ZTE

Huawei’s Response to U.S. Trade Sanctions

Huawei will go down in history as one of the major Chinese tech companies that felt the heat of the 2019 U.S-China trade war. Prior to 16th May when the U.S. Department of Commerce announced that it had added Huawei to the Entry List, Huawei was doing really well. As evident for this, its first-quarter revenue shot up 39 per cent year on year. The news turned tables for Huawei and is a clear signal of a heightening cold war between the two countries.

According to some officials in Europe, Huawei would carry on with their plan to build 5G-enabled networks. But the sanctions by the Trump administration might have great effect on Huawei. Soon after the announcement by the Department of Commerce, chipmakers such as Broadcom and Intel stopped supplying to Huawei. Google also suspended Huawei’s licenses for critical mobile applications like Google Play and Gmail.

Where Huawei’s Woes Started

source: leafly.ca

The business quagmire Huawei is currently facing resulted from inclusion in the Entity List. This is a list of companies that the US government considers a threat to US national security. Any US company that wishes to export products to an enlisted firm must obtain a license from the Department of Commerce through the Bureau of Industry and Security. The license review policy is normally “presumption of denial” which means applications for licenses are more likely to be rejected. It is clear that the US government can decide whether or not a company will work with US companies.

Huawei Loses Access to Key Inputs

source: linkedin.com

Huawei’s leadership in the global technology space places it at the eye of the storm that the US-China trade war has created. The tech giant has been working with a wide range of US suppliers. In 2018, Huawei spent $11 billion to buy products from top US corporations including Intel, Qualcomm, and Micron. According to Bloomberg, chipmakers Intel, Qualcomm, Xilinx and Broadcom have already notified their employees that they will stop supplying to Huawei until further notice.

Is it Time for a new Android for Huawei?

source: alhurra.com

With Goggle’s suspension of Huawei’s Android license, how will future Huawei devices access popular Google services? Using Android OS doesn’t give a device automatic access to Google services and apps. How will a future Huawei user access daily-use apps like YouTube and Gmail? These are some of the questions Huawei must ask itself as it finds ways to survive this storm.

Huawei Saved for the Rainy Day

source: yahoo.com

Details have emerged that the Chinese tech giant has been making preparations for the unexpected, which already happened. For almost a year, the company has been stockpiling key components sourced from US corporations. It will hopefully use the stock to manage the current scenario even as it hopes the trade tangles between the two countries will be resolved in a business-friendly way.

In addition, Huawei has also made several initiatives to develop its own chipsets (Intel and Qualcomm alternatives) for use in its networking products as well as smartphones. In March, Huawei confirmed that it has developed operating systems for smartphones and computers. The company planned to use these systems in case those supplied by US firms are not available.

Launching of the New Budget Honor Smartphone

source: zimtimes.com

Huawei has responded to the immediate tests with resilience. The company launched the Honor 20 series in London on May 21. It released the Honor 2o and the Honor 20 Pro. This came just 10 days ahead of the planned unveiling of the same product in Shanghai on May 31.

The tests Huawei is going through shows how pervasive the company’s goods and technology are across the globe. The restrictions by the US will definitely have far-reaching impacts not only on Huawei but also the global economy. One cannot avoid thinking: Will the U.S trade sanction on Huawei last?

A former Department of Commerce official compared a Huawei reprieve with the lifted trade ban on ZTE in July. The U.S had banned ZTE from buying American-made components but called off the ban to prevent systems from crashing. The ban wreaked havoc at many wireless carriers in South Asia and Europe. The Commerce Department reached an agreement with ZTE which included a $1 billion fine and $400 million in escrow. Traders working with Admiral Markets reported that Huawei has been one of the best shares to buy for tech investors. It’s intriguing to see how its case will end.

 

Will Trump’s Deal with a Dangerous Company be Blocked by Congress?

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Donald Trump did what no other president before him could do. He started denuclearization talks with North Korea, and instead of welcoming him to his country as a hero, the Congress awaited him with criticism. Both Republican and Democratic senators agreed to counter his decision to save the Chinese telecommunications company ZTE.

Donald Trump is expected to fight back. He is going to say that he knows what he is doing, but this will only make him look weak and perhaps not even his allies will back him up in this. But the Senate must not give up. The ZTE is considered to be a threat to the American security, and there are possible ties between the company and the Trump family business, which would be the main reason why POTUS wanted to save it.

Source:scmp.com

Why did the US put ZTE on the list of sanctions? Attorney General Jeff Sessions and the other law enforcement officials claim that it violated export controls. In other words, the American technology was supposed to be kept out of the hands of North Korea and Iran. But the ZTE resumed shipping to those countries even after their actions have been revealed. According to the Justice Department, the violations were a part of an “elaborate scheme” that was approved by the top management of ZTE.

