September 13, 2022 | The Hill

Gearing up for Huawei’s second act

September 13, 2022 | The Hill

Gearing up for Huawei’s second act

Excerpt

Washington’s wielding of strategic export controls has seriously blunted Beijing’s technological ambitions, so much so that Huawei founder Ren Zhengfei warned in a recently leaked memo that his company’s goal is simply to “survive.” Nevertheless, policymakers would be wise to remain vigilant given indications that Huawei is adapting its business model and circumventing U.S. restrictions to maintain persistent access to American networks.

The U.S. government’s regulatory assault on Huawei has been undeniably stark. Starting in 2019, Trump-era rule-changes prohibited the company from selling its wireless gear in the U.S. or purchasing American-produced semiconductor chips, which supported its then-highly profitable consumer business. This order was expanded in 2020 to prevent foreign chipmakers, such as TSMC in Taiwan, from supplying Huawei. To Ren’s credit, two years passed before these bans significantly impacted Huawei’s production of smartphones, PCs and tablets. One reason: Huawei stockpiled U.S. chips before the bans went into effect, with the goal of shielding the company from a crackdown.

Eventually though, Huawei’s network and consumer businesses wilted under Washington’s pressure. In 2021, Huawei’s annual revenue plunged 28.6 percent — the first time on record that the company reported such a decline. For the next 18 months, Huawei reported double-digit quarterly revenue drops. Huawei’s financial health became so dire that Yan Xuetong, dean at China’s prestigious Tsinghua University, warned that, “If Huawei cannot survive,” China “will have no hope for rejuvenation.”

Jonathan Pelson is a former telecom executive and the author of Wireless Wars: China’s Dangerous Domination of 5G and How We’re Fighting Back. Craig Singleton is a senior China fellow at the non-partisan Foundation for Defense of Democracies. Follow Craig on Twitter @CraigMSingleton.

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Issues:

China Cyber