Companies Find Ways Around Huawei Ban -- WSJ

Date : 06/26/2019 @ 8:02AM
Source : Dow Jones News
Stock : Micron Technology Inc (MU)
Quote : 45.5  0.0 (0.00%) @ 1:07PM
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Companies Find Ways Around Huawei Ban -- WSJ

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Micron, Qualcomm, Intel say they restarted some shipments to firm

By Dan Strumpf in Hong Kong, Asa Fitch in San Francisco and Yoko Kubota in Beijing 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 26, 2019).

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 26, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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