Trump wants ZTE to resume business with the American supplier in exchange for a $1 billion fine. Even though it sounds much, the Chinese company would have no problem paying this since they had a market capitalization of around $20 billion, before the sanctions were announced.

But the precedent set here is horrific. The other businesses can come to the negotiating table aware of the fact that they can commit violations and lie to the American investigators. After that, all they have to do is buy their way out of the problem. Why is the ZTE receiving the special treatment? Even though that is unclear, many people believe that the Trump family has some kind of benefit from it.

And they do. Just a few days before Trump announced his decision to rescue ZTE, it was divulged that the Trump family benefits from over $500 million in investments extended by a conglomerate owned by the Chinese government in an Indonesian development project which is in connection with the Trump Organization. According to the developer, the Trumps are the partners in this project and considering that POTUS remained a part of the company, he is earning money from the investment.

Source:en.radiofarda.com

But Donald is not the only person from the family who benefits. The Chinese government approved seven new trademarks for the business of his daughter, Ivanka. The value of these trademarks remains unknown, but it is estimated that they go as high as millions of dollars. Also, it is necessary to mention Ms. Trump and Jared Kushner, her husband grossed $82 million last year, but their operations in China are hard to trace. Even though some gaps need to be filled to complete the picture, it is quite clear that the Trump family benefits big time.

On the other hand, $500 million to China means nothing. However, the US could face severe consequences. That is why so many people in Congress sought a standing in the Federal District Court in the District of Columbia, alleging that POTUS has violated a constitution by receiving profit from Chinese and the other foreign governments.

As for the ZTE, the Senate provision is introduced by the Republicans Tom Cotton and Marco Rubio as well as the Democrats Chuck Schumer and Chris Van Hollen who want the sanction on the Chinese communications company re-imposed. This is something senators are not likely to give up on, but they will have Trump on the opposite side, who has had success in talks with Kim.

Source: nytimes.com

Trade Talks Between America and China End In Stalemate

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On Sunday, China and the United States ended the trade talks that took place in Beijing. The number of announced deals is zero, and Beijing officials refused to commit to buying more American goods. The US will continue with imposing further tariffs on Chinese export goods.

Chinese news media distributed the official statement that said: “If the United States introduces trade measures, including an increase of tariffs, all the economic and trade outcomes negotiated by the two parties will not take effect.”

Now, the Trump administration has China’s industrial policies to worry about. Furthermore, the problem with the Chinese telecommunications company ZTE remains unresolved, which harms both countries. The American export promotion team was led by Commerce Secretary Wilbur Ross and he was joined by senior officials from the Treasury and the Agriculture Department. The United States Trade Representative Office has threatened to impose 25 percent tariffs on $50 billion a year in Chinese goods, while the aluminum tariffs that are already imposed will remain in power. Interestingly enough, the top officials from this office were not present.

Meanwhile, Trump wrote on Twitter: “When you’re almost 800 Billion Dollars a year down on Trade, you can’t lose a Trade War!” However, Beijing officials would not pledge additional purchases and they demand Americans to solve their border trade issues. China is ready to strike back if the US imposes the tariffs. In that case, Beijing would block an equal value of soybeans and other goods that come from the United States.

The dispute is obviously the main issue, but the Chinese officials are concerned about ZTE, a telecommunications giant which employs 70,000 people. The company was forced to shut down its operations almost completely because the American government agency, the Bureau of Industry and Security ordered the US companies to stop selling software and microchips to ZTE.

Around three weeks ago, Trump wrote a tweet in which he expressed concern about the American sanctions on ZTE. When Mr. Ross and his team arrived in the Beijing, China has become optimistic that they could finally solve the issue without any major obstacles and sacrifices.

“Chinese officials know these talks are precarious, but may underestimate the domestic political cost Trump now sees in lifting the ZTE ban without major concessions from China,” said Andrew Gilholm, the director of China analysis at Control Risks, a political and security consulting firm. “If the ban stays, Beijing’s retaliation will definitely go up a gear.”

Meanwhile, the state media in China explained why the sales ban is imposed on ZTE. The company has ties to Iran and North Korea. Such connections do not cast the best light on the country because Beijing claimed that China’s enforcement of international sanctions against North Korea was one of the reasons the upcoming summit between Donald Trump and Kim Jong-Un was organized.

Source:uk.reuters.com

According to the Chinese news outlets, the ZTE decision was made by Mr. Ross’ Commerce Department. They suggested that the decision is nothing more than a bargaining ploy, which is a part of trade negotiations. The Bureau of Industry and Security is a part of the Commerce Department, but despite that, its autonomy is considerable. The agents of the bureau carry guns and badges, and they have played a huge role in preventing Iran and Iraq from fully developing the nuclear weapon.

James Zimmerman, a former chairman of the American Chamber of Commerce in China and current partner in the Beijing office of the law firm Perkins Coie says: “Trump’s strategy does no favors for the moderates like trade negotiator Liu He who are eager to take China down a more manageable path of market and financial reforms, and such reforms would indeed be good for U.S. commercial interests.”

