US-based companies or companies with US connections. At Huawei’s recent developer conference, the company confirmed that it was preparing to roll out its own ‘Harmony’ (or ‘Hongmeng’) OS on IoT devices, although “for the time being” Huawei phones would continue to use Android.

Following its addition to the Entity List, Huawei was given a 90-day reprieve in which it could continue to buy goods from US suppliers; this period is due to end today.

However, it is expected that the US Commerce Department will grant a “temporary general license” to extend this period by a further 90 days to 17 November. According to a report from Reuters, this extension has been motivated by a need to allow Huawei to continue providing service to existing customers – such as by supporting network connections in rural parts of the US and software updates for their smartphones – while the dispute continues.

 

Of $70bn spent by Huawei on components in 2018, more than $10bn was spent with US-based companies such as Intel, Qualcomm and Micron Technology. According to Wilbur Ross, the US Commerce Secretary, more than 50 of Huawei’s suppliers have applied for a license to continue to trade with the Shenzhen-based company.

A source told Reuters that Trump planned to discuss Huawei’s position directly with President of China Xi Jinping.

Addressing reporters as he boarded Air Force One in New Jersey on Sunday, Trump commented that: “At this moment it looks much more like we’re not going to do business [with Huawei]. I don’t want to do business at all because it is a national security threat and I really believe that the media has covered it a little bit differently than that.”

On the same day, Trump told reporters that he may have been persuaded against mounting further tariffs on Chinese products following a dinner meeting with Apple CEO Tim Cook. Cook had communicated that Apple would be hit by new tariffs as its products are largely manufactured in China, while South Korean competitor Samsung would be able to avoid the blow as its manufacturing operations are mostly located in other countries in South East Asia. Trump described this as a “very compelling argument.”

The planned tariffs will go into effect on 1 September 2019, raising prices on some electronics products by 10 per cent.

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