Sources: White House holds off Huawei reprieve after China counter-punch

US suppliers are still staring into the abyss as reports emerge the US Government has halted its special-permissions programme to work with Huawei due to Chinese retaliation.

According to Bloomberg, applications for special-licenses to continue supplying Huawei with US components, products and services are currently on hold, as the US Government ponders the latest counter-move from the Chinese Government; a halt to purchases of US agricultural equipment.

Just as there was a moment to celebrate, dozens of US firms are now allegedly back to square one.

The licenses themselves have proved to be popular, with Commerce Secretary Wilbur Ross suggesting his department had received 50 applications, as of last week. This is not to say 50 companies will be given permission, the US Government has hinted the majority will be turned down, though it is back to purgatory the suppliers go.

Entry onto the Entity List has caused a significant headache for numerous parties around the world. Not only do the US suppliers have to figure out where they are going to recapture lost revenues, but potential customers in other markets have to assess the quality and resilience of the products following a disruption to the supply-chain.

Last month, Ross announced the Commerce Department would start accepting applications for licenses to receive permission to trade with Huawei. That said, no advice was offered on the criteria said applications would be measured against, aside from an ill-defined reference to national security.

What is also worth noting is the mentality of those considering the applications. Refusal would be front of mind, unless the application was compelling enough.

However, this has all been turned upside-down.

We might have been expecting retaliation from Chinese Government, though few would have assumed the White House would snap the olive branch extended to US suppliers who are losing a major customer. This is allegedly what is happening today.

This tit-for-tat trade battle has now entered the realms of finger pointing. Trump has suggested he would loosen controls on Huawei if China increased purchases of US agricultural equipment. China has stopped purchases because the noose is still firm grasped, but the US is not willing to let go because China has not ramped up its purchases.

It’s a Mexican stand-off with private companies, in both countries, feeling the pain of government posturing and flexing, as egos are massaged by enablers and yes-men looking to gain favour with short-sighted and morally-bankrupt politicians.

Looking at the collateral damage, numerous US technology companies saw share price decline following the rumours. Skyworks Solutions, where 10% of revenues are attributable to Huawei, recently reported quarterly earnings with a $127 million hole in the spreadsheets. Total revenues were 16% down in comparison to the same period of 2018, prior to the Huawei headache.

Interestingly enough, there are several companies who have publicly stated they have applied for licences. Micron and Xilinx, two US semiconductor companies, have said the license is key as their role in the supply chain can be replaced by a foreign alternative.

If the rhetoric of the trade-war is to help US companies in the long-run, the very opposite is being done with these two organisations; once they are out of the supply chain, it will be very difficult to get back in. Most likely the only way will be to renegotiate contracts at less favourable rates to convince Huawei to ditch newly found alternatives.

Google is another which will pray for the end of the trade-war and ban on supplying Huawei due to the emergence of Harmony OS, the Chinese vendors in-house OS which could be applied to smartphones and smart devices. The emergence of another contender in the OS segment could lead to Google losing real-estate on millions (if not billions) of devices for its products such as Google Play, Chrome and Google Maps.

Right now, it is difficult to see this trade-war as anything more than a battle of egos. It was supposed to counter nefarious activities of the Chinese Government, creating a platform for US companies to thrive. However, with alternatives being sought and created, the temporary damage could turn permanent very quickly.

US suppliers do not want to permanently lose a lucrative position in the supply chain of one of the worlds’ fastest growing technology companies, though that is the reality some will have to face.

US Senators start snapping Trump’s China olive branch

The President’s opponents have promised to be difficult and now they have begun the process of making it official.

A horde of Senators, led by the Republican representative of Arkansas Tom Cotton and Democrat Chris Van Hollen of Maryland, have tabled a new bill which will be known as the Defending America’s 5G Future Act. The bill aims to reinforce the Executive Order signed by Trump, prohibiting the removal of Huawei from the Commerce Department Entity List without an act of Congress.

Other Senators backing the bill include the Republican representatives of Florida and Utah, Marco Rubio and Mitt Romney, as well as Democrats from Virginia and Connecticut, Mark Warner and Richard Blumenthal.