Source: mobile.nytimes.com

This Is How Europe Can Block Trump Actions

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The US exited Iran deal, and the sanctions they will impose on this Middle East country could harm European companies. But EU could try and use a tool that worked well for them in the 90s in a situation similar to this.

America’s exit from Iran deal wasn’t graceful, and President Trump threatened that he would use the sanctions to make Europe follow him. So, Trump didn’t only violate a multilateral agreement, which the rest of the signatories intend to honor, his administration also wants to impact European business in that country. POTUS also mentioned that he plans to impose harmful trade tariffs on EU if they fail to oblige. If this happens, a trade war is imminent. Also, Europe will be between a rock and a hard place in their attempt to retain its sovereignty while not further damaging trans-Atlantic alliance in the process.

After Trump announced that America exited Iran deal, his administration said that the set of sanctioning measures would be imposed in Iran, and that same awaits any countries that continue to trade with Iran. The US ambassador in Germany tweeted that German companies should cease all trade affairs with Iran immediately.

Source: www.dw.com

Upon these threats Germany’s economy minister, Peter Altmaier said that German government was “ready to talk to all the companies concerned about what we can do to minimize the negative consequences of the U.S. withdrawal.” French Finance Minister Bruno Le Maire was harsher in his response by saying: “The international reach of U.S. sanctions makes the U.S. the economic policeman of the planet and that is not acceptable.” At the moment of writing of this article, Iran and EU are working on a plan that will allow Iran to sell Oil and Gas and protect European companies at the same time.

After Trump removed the US from the deal, there are two paths that the Old Continent can take. The first one is to accept the US leaving the agreement but to work on economic issues that will arise. Europe needs to make sure that their companies operating in Iran won’t be penalized by America.

The second path would be to be aggressive towards the US and to reinstate the ‘blocking regulation’ which hasn’t been used in more than 20 years. The primary goal of this regulation is to ‘abolish restrictions on international trade.’ The last time it was imposed was in 1996 when President Bill Clinton turned Iran and Libya Sanctions Act and the Cuban Liberty and Democratic Solidarity Act to law. At the time this was against EU interests, and Europe acted on behalf of its security and economy.

Source: www.vox.com

This act was called Council Regulation N0. 2271 and its goal was to protect EU companies against the “effects of the extra-territorial application of legislation adopted by a third country.” The regulation also contained ‘clawback provision’ which essentially allows EU company to sue America on European courts in a case that their business is damaged on purpose by the US actions. In this case, if the US losses on the court, every EU company could get a refund through a seizure of the US entity on EU soil against which they had a grievance.

Source: cnn.com

But if the Trump sanctions go from Iran onto Europe, most EU companies would stop to trade with Iran. The losses they would have that way are far smaller than those that would occur if they ended their work with America. Luckily for all parties involved, Trump might be willing to negotiate and to soften his hard stance. We draw this conclusion from his recent tweet in which he stated that he’s ready to sit at the table with Chinese president Xi Jinping in order to loosen the sanctions on ZTE. This company was penalized by the US administration due to steady sales to North Korea and Iran. If Trump can find common ground with Chinese, there’s no reason he can’t get along with EU countries.

Source: foreignpolicy.com

Did President Trump just save ZTE?

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As we all know, Samsung and Apple are still two biggest companies when it comes to modern phones. Whether you are an android fan or a fan of the iOS, there is no doubt that you have seen how both of them look. These are the giants of this market.

Well, the one company that is trying their best to match up with the giants is ZTE. But, it’s kind of hard for them to do that when they have a huge ban in the US.

ZTE is actually the fourth-largest smartphone maker in the States and has been in trouble lately as the US Commerce Department issued a denial order which is preventing US businesses from providing services or even selling hardware to Chinese tech giant. We are talking about a seven-year ban here that actually forced ZTE to say goodbye to some of their “major operating activities.”

Source:automobilnews.eu

But don’t you worry, here comes President Trump, ZTE’s newest ally! He has tweeted out that he is working with the President of China, Xi Jinping, on getting back into business this massive Chinese phone company. He wants to find a way to make everything work and he wants to do it fast.

He even stated that the Commerce Department has been instructed to get things done quick, fast and in a hurry.

ZTE has been working hard on getting that denial order overturned. Their biggest hopes were the bilateral trade talks between US and China. Now, it seems that they have President Trump on their side, which is a huge plus for the Chinese company.

It is a bit of a surprise that Trump of all people has stated that he is concerned about Chinese people losing jobs since he was the one to say that protecting the jobs of the American people is something that he wants to focus on.

Anyway, this is a strange situation. We’ll have to wait and see the results of Trump’s and ZTE’s efforts.

Source: cnet.com