US yet to grant any licenses to sell to Huawei – report

Despite a second suspension of the Huawei export ban, none of the 130 special license applications from US companies have been approved.

This news comes courtesy of Reuters, which has chatted to a few people who reckon they know what they’re talking about. They say the U.S. Commerce Department has received over 130 applications from companies for licenses to sell US goods to Huawei but three months after the export ban was suspended specifically to help them out, none of those licenses have been granted.

There’s not a lot of point in continually making concessions to soften the blow for US companies, only to fail to follow through on them. One on-the-record bloke in the Reuters piece places the blame at President Trump’s feet and the lack of guidance offered to agencies. They, in turn, are afraid of granting licenses in case they provoke the capricious commander-in-chief into some act of arbitrary retribution.

It’s almost as if the Trump administration doesn’t actually care about the impact its trade war with China may be having on US businesses and just makes shallow concessions every now and then to keep its critics off guard. Without an efficient process for granting licenses the continued suspension of the export ban is totally meaningless, which is probably what prompted the leaks in this story. Trump needs to make a call on this one way or the other because the current regulatory limbo is the worst of both worlds for US companies.

Tim Cook smooth talks Trump away from tariffs over dinner

Over dinner this weekend, Apple CEO Tim Cook has seemingly added to the softening position President Trump is taking on trade tariffs imposed on goods and services from China.

The last week has seen several new rumours emerge from the mill, suggesting the White House is backing away from its aggressive stance against China. It of course remains to be seen whether Congress will allow Trump to de-escalate the situation, though it does appear Trump wants to switch-up the rhetoric.

“I had a very good meeting with Tim Cook, I have a lot of respect for Tim Cook, and Tim was talking to me about tariffs,” Trump said to US reporters over the weekend.

“And one of the things is that he made a good case, is that Samsung is the number one competitor and Samsung is not paying tariffs because they are based in South Korea, and it’s tough for Apple to pay tariffs if they are competing with a very good company that is not.”

Finding consistency in the Trump rhetoric is similar to discussion the pros and cons of VAR with the Mad Hatter. Aside from these comments, some US companies will supposedly have until Christmas to work with Chinese suppliers, Huawei Technologies will allegedly be given another three months to buy from US suppliers and Trump has promised violence against protesters in Hong Kong will negatively affect trade talks.

Looking at the extension, sources are now suggesting Huawei will be granted another temporary general licence. The additional three-month window will offer another reprieve to US suppliers, though it is highly-likely Congress will start to throw a bit of a temper tantrum. Political opponents of Trump have already shown distaste for the mood swings of the President, and we suspect road-blocks will be introduced.

The only consistency from the trade conflict between the worlds’ two largest economies is inconsistency.

We are yet to read Trump’s “The Art of the Deal” but perhaps there is a chapter on shifting goal posts. The strategy from the White House seems to be escalate and de-escalate tensions regularly, perhaps to confuse political opponents in Beijing so a cohesive counter-strategy cannot be formed.

Here, Cook’s comments are exactly what you would expect from a CEO who has little concern with geo-politics. Cook and the Apple management team will not want to take sides, simply sell iPhones to iLifers, irrelevant to where they live, at a price which generates the most profit. The tariffs threaten this mission.

Apple might be able to recover its second-place in the smartphone market share rankings before too long, such is the damage which is being dealt to the Huawei consumer business, but how will Samsung benefit?

If Huawei’s international customers stop buying Huawei devices, sales will be redirected elsewhere. However, if Apple is not able to keep the price of its devices down, it will struggle to compete. Apple will firstly have to convince Android users to switch to iOS, but also not to be tempted by Samsung, or more price-sensitive brands such as OPPO, LG, OnePlus or Xiaomi.

What is not entirely clear is how broad the tariffs conversation actually was. We suspect Cook simply argued Apple should be exempt from the tariffs, why should he want to help anyone else, though there will be plenty of companies keeping an eye on the developing situation. Trump could find himself in a very difficult situation if preference is shown to a few hand selected companies.

If there is a game plan scribbled on the back of a Burger King menu somewhere in the Oval Office, it will either be the musings of a mad-man or the work of a strategic genius. The number of moving parts and dummy passes is enough to make anyone’s head spin.

Trump backs off tech tariffs as threat to consumer wallet gets real

There is seemingly only one thing which is more important to President Donald Trump than winning the trade-war, and that’s getting re-elected to the White House for a second term.

