- The Washington Times - Monday, August 17, 2020

The Trump administration on Monday imposed new restrictions on sales of microchips to China’s Huawei Technologies aimed at further curtailing the company’s ability to build smartphones.

New Commerce Department restrictions added an additional 38 affiliates of the Chinese telecommunications giant to its list of companies that must first obtain an export license before acquiring microchips containing American technology.

The licensing requirement is now required for all transactions by Huawei as a purchasers, intermediary or end-users.

Huawei is the world’s largest telecommunications company that makes smartphones and other devices using American microchips. The Trump administration argues that the company’s ties to the Beijing government and Chinese military and intelligence services make it a major security risk.

“These actions, effective immediately, prevent Huawei’s attempts to circumvent U.S. export controls to obtain electronic components developed or produced using U.S. technology,” the Commerce Department said in announcing the new curbs.

The action is the latest step in the Trump administration’s bid to prevent the Chinese government-backed Huawei from expanding its reach. Monday’s action followed a May amendment to rules limiting Huawei’s purchase of semiconductors that are a direct product of U.S. software and technology.

Huawei has repeatedly denied the spying charges.

The latest action refined the restrictions by limiting products containing U.S. technology used in foreign-produced chips or components. The Commerce Department also made it a requirement for Huawei first obtain a U.S. export license when the company or any one of its subsidiaries uses American-origin chips.

The curbs close a loophole in export controls that had allowed Huawei to obtain foreign-made chips containing U.S. technology.

“The new rule makes it clear that any use of American software or American fabrication equipment to produce things through Huawei is banned and requires a license,” said Commerce Secretary Wilbur L. Ross Jr. “So it’s really a question of closing loopholes to prevent a bad actor from access to U.S. technology, even as they try to do it in a very indirect, very tricky manner.”

The 38 new Huawei affiliates placed on the entities list are located in 21 countries, including China, Hong Kong, Egypt, Russia, India, Chile, Singapore, Turkey, South Africa, Thailand and Dubai.

Secretary of State Mike Pompeo, who has been a leading advocate for increased sanctions on China, praised the decision.

“The Trump administration sees Huawei for what it is – an arm of the Chinese Communist Party’s surveillance state — and we have taken action accordingly,” Mr. Pompeo said.

The Justice Department has indicted Huawei for what it says violations of U.S. financial sanctions on Iran and the theft of American robot technology. Huawei Chief Financial Officer Meng Wenzhou is fighting extradition to the United States from Canada over the illicit Iran financing charges.

The Huawei restrictions are part of a U.S.-led effort Mr. Pompeo has called “Clean Networks” that seeks to rid international telecommunications of all Huawei and other Chinese gear subject to Beijing’s intelligence and cyber laws. Thirty nations have jointed the anti-Huawei coalition.

Harry Haury, a cloud computing specialist with extensive experience in China, said Huawei has a long contentious history with the United States, beginning with the theft of router source code and manuals from a U.S. company.

“Huawei has always had close ties to the People’s Liberation Army and was founded by a former senior military officer,” Mr. Haury said. “In the U.S. we simply misunderstand the relationship between companies, the military and the government in China.”

Companies like Huawei and other large state-owned enterprises and strategic companies “are actually part of the government and under their direct control,” he added.

“Non-technical people rarely understand what it means to have a foreign router or switch in our infrastructure,” Mr. Haury said.

“In today’s digital world data can be seamlessly routed anywhere in the world,” he said. “In the U.S., networks were designed with a fair amount of openness by academics and we never put in the kind of layered control necessary to protect our systems from bad actors.”

David Goldman, an American economist who writes about China, said the stricter new U.S. controls will “definitely hurt Huawei, especially its smartphone businesses, and will shift market share to Xiaomi, Oppo and other brands.”

But, he added, Chinese officials will likely “hold fire on any meaningful retaliation and await the outcome of the November elections,” Mr. Goldman said. “That probably explains the market’s indifference to the news.”

• Bill Gertz can be reached at bgertz@washingtontimes.com.

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