I am suffering from a serious case of chronic, excessive Huawei news. I’m sick of writing about them, I’m tired of reading about them. I’m irked by journalists who can’t speak any Chinese calling them “Wah-way,” as if “Hua” is somehow difficult to pronounce. I’m over “my way or the Hua-wei” puns. And sweet Lord, I never want to hear the phrase “smoking gun” again in my life.
There’s too much talk, and not enough information. The topic of 5G technology and security is highly complex and technical. The question of who owns and controls the company has been the subject of much debate, as have Huawei’s connections with the Chinese military. In each case, it’s hard to say if the picture has become much clearer. The company is massive and opaque, as is China and the Communist Party, and the degree to which those three entities are both different and the same. Add to that the chaos of Washington in the Trump era.
What we get from that cocktail is pretty much what we’ve seen for the past eight months or so: intriguing headlines, drama, arrests, speculation, controversy, diplomatic kerfuffles, and don’t forget tweets. Lots and lots of tweets. After a May 15 White House executive order effectively banning US firms from using Huawei equipment and a Commerce Department decision to place the firm and 70 of its subsidiaries on its “Entity List,” barring them from buying parts and components from US companies without the government’s prior approval, some predicted the death of the company. Then President Trump mentioned the possibility of lifting the ban altogether. Then Commerce Secretary Wilbur Ross made a statement which was about as devoid of substance as a slice of white bread.
There has now also been news of leaked documents showing that Huawei had secretly planned to build North Korea’s wireless network, information that at one point probably would have been big news, but is now just another headline of many that we are all now becoming desensitized to.
This entire situation is one big swirly-eye emoji, followed by a facepalm.
So what is actually changing on a business level? How and when will users and suppliers begin to directly feel the heat? Here are a few bullet points which will hopefully provide a bit more clarity:
Mark August 19 on your calendar: Despite all the orders and proclamations, it’s safe to say that at least thus far, there has been more thunder than lightning about the impact on Huawei’s day-to-day operations. This is in large part due to the 90-day suspension of the ban by the US Department of Commerce, put in place on May 21. As things currently stand, Huawei will lose access to US-made products and components on August 19.
“The deadline on August 19 is definitely an action-forcing event for the US government, requiring them to come to the table with a clear decision on whether they will make a deal on Huawei,” said Samm Sacks, Cybersecurity Policy and China Digital Economy Fellow at New America. “After that the big question for Huawei will be how many components they’ve stockpiled, which is in large part a mystery at this point.”
Reports on the size of Huawei’s stockpile of imported components have differed, ranging from three months’ worth to a year. What will likely have an immediate impact is that from August 19 Google will stop sending Android software updates to newly-purchased Huawei handsets, forcing the company’s hand in launching its much-anticipated Hongmeng OS. Company founder Ren Zhengfei has said (paywalled, in French) is not even designed for use on smartphones, likely making Huawei handsets a tough sell to overseas users.
International smartphones sales are already hurting: In June, Ren confirmed a 40% drop-off in the firm’s overseas smartphone shipments. Huawei expects a drop of 40 to 60 million international handset sales this year, roughly half of the previous year’s figure.
Ren added that pressure from the US could account for as much as $30 billion in lost sales growth; estimated revenue for the year has been revised down from $130 billion to $100 billion.
One particularly acute pain point to watch will be Huawei’s standing in Europe’s smartphone market. The company had been steadily increasing market share in the region, where the relatively affluent consumer base had been warming up to their higher-margin premium handsets.
Congress doesn’t trust Trump to be tough enough on Huawei: While Trump has demonstrated willingness to bargain on Huawei to accomplish a trade deal, legislators seem to be moving to limit his ability to do so. On July 16, bipartisan-sponsored bills in the House and Senate were introduced which would, among other things, bar the removal of Huawei from the Entity List without House and Senate approval. The bills also let Congress disallow waivers granted to US companies doing business with the company.
The introduction of the “Defending America’s 5G Future Act” suggests that other leaders in Washington are unwilling to soften their stance on Huawei, even if the President is.
A long waiting game: As is often the case with such high-profile legal and political battles, one thing is fairly certain: we can expect to see a whole lot of cans kicked down a whole lot of roads. Trump’s “trade war” with China, like most American wars over the past few decades, now seems to be just continuing in perpetuity. Detained Huawei CFO Meng Wanzhou’s extradition proceedings will not begin until January of next year, with hearings likely to continue into October, which is not good news for the two detained Canadians who are being held in far less pleasant conditions than Meng.
US chipmakers have been lobbying Washington to ease the ban, as has Google, and it would be surprising if such powerful interests were unable to have any sway on the matter. And of course, if Trump is defeated in November of 2020, we could potentially see a re-examining of US policy towards China and its tech firms. Yet regardless of how exactly everything plays out, we can all probably assume that assume that US hostility to Huawei, and efforts to restrict its business, are here to stay.
For all the talk of the US government delivering “lethal blows” to Huawei, it’s hard to imagine the situation playing out with such a sense of tidy resolution. What we can expect to see over the coming months and years with Huawei is something akin to a military siege of a city: sitting and waiting, while they slowly run out of resources and options until they are weakened to the point of irrelevance.
In the meantime, we’ll just all have to keep reading, writing, and talking about the situation, complete with mispronunciation, bad puns, and all.