America will probably use its ability to withhold components from Huawei as a bargaining chip in a future trade deal with China
ON MAY 20TH it became clear that some of the world’s most prominent technology companies—Google, Intel and Qualcomm—had stopped selling software, hardware and licences for intellectual property to Huawei, a Chinese manufacturer of phones and networking gear. This followed an announcement by the American government on May 15th that it was banning the export of American technology to Huawei unless companies got a special licence from the Department of Commerce.
Huawei’s hardware is threatened, too. Intel, Qualcomm and a host of other companies have stopped supplying the parts and designs that Huawei needs to build its phones and network gear. Huawei’s sales grew by 20% in 2018 to $107bn. If the supply tap is not turned back on, 2019 will be rather less rosy.
Huawei’s Asian suppliers must obey American law on export control, in theory at least, because it prohibits not just the direct sale of American technology by American firms, but also its transmission through non-American companies like TSMC. In reality, America has few levers to force companies like TSMC to comply with its laws. Losing TSMC as a supplier would be the final blow for Huawei. Currently, that is unlikely, but if conflict escalates TSMC could become the next battleground.
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