American Tech Companies Find Ways Around Huawei Ban
June 25 2019 - 11:23PM
Dow Jones News
By Dan Strumpf in Hong Kong, Asa Fitch in San Francisco and Yoko Kubota in Beijing
Large U.S. tech companies in the direct sights of the Trump
administration's ban on exports to Huawei Technologies Co. are
finding ways to resume some shipments to the blacklisted Chinese
tech giant without running afoul of American regulations.
Micron Technology Inc., one of the world's largest makers of
memory chips, on Tuesday said it restarted some shipments to Huawei
after determining they were in compliance with U.S. law. Qualcomm
Inc., the leading supplier of wireless chips, has also resumed
shipments of certain radio-frequency components to Huawei, while
Intel Corp. resumed shipments of some of its products, according to
people familiar with the matter. Other American tech companies
including ON Semiconductor Corp. are also examining ways that would
allow them to resume shipments.
The moves are part of a wider effort by American companies to
fulfill contracts and continue doing business with Huawei while
remaining compliant with Commerce Department restrictions on
exporting technology to the Chinese technology giant.
Huawei was a prolific buyer of American technology--spending $11
billion last year--until the Commerce Department put it on a
blacklist in May. That required companies supplying Huawei with
U.S.-sourced equipment to apply for licenses.
The blacklisting prompted an industrywide halt in shipments to
Huawei, which had been stockpiling components in anticipation of
the action, as companies assessed the new rules. It also led
Alphabet Inc.'s Google to pull its Android operating system from
future Huawei phone models, while many non-U.S. technology
companies--like U.K. chip-design firm ARM Holdings PLC--cut off
their business with the company.
The blacklisting means that exports from the U.S. to Huawei of
any type of equipment or technology is prohibited. But the
regulations don't prohibit shipments to Huawei of components made
in foreign countries, as long as they don't contain more than 25%
of U.S.-originated material that would be otherwise subject to U.S.
export controls.
U.S.-sourced content includes physical components, but it also
includes software and technical literature. For multinational
technology companies like those supplying Huawei, it isn't uncommon
that some exports meet the requirements and some don't.
Companies also need to decide whether they can classify products
as foreign-made, potentially exempting them from Huawei
restrictions. Regulations don't say precisely what criteria need to
be met to qualify as being manufactured overseas, according to
Kevin Wolf, a partner at law firm Akin Gump who was a Commerce
Department official in the Obama administration.
John Neuffer, the president and chief executive of the
Semiconductor Industry Association, a trade group, said last week
that some items could be supplied to Huawei in accordance with
Commerce Department rules.
"Each company is impacted differently based on their specific
products and supply chains and each company must evaluate how best
to conduct its business and remain in compliance," he said in a
statement.
Micron Technology, a leading memory and digital storage company,
said Tuesday that some of its products that it supplied to Huawei
weren't fully restricted.
"We have started shipping some orders of those products to
Huawei in the last two weeks," Chief Executive Sanjay Mehrotra said
in a call with analysts after the company reported its quarterly
results.
He added that uncertainty surrounding the business with Huawei
hadn't subsided and it isn't unclear how many products the company
would be able to ship to Huawei and for how long.
Qualcomm, the San Diego smartphone chip giant, has resumed
shipments to Huawei of radio-frequency components after the company
discovered that it could do so under Commerce Department rules,
according to a person familiar with the matter. Qualcomm's primary
Huawei product--broadband chips--aren't being shipped and it isn't
clear when shipments could resume, this person said.
Separately, Intel has also resumed shipments of some components
after finding ways to do so while remaining compliant with Commerce
Department rules, according to people familiar with the matter. The
specific nature of the shipments wasn't immediately clear. The New
York Times earlier reported that Intel had resumed shipments.
Many other companies are scrambling to find ways to resume
shipments to Huawei. Flex Ltd., a San Jose-based technology
manufacturer, said earlier this month it resumed 90% of its
Huawei-related production after evaluating its business with the
Chinese company. Bernard Gutmann, the chief financial officer of
Phoenix-based chip maker ON Semiconductor, said earlier this month
that it is working with internal and external auditors and was in
talks with the Commerce Department about "all the different nuances
of the law" and ways to "avail ourselves of in terms of improving"
the situation.
A Commerce Department spokesman declined to comment and referred
to regulations governing the entity list.
At least one company is publicly pushing back against the U.S.
rules. FedEx Corp. on June 24 filed a lawsuit against the Commerce
Department, saying the blacklisting of Huawei forces it to
unreasonably police the contents of its deliveries. The company is
under investigation in China after it acknowledged mishandling
packages for Huawei.
Andy Purdy, Huawei's top U.S. cybersecurity executive, said
earlier this month that the company is in close communication with
its suppliers in the wake of the U.S. blacklisting.
Write to Dan Strumpf at daniel.strumpf@wsj.com, Asa Fitch at
asa.fitch@wsj.com and Yoko Kubota at yoko.kubota@wsj.com
(END) Dow Jones Newswires
June 25, 2019 23:08 ET (03:08 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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