“Huawei isn’t a normal business partner for American companies, it’s a front for the Chinese Communist Party,” said Cotton. “Our bill reinforces the president’s decision to place Huawei on a technology blacklist. American companies shouldn’t be in the business of selling our enemies the tools they’ll use to spy on Americans.”

“The best way to address the national security threat we face from China’s telecommunications companies is to draw a clear line in the sand and stop retreating every time Beijing pushes back,” said Van Hollen. “By prohibiting American companies from doing business with Huawei, we finally sent an unequivocal message that we take this threat seriously and President Trump shouldn’t be able to trade away those legitimate security concerns.”

Despite Trump’s efforts to demonstrate the power of US sanctions, it seems there are politicians who genuinely believe the Chinese threat to the US, even if Trump doesn’t. That, or they just want to be awkward.

It has appeared over the last couple of weeks that the President has only be stirring the national security pot as a means to drive China back to the trade talks table, but other politicians haven’t read the playbook; if this was a demonstration of strength, with the intention to back down one the message had been heard, things are not going to plan.

Rubio is using the argument Huawei is a front for the Chinese Government, Warner objects to the use of national security as a bargaining chip, Blumenthal has bought into the dangers of Huawei as a company and so does Romney, who is also protesting to IP theft. It should come as little surprise, Trump has done an excellent job of rousing xenophobia and fear of globalisation, there were always going to be objections when Trump climbed down off the pillar of propaganda.

Soon enough, Trump will learn he is not able to run the US like a private business. He might be one of the most powerful people in the world, but his word is not gospel; the separation of powers in US Government prevents such suspect strategies. Amazingly, despite efforts to escalate an atmosphere of discord, Trump is managing to convince Senators to reach across the aisle in opposition.

It’s a rather beautiful representation of unity.

Trump’s Huawei de-escalation plans face broad domestic opposition

President Donald Trump might be about to find out, once again, that he cannot do whatever he pleases in the Oval Office, especially when it comes to national security.

A few tweets have emerged over the last couple of days which indicate prominent Senators are going to be standing in the way of the Trump grand plan. Republican Senator Marco Rubio and Democrat Senator Chuck Schumer have both voiced opposition to Trump’s plans to let Huawei off the hook to get trade discussions with China back on track.

What Trump has done over the last couple of months is something which might have worked in the world of private business, but it does not seem to be a legitimate strategy from a politician. The President built the hype surrounding Huawei as a national security threat to impose legislation in an attempt to cripple the firm, but now wants to step back.

It seems the demonstration of power has been enough, now Trump wants to offer an olive branch to the Chinese while he seemingly has the upper-hand in the trade talks. Unfortunately, the two prominent Senators are reading from the same playbook.

Rubio and Schumer have seemingly bought into the idea of Huawei as a threat to national security, and do not believe protections of US citizens can be used as a playing card in the international game of poker Trump is attempting to mastermind.

The message from the two Senators seems to be clear here; if Huawei is a national security threat, as the President has made so clear, it remains so. Just because there is an advantage to be claimed in the political game of trade talks doesn’t change the impression of Huawei.

We suspect Trump hasn’t fully grasped the dynamics of politics. This sort of play, a demonstration of power and influence, might have worked in private industry where Trump rules with iron authority, but that is not the way politics operates. There is a separation of power, with Congress holding the White House accountable and preventing abuses of power.

This is of course not the first time this dynamic has been exposed. During the ZTE saga, Trump demonstrated the power of the US economy to the Chinese and then wanted to stand-down. Congress proved to be a difficult compatriot to Trump in this instance, and it seems it wants to do so again.

What this could mean is a return to the status quo of uncertainly and passive aggressive tariffs. If the security conscious Senators get their way, Huawei would still remain an enemy of the state and the world will return to the political purgatory which has dominated the headlines for the last 12 months. If Huawei remains in the US crosshairs, Chinese demands are not being met and we suspect trade talks with stagnate once again.

What we will leave you decide is how much of this saga is political opportunism.

Let’s say Trump doesn’t believe Huawei is a national security threat and this entire incident has been a strategy to gain greater influence in the trade talks with China, we wonder if Rubio and Schumer are simply taking advantage of the situation also. Rubio is an opponent of Trump with ambitions of representing the Republicans in the White House, while Schumer and the Democrats will want to make life as difficult for Trump wherever possible.

Perhaps we are being overly cynical. We’ll let you come to your own conclusions.

Trade deal on the cards if Trump leaves Huawei alone

For weeks and weeks there has seemed to constantly be new stories to write about the US/China trade war, and on the eve of the G20 meeting, the dynamic duo haven’t disappointed.

This week, representatives of the 20 richest countries around the world will meet in Japan to discuss everything from fishing regulations through to finance and climate change. Telecommunications, and more specifically cybersecurity, will of course be on the agenda, and most importantly, it will feature in the meeting between President Donald Trump and President Xi Jinping.

Of all the bouts over the next couple of days, this will be the one everyone is paying attention to. The leaders of the worlds’ two largest economy, duking it out to gain supremacy. Trump has said he wants a trade deal, and so has Xi. These two nations not getting on is no good for anyone, but it seems neither wants to appear as weak and concede ground.

The latest development is coming out of Beijing. Xi has stated he is open to a trade deal between the two nations, but Trump would have to stop targeting Huawei as a proxy for passive and active aggression against the Chinese Government.

This is going to be a massive ask from the Chinese premier, as while Trump is fully willing to use companies as pawns in his greatest negotiation, the supporting cast in Congress might not be as willing. We’ve already seen this during the ZTE saga.

It might seem like a lifetime ago, but it was in mid-2018 ZTE found itself in the crosshairs of the White House. Trump built up the situation, seemingly as a demonstration of the power of the Oval Office, and once the point had been made he tried to stand down. But Congress stood in the way.

26 Senators, somewhat hardliners, attempted to block the de-escalation from Trump. They seemingly bought into the evil stories told by Trump as validation for such actions and weren’t willing to let the company off the hook. Trump wanted to play a game with ZTE as movable piece, but Congress wasn’t reading the rule book.

The same situation might happen here. Opinion in the US has been directed towards Huawei being the weapon of Chinese oppression on the world, and Trump has been the most vocal when it came to hyping the fear. Even if Trump does want to step down from this position to facilitate a deal, Congress might once again prevent him.

Trump seems to have done a good job in convincing politicians of the national security threat, and Congress does not seem to have the same game-playing attitude as Trump; if something is a national security threat, it will remain one. The opportunity of commercial gain will not change that.

This is of course assuming Trump wants to make a deal. Xi has played his hand, set out his demands with Huawei, and Trump seems to be just as combative. In interviews and tweets, the President has condemned Canada for tariffs on agricultural products, slammed India for its own tariffs and suggest China’s economy is ‘going down the tubes’.

Currently we have two Presidents who do not seem like they are going to shift. In their homelands they have created personas of strength, leaning on hawkish strategies not diplomacy. It would be fair to assume a continuation of the status quo.

US officials ask for delay to Huawei ban on competition grounds – report

Deputy Director of the Office of Management and Budget Russell Vought has requested the ban on Huawei technologies be delayed by two years, sounding very similar to Huawei’s own argument.

In a letter to the White House, Vought is arguing the ban should be delayed in certain areas to ensure national security considerations and objectives can be suitably met in the new procurement landscape. Vought is currently on the clock, as rules signed into law last year are to be officially introduced in 2020. These laws would place a ban on any government funds being used to purchase Huawei products, services or components.

The issue which is currently being faced is in the procurement functions. Vought is suggesting the ban has been rushed in and would significantly reduce the number of vendors available for government agencies to work with. Interestingly enough, this is remarkably similar to the argument Huawei has been using to counter the ban. Of course, this reference would certainly not be made by the White House.

Plenty of arguments have been put forward by the under-fire Chinese firm, most recently there has been a challenge to the constitutional legitimacy of the rules, though the competition claim is one which was made back in October 2018.

At the time, Huawei suggested that banning its technologies and services in the US could hand control of the global 5G economy over to China. In a filing to the FCC, Huawei suggested the price and speed of infrastructure deployment would be impacted as competition would be reduced. This is quite a reasonable point to make as this segment of the telecom’s world is incredibly short on tier-one suppliers, or at least those which can match the quality of equipment provided and the support services which follow.

The letter from Vought is not making the exact same point, but the principle is very similar. Too many contractors rely on Huawei in their own supply chain, therefore banning Huawei would prevent any government agencies from working with these vendors. This would decrease competition for valuable contracts, potentially pushing up the price while lowering the quality of service offered.

Although the US has made its stance against China and Huawei very clear, the White House has shown on numerous occasions it is willing to be flexible with its own principles if it suits its own agenda. President Donald Trump attempted to reverse the ban on ZTE last year, once it had achieved its aims, only to face opposition in the House.

It would appear the national security argument can once again be ignored if there is too much pain is experienced by federal agencies. There seems to be little concern of the impact to private industry, see the complaints from rural telcos or those organizations where Huawei is an important customer, with these companies little more than pawns ready for sacrifice.

Perhaps we should be surprised at the consistency of hypocrisy coming out of the White House, but such are the lowly levels standards are currently being set, we are not.

Japan joins the anti-globalisation movement

It might not be as aggressive a position as the White House has entrenched itself in but limiting foreign ownership of strategic segments is a similar objection to globalisation.

According to The Telegraph, the Japanese government has identified 15 new sectors which would be restricted from foreign ownership, while restrictions on a further five would be increased. Any foreign investor wanting to take more than a 10% share of a companies listed in these segments would have to report to the Japanese government.

“…based on increasing importance of ensuring cyber security in recent years, we decided to take necessary steps, including the addition of integrated circuit manufacturing, from the standpoint of preventing as appropriate a situation that will severely affect Japan’s national security,” said a spokesperson for the Japanese government.

While telecom is already one of the sectors which has been listed for protection against foreign ownership, the new segments include mobile phone and the wider IT sector.

The rules themselves seem to be heavily nuanced to offer enough wiggle room for decision makers. At the very top level, should an investment be deemed contrary to national security, the Japanese government has granted itself the power to block or force changes to investment plans.

Although this might seem like another step on the road towards isolating China, sceptics are suggesting this is a plan to block the theft of trade-secrets by Chinese authorities and companies, it should hardly come as a surprise. After all, Japan is one of the countries the US has success in turning against China.

Last year, the Japanese government passed rules which would ban the use of phones, computers and other components from Chinese vendors in any of its agencies. Telcos have also been awarded 5G spectrum licences which come with coverage and security obligations, a move seen by some as a means to limit network exposure to Huawei. The telcos had in fact already committed to omit Huawei and ZTE from their network deployment plans, though an official position is a much stronger symbolic gesture.

There might be genuine security and economic concerns about China and its telco flagbearers, but the world is increasingly moving away from the concepts of openness. This announcement might only be a pebble in the global pond, but each pebble adds to the growing waves of isolationism.

T-Mobile/Sprint merger finds a new enemy in mysterious lobby group

A new non-profit organization called ‘Protect America’s Wireless’ has emerged, seemingly with the sole objective of hurling spanners at the T-Mobile US and Sprint merger.

Details on the group are relatively thin at the moment, it was only founded last month, though a press call introducing the group and its mission statement on the website both seem to give the same message; the T-Mobile US and Sprint merger will be bad for the national security of the US.

“We must protect our networks from foreign spying,” the team announces on the websites homepage. “Our greatest concern is the pending Sprint T-Mobile merger, which could give countries like Saudi Arabia, China, Germany, and Japan direct access to our networks through the use of foreign-made networking equipment and billions of foreign money. We call on President Trump, Congress, and the FCC to protect American national security by denying these foreign interests access to America’s wireless communications.”

On the press call, David Wade, Founder of Greenlight Strategies, suggested a merger of the two telcos would open up the US to a Chinese ecosystem, while also suggesting any business working closely with Chinese vendors would effectively handover data to the Chinese government. While it is true Sprint owner Softbank has collaborated closely with Huawei and ZTE in the 5G R&D journey, this seems to be taking the conspiracy theory up another level. Deutsche Telekom, parent company of T-Mobile US, also has ties to Chinese vendors, but there aren’t many telcos who don’t.

The theory here is a merger between the two telcos would be bad for national security, effectively handing China a key to the backdoor. There have certainly been objections from a competition perspective, but this is the first we’ve seen with this angle. It’s difficult not to be suspicious about who the puppet master actually is.

Interestingly enough, the group has declined to discuss where funding is emerging from. As a 501c4 non-profit, the team do not have to disclose funding or ownership details, though they are permitted to attempt to influence politics as long as it isn’t their main area of focus. While the groups attempt to tackle US security is a thinly veiled attempt to demonstrate ‘social welfare’, as long as the group isn’t spending more than half of its funds on political-related activities, it can continue to operate half-hidden by shadows.

Finding out who is funding this organization is key to figure out what the angle is and whether this is yet another example of propaganda, though it is not necessarily a simple task. 501c4 non-profits have to complete a Form 990 for the IRS, on which any donations above $5,000 have to be disclosed. Unfortunately, due to the efficiency of the IRS, there is usually a 12-18 month lag on this information being made publicly available.

Until the influencers and donors of this group have been identified, this could be a very dangerous source of misinformation. Statements being made might very well be true, but without transparency it would be safe to be suspicious.

National security starting to become ‘free pass’ as India seeks to block social media

In years gone governments used the idea of defending national security as a means to justify invasions of foreign lands, nowadays its turning into a free pass for rule-makers to do whatever they want.

George W. Bush used the idea of defending national security to hunt terrorists abroad, President Trump has somehow been managing to use it to impose tariffs on steel and maple syrup imports and now the Indian government is seeking to use the concept of defending its citizens to limit the use of social media.

Under Section 69A of the 2000 IT Act, the Indian government is investigating how it can block social media sites in the country, specifically targeting Facebook, WhatsApp, Instagram and Telegram. According to The Economic Times, the Department of Telecommunications (DoT) does have valid ambitions in mind, tackling fake news and child pornography, though limiting means by which citizens can express themselves is a questionable way to go about it.

The letter to Indian telcos “requested to explore various possible options and confirm how the Instagram/Facebook/WhatsApp/Telegram and other such mobile apps can be blocked on internet,” which was sent on July 18.

As you can imagine, there has been resistance to the idea. The Associated Chambers of Commerce and Industry of India has said “proposed measure to evolve mechanisms to block applications as a whole at the telecom operator level is excessive, unnecessary, and would greatly harm India’s reputation as growing hub of innovation in technology,” while the Supreme Court of India is also against the idea of social media monitoring. Last month, Chief Justice Dipak Misra and Justices AM Khanwilkar and DY Chandrachud warned a government plan to set up the hubs for monitoring online data risked the creation of a ‘surveillance state’ and ‘sheer intrusion into privacy’.

What is worth noting, blocking such apps will only be used in the most extreme circumstances. There have been several circumstances where fake news has been the cause of mob lynching in the country, while the government is also concerned it could influence elections due to take place next year. These are all incredibly valid reasons, though accountability and justification are two words which need to play a significant role here.

Recently the Indian government released a paper to address the inadequacies in data protection and privacy legislation. The desire to update the regulatory and legislative environment in light of societal changes is commendable, though it has not been presented in the best manner. While there will be protections for the consumer in terms of data collection and processing, these rules can be lifted for purposes relating to the government.

We understand there are extreme circumstances where extreme actions need to be taken, though lack of clarity surrounding accountability and justification leaves the process open to abuse. Considering the idea of defending national security is a very varied definition dependent on your personality, experience and content, as many grey areas as possible need to be abolished. This is in defence of a citizen’s right to privacy and the same should be said for freedom of speech.

While many look down on social media, it is a platform for expression. Many are buoyed and empowered by such platforms, therefore the government needs to tread carefully to ensure the processes in suspending privacy and freedom of speech are fully justified.

As mentioned before, extreme circumstance often require extreme actions, though there needs to be a process to ensure there is no other possible course of action which can be taken as an alternative, to maintain these rights. It should be the last possible option. With today’s haphazard use of national security to justify any actions, we worry whether this is becoming forgotten.