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Huawei woes hide ‘toothless’ US export controls against Chinese tech
Access to vital market for equipment and software makers stands in way of blanket bans
Any US government official looking at Huawei’s recent financial performance must feel vindicated. Washington’s efforts to destroy the Chinese technology group appear to be working: Huawei’s revenues are in free fall, the premium smartphones it launched in late July do not work for 5G, and it is forced to sell off parts of its business.
For the next five years, according to chair Eric Xu, the company’s sole goal is survival. But policy experts caution that the US is in no position to declare victory in its “technology war” with China. In fact, among hundreds of Chinese technology companies which the US Department of Commerce has targeted with sanctions, Huawei is the only one fighting for its life. “As it stands today, the restrictions that are in place are rather limited,” said Douglas Fuller, an associate professor at City University Hong Kong who closely follows the Chinese technology industry and Beijing’s and Washington’s policies towards it. “Obviously, they heavily impact Huawei. But all those other companies, not so much.” That is because Washington has used its most potent weapon — barring access to semiconductors via the US-made machinery and software tools needed to manufacture them — against Huawei only.
Washington faces a dilemma in its attempt to rejig export controls: For American chip equipment makers and producers of the software tools used to design chips, China has become the biggest and fastest-growing market. John Verwey, a trade and investment analyst with a focus on microelectronics, argues that it is China-powered growth that finances the US industry’s ability to innovate and thus stay ahead in its race with China. Under the 2018 Export Control Reform Act, the US administration must identify technologies on which additional export controls should apply beyond the existing register of military-use or dual-use technologies. But work on those lists keeps dragging on as the government seeks to balance national security risks posed by China’s acquisition of key chip technology with the risk for the US of losing a vital market. Instead, Washington is going after China with a cruder instrument: the so-called Entity List, a register of legal persons seen as engaging in activity running counter to US national security or foreign policy interests.
US companies need to apply for an export licence to sell to targeted companies, but they are not under a blanket ban. “Controls on a specific technology or end use more effectively address a broader national security risk,” Emma Rafaelof, a policy analyst at the US-China Economic and Security Review Commission, a Congress-mandated body, wrote in a recent paper. She added that the long process of identifying which technologies should fall under extra export controls “has allowed for unfettered US exports of these technologies in the meantime”.
Access to vital market for equipment and software makers stands in way of blanket bans
Any US government official looking at Huawei’s recent financial performance must feel vindicated. Washington’s efforts to destroy the Chinese technology group appear to be working: Huawei’s revenues are in free fall, the premium smartphones it launched in late July do not work for 5G, and it is forced to sell off parts of its business.
For the next five years, according to chair Eric Xu, the company’s sole goal is survival. But policy experts caution that the US is in no position to declare victory in its “technology war” with China. In fact, among hundreds of Chinese technology companies which the US Department of Commerce has targeted with sanctions, Huawei is the only one fighting for its life. “As it stands today, the restrictions that are in place are rather limited,” said Douglas Fuller, an associate professor at City University Hong Kong who closely follows the Chinese technology industry and Beijing’s and Washington’s policies towards it. “Obviously, they heavily impact Huawei. But all those other companies, not so much.” That is because Washington has used its most potent weapon — barring access to semiconductors via the US-made machinery and software tools needed to manufacture them — against Huawei only.
Washington faces a dilemma in its attempt to rejig export controls: For American chip equipment makers and producers of the software tools used to design chips, China has become the biggest and fastest-growing market. John Verwey, a trade and investment analyst with a focus on microelectronics, argues that it is China-powered growth that finances the US industry’s ability to innovate and thus stay ahead in its race with China. Under the 2018 Export Control Reform Act, the US administration must identify technologies on which additional export controls should apply beyond the existing register of military-use or dual-use technologies. But work on those lists keeps dragging on as the government seeks to balance national security risks posed by China’s acquisition of key chip technology with the risk for the US of losing a vital market. Instead, Washington is going after China with a cruder instrument: the so-called Entity List, a register of legal persons seen as engaging in activity running counter to US national security or foreign policy interests.
US companies need to apply for an export licence to sell to targeted companies, but they are not under a blanket ban. “Controls on a specific technology or end use more effectively address a broader national security risk,” Emma Rafaelof, a policy analyst at the US-China Economic and Security Review Commission, a Congress-mandated body, wrote in a recent paper. She added that the long process of identifying which technologies should fall under extra export controls “has allowed for unfettered US exports of these technologies in the meantime”.
