Complex Made Simple

The US is easing restrictions on Huawei a year after blacklisting it – Here’s why

It has been over a year that the US had put Huawei on its Entity List, effectively banning US companies without special licenses from dealing with it. Now, restrictions are finally being eased.

This was decided so that US companies would be able work together with Huawei on setting standards for next-generation 5G networks The US realized that the ban would hurt their role in deciding the future of 5G like it did with 3G and 4G, while giving China the upper hand US pressure is extending to its allies too, as the UK has made a 180-degree turn on their opinion of Huawei

A Reuters report from earlier this week stated that the US would be easing restrictions on Huawei’s dealings with US companies. This was decided so that US companies would be able work together with Huawei on setting standards for next-generation 5G networks.

The Trump administration had put Huawei on their ‘Entity List’ on May 16, 2019, over a year ago, citing national security concerns. The US under Donald Trump had shown itself over the years to be very critical of China, putting many other Chinese firms on their blacklist, as well as engaging in a Trade War with the Asian superpower. The US Department of Commerce put another two dozen Chinese firms on its Entity List in late May, mounting the pressure.

Still, in the aftermath of the blacklisting, US companies and other global firms suffered sigificant damage from the US’ decision, since Huawei’s role in global supply chains means a whole host of firms saw their business disrupted. Additionally, there is always the risk that China would amp up restrictions of its own on US firms. 

The Huawei ban backfired, somewhat
So why is the US loosening its grip on Huawei? Well, this has to do with the aforementioned 5G standards. 

“Industry and government officials said the rule change should not be viewed as a sign of weakening U.S. resolve against Huawei, the world’s largest telecommunications equipment maker,” Reuters noted. “They said the Huawei Entity Listing put the United States at a disadvantage in standards settings, where companies develop specifications to allow equipment from different companies to function together.”

Indeed, the US’ decision to blacklist Huawei had somewhat backfired, leaving US companies with an awkward position in the 5G market and its future. 

“With U.S. companies uncertain what technology or information they were allowed to share, engineers from some U.S. firms reduced their participation, giving Huawei a stronger voice,” Reuters explained.

“[Essentially, standards] are technical specifications and other things that spell out how a technology works and allows different devices or systems around the world to work together,” CNBC explains. “U.S. and European technology firms have been key players in defining technology standards for the last generation of technology. But now, new technologies are emerging — such as next-generation mobile internet known as 5G or autonomous vehicles. Who gets to define those standards has yet to be determined.”

Basically, it boils down to politics. With the US having been a major player in setting the standards for 3G and 4G, they feel their position is threatened if they are unable to deal more freely with one of the greatest innovators of the next generation of cellular networks: 5G. 

“Without the U.S. companies involved in standards setting, the concern is American technology firms could lose their competitiveness,” CNBC said. 

“U.S. participation and leadership in standard-setting influences the future of 5G, autonomous vehicles, artificial intelligence, and other cutting-edge technologies,” the Department of Commerce said.

Anti-China sentiment spills over to the UK

Huawei offices in Reading, Berkshire, UK

In recent weeks, the UK has also been ramping up anti-Chinese sentiment, despite arguing earlier that “any risks that Huawei equipment could be exploited for mass surveillance could be contained,” as per The Guardian. The European nation had stated it would limit the involvement of Huawei and other “high risk vendors” in non-sensitive parts of British network to 35%

“External diplomatic pressure from the United States is evidently influencing the UK government’s thinking on Huawei, as they seek closer ties with the U.S. post-Brexit, CGTN said.

Huawei forges on

At the moment, there are four major players in the 5G field: Huawei, ZTE, Ericsson and Nokia. Huawei and ZTE are Chinese-based, whereas Nokia is Finnish and Ericsson is Swedish. If the US continues its campaign against Chinese telecom firms, half the competiton will be wiped from the Western market, which will impact pricing and affordability.

“If you typically prefer only two companies for procuring equipment … the process of competitive tendering will be hardly competitive. By potentially removing Huawei and ZTE, you are forcing out half of the competition from the market.” Matthew Kendall, chief telecoms analyst at the Economist Intelligence Unit, told The National. 

Attending a virtual tour of Huawei’s 5G facilities just yesterday, it seemed clear to me that Huawei was forging onwards with their 5G tech, and their implementations extended far and wide, from VR and AR, to IoT, and beyond. 

As for its smartphone business, research firm Counterpoint revealed that for the first time ever this April, Huawei surpassed Samsung to become the largest smartphone manufacturer in the world. Note, however, that the COVID-19 pandemic had a hand in this, so special conditions were at play here.

AMEinfo also participated in a Q & A session with Joe Kelly, Vice President of Corporate Communications at Huawei, and while multiple journalists addressed the elephant in the room which is the US Entity List, Kelly seemed confident that Huawei will continue to play a major role in the world’s journey with 5G. While he wasn’t able to give any precise predictions, he seemed adamant that 5G development at Huawei was going forward at full force, regardless of political developments.