The latest message from the White House is a simple one; technology companies will largely avoid the threatened tariffs because it might punish the consumer financially. The fourth quarter is fast approaching, a period which is usually very profitable for the consumer technology giants due to Christmas purchases, the political fallout could be quite damaging.

Announced by the Office of the US Trade Representative, certain products will be exempt from trade tariffs to be introduced on September 1. These products include smartphones, laptops, gaming consoles, some toys, computer monitors, and various items of footwear and clothing. The tariffs will instead be introduced on December 15, once the store shelves have been stocked and many consumers would have completed their Christmas shopping.

“We’re doing this for Christmas season,” Trump said to US reporters. “Just in case some of the tariffs would have an impact on US customers which so far they have virtually none. The only impact is that we’ve collected over $60 billion from China.

“Just in chance it would have an impact on people, we’re delaying the tariffs, so they won’t be relevant to the Christmas season.”

This might be a short-term win for the consumer, but let’s not forget, the tariffs will be introduced eventually. Consumer goods will increase in price, as there are few firms who are patriotic. Manufacturing facilities would not be on the other side of the world if they were, they would create jobs and facilities in the US. There is a financial benefit to manufacturing products elsewhere or purchasing components from China.

Trump has stated there have been no impact to the consumer to date, but there will be. Anyone who believes the consumer will be protected from the additional cost acquired through these tariffs is either naïve or stupid.

There have of course been numerous technology companies lobbying for exemption from the tariffs however this reprieve is much more expansive. Share prices have increased by 4.5% for Apple following the quip from Trump, however toy manufacturer Mattel saw a 4.6% gain, while shoe designer Steve Madden saw a 3.4% boost.

For the moment, this is a good thing for the consumer, however it will likely only be temporary. Trump has escalated and de-escalated the trade-war with China where it suits his ambitions, and this smells like another tactical withdrawal. The aggression has been anything but consistent, with some ego stroking thrown in and the promise of a progressive phone call never too far away. This is usually followed up by a significant announcement or claim from one of the hawkish politicians.

The see-sawing might well be a ploy by the White House to destabilise trade-talks, perhaps an attempt to manoeuvre into a more advantageous position. This might well be the case here, though there is perhaps an eye being cast to the next Presidential Election.

There is now 446 days left until the next Presidential Election and the campaigning will start to ramp up in the new year. As the Democrats already have plenty of ammunition to hurl towards the Oval Office, the last thing Trump needs is fresh wounds from an overly expensive Christmas shopping list to be lurking in the already financially straining January.

This looks to a momentary reprieve in the trade-conflict which has dominated headlines in the technology world for 2019. As it stands, the tariffs will be introduced, but at least US consumers can get their hands on the latest Apple flagship device first.

Trump threatens Google over claimed political bias

US President Donald Trump has directed his ire towards Silicon Valley once more, this time warning Google about meddling in the 2020 Presidential election.

As ever Trump used Twitter to fire his latest broadside at the tech sector, once more focusing on his pet topic of political bias (largely against him) facilitated by the big internet platforms. In a series of tweets Trump made reference to a whistle-blower at Google, who alleged anti-conservative bias within the company.

If Trump had more proof of these allegations than one or two whistle-blowers he would presumably be doing more than sending menacing tweets, but this seems to indicate that he’s actively looking for it. Much of the media, even the usually neutral and objective Reuters, has chosen to characterise Trumps allegation as being ‘without evidence’, but surely the public testimony of a Google employee, while not necessarily outright proof, is certainly evidence.

While we’re on Trump’s Twitter account, he also recently accused China of currency manipulation, following the fall of the value of the Yuan to historical lows. One of the core gripes with China as a global trading partner is that it devalues the Yuan in order to help its exporters and Trump’s tweets coincide with the US Department of the Treasury officially designating China as a currency manipulator.

General commentary of this move characterises it as a new front in the trade war between the US and China and is likely to lead to some kind of tit-for-tat retaliation. All this currency aggro is considered to be the main cause of a sharp global stock market decline in the past week, as investors are understandably skittish as they wait for further developments.

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.

Another Trump tweet paints an uncomfortable picture for Google

Twitter is the battlefield and an iPhone his weapon; the hawkish President Trump has seemingly declared war on the hipsters and IT geeks of Google.

Once again, with little evidence, Trump has declared war on a technology company. This time however, the Commander in Chief has directed his venom towards a domestic enemy of the Oval Office. Thanks to the seemingly unfounded accusations of tech entrepreneur Peter Thiel, the President now has the idea Google is under the influence of the Chinese Government.

Speaking at a conference, Thiel used his keynote speech to launch an attack at the internet giant. Theil posed three questions to the audience; firstly, how many foreign intelligence agencies have infiltrated Google’s AI work. Secondly, whether Google’s management team believes it has been infiltrated by China. And finally, why it was working with the Chinese Government and not the US Government.

To be clear, aside from Thiel’s accusations, there is little evidence of such grand conspiracy theories.

That said, the burden of truth is not a consideration which is greatly appreciated by the current administration. Throughout the entire Huawei saga, no evidence of collusion with the Chinese Government has been presented to the general public, and it seems it hasn’t been presented to allied Governments either. Numerous nations have refused the call to ban Huawei without suitable evidence, and the resistance continues today.

Bearing this in mind, the Googlers should have something to worry about. Trump has demonstrated he can make life awkward for those who get his wrong side.

For the moment, there are no details of what an investigation would entail or whether the threat of treason is genuine. Another trend which we have witnessed over the last 29 months is the huffing and puffing nature of the President. This might be nothing more than a bicep flex against a company deemed to be a domestic enemy.

Trump has had a difficult relationship with Google over the last few years, with the President and many of his supporters suggesting conservative voices are being supressed on the digital highway. Perhaps we should not be surprised Trump has targeted another mainstay of Silicon Valley.

One has to question how many fronts the Trump war campaign can fight simultaneously; the enemies of the White House are starting to add up.

Battle lines drawn ahead of White House social media summit

US President Trump has invited a number of social media commentators to a discussion about the current digital environment.

This is being largely interpreted as an anecdotal investigation into the nature of social media censorship, with Trump having repeatedly raised his concerns on the matter. The major social media platforms don’t seem to have been invited, however, instead a selection of independent journalists, commentators and activists will be asked about their online experiences.

The White House hasn’t published a list of attendees, so here’s our own, in no particular order, derived from information already in the public domain. We’ve also included the number of Twitter followers each attendee has to provide some measure of their online influence. The summit takes place tomorrow.

  • Tim Pool – YouTube Journalist – 352k
  • James O’Keefe – Independent Journalist – 548k
  • Ben Garrison – Political Cartoonist – 176k
  • Charlie Kirk – Activist – 1.16m
  • Ali Alexander – Activist – 95k
  • Scott Presler – Activist – 226k
  • Bill Mitchell – Broadcaster – 445k
  • Carpe Donctum – Activist – 122k
  • PragerU – YouTube Commentator – 271k
  • Heritage Foundation – Think Tank – 649k
  • Media Research Center – Media Watchdog – 157k
  • Christian Ziegler – Activist – 3k

It has not gone unnoticed that nearly all of those invited are at the conservative end of the US political spectrum and Trump is known to be concerned that online censorship tends to affect conservatives disproportionately. It’s presumably not a coincidence that most of these conservatives also seem to be committed Trump supporters.

The presence of the two journalists at the top of the list indicates this will be more than just a Trump supporter love-in, however. “This event will bring together digital leaders for a robust conversation on the opportunities and challenges of today’s online environment,” a White House spokesperson is widely reported to have advised.

Pool has probably been chosen due to his high-profile grilling of Twitter on the Joe Rogan podcast, in which he argued some of its rules on speech it permits  are demonstrably biased against conservatives. Similarly O’Keefe’s organisation Project Veritas has recently claimed to have exposed similar political bias at Google.

So it seems clear that at least one of the primary purposes of this summit is to enable the US government to gather evidence of bias in social media censorship. Earlier this year the White House opened a web form inviting people to submit such evidence, so it’s possible this will have influenced who was invited too.

While much commentary has focused on the perceived political agenda of this summit, the absence of not only the big tech companies but big media too indicates another angle. There is a growing body of anecdotal evidence that social media censorship is increasingly biased against independent commentators and thus in favour of corporate, institutional, establishment voices.

Leftist independent commentator David Pakman has alleged in the video below that the YouTube recommendation algorithm has been changed in order to favour corporate over independent media. Most of the independents he cites are also leftist, indicating this isn’t a predominantly political move.

 

It is well documented that YouTube has been anxious about the effect of some of its more contentious contributors on revenues for some time and has implemented broad censorship in an apparent attempt to appease big advertisers. If there is bias in the recommendation algorithm in favour of corporate media it’s probably because advertisers also favour them, but every piece of arbitrary censorship seems to create as many problems as it solves.

Meanwhile, Twitter is where Trump spends much of his time and so is probably the platform he scrutinises most closely. A US appeals court recently ruled that it’s unconstitutional for Trump to block people on Twitter, but this precedent had led to other US politicians who have blocked people on Twitter being sued. Elsewhere Twitter’s recent decision to ban any comment that ‘dehumanizes others on the basis of religion’ seems destined to raise questions about selective enforcement.

Not to be out-done Facebook recently updated its policy regarding ‘violence and incitement’ with the guidance shown in the screenshot below.

Facebook policy screen

This seems to say that it’s OK to advocate high-severity violence (un-defined) against anyone Facebook considers to be a ‘dangerous individual’ or anyone said to be a violent criminal or sexual predator. Since Facebook explicitly identified several individuals as dangerous recently, some of those people have understandably interpreted this move as hostile to them.

That there is a growing body of evidence of a deeply flawed approach by social media companies to policing their platforms is undeniable. To what extent this involves political bias remains unclear, but Trump seems to think it does and, with the next US general election imminent, he seems increasingly disposed to bring the full force of the state against any tech companies deemed to be acting against the public, and his, interest. Those companies will doubtless be following this summit with interest.

We’ll leave you with Pool’s take on the whole thing.

 

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.

Understanding the collateral damage from Trump’s trade aggression

President Donald Trump might be back on friendly terms with China’s President Xi Jinping, but his efforts to kill Huawei’s business produced friendly fire, hitting companies based in allied nations.

This is the unintended and unavoidable consequence of a targeting a single company or country with sanctions and tariffs, the US’ version of an economic dirty-bomb; such are the complexities and wide-spread nature of today’s global supply chains, you are going to cause damage to innocent parties. We suspect Trump does not care, as long as his objectives are achieved, but here we’re going to have a look at the indirect friendly-fire.

The Nikkei Asian Review has broken down Huawei’s latest smartphone, the P30, listing off the individual components of the device and also giving an estimation of cost. Japan supplies the largest proportion of components for the device, 53.2% or 869 parts, while the US supplies 0.9% of the components and South Korea provides 34.4%. Interestingly enough the costs tell a slightly different story.

The financial output from Huawei is an interesting split. It is estimated that a P30 costs $363.83 to manufacture, with 38.1% of the expenditure remaining with Chinese suppliers. The 15 parts supplied by US firms account for $59.36 per device with Micron Technology collecting $40.96 for its DRAM chipset. Japanese suppliers gain $83.71 for every device manufactured, while $28 heads to South Korea and $28.85 to Taiwan.

What is important to consider when you are assessing the friendly-fire is the direct and indirect impact of Trump’s actions. The direct impact is easily measured; by banning US companies from working with Huawei you can see the financial detriment of losing a customer. If you go one stage further, you can see the indirect impact. By taking a shot at Huawei, less devices are being sold, therefore less cash is being paid out to every supplier.

The table below gives an overview of some of the international organizations which have been impacted by Trump aggression towards China:

Company Country Component Supplied Cost
Micron Technology US DRAM $40.96
Samsung South Korea NANDflash memory $28.16
Sony Japan Rear camera $15.15
Sony Japan Front camera $12.16
Skyworks Solutions US Communication semiconductor $8
Sony Japan Rear camera $7.6
Qorvo US Communication semiconductor $3
Alps Electric and Alps Alpine Japan Touch panel $3
Corning US Cover glass $2.7

Estimates courtesy of Nikkei Asian Review

What is worth noting is the aggression towards Huawei is temporarily on hold. At the G20 Summit this weekend, the US and China have made positive statements about getting trade talks back on track, though this would mean Trump would have to stop his campaign of terror against Huawei. Suppliers to the firm will be relieved, but you have to wonder whether the damage has already been done to the smartphone business.

Just like the telcos for networking equipment, consumers will want assurances the devices will continue to work over the lifetime of the product. As Google is a US firm, and therefore subject to the Entity ban, consumers were much less likely to buy a Huawei device when there is no guarantee Android will work as effectively and securely as it should.

The statements from the two Premiers are all well and good, but considering Trump’s opinion seems to change as often as the tides, how can anyone guarantee the effectiveness of the Android operating system over the course of the device’s lifetime? There are other factors to consider here, Huawei’s homegrown OS for example, but this is an unknown factor and consumers rarely trust the unknown en-masse.

This is where we believe the damage has already been dealt; it takes a lot to earn consumers trust but not much to lose it. Huawei has been gathering momentum in the smartphone market for years, and entry onto the Entity List might have set it back to the beginning. Rumours have emerged suggesting the company is preparing for a 40-60% decline in shipments for the remainder of 2019; how long will it take the firm to recapture these customers?

Trump makes minor Huawei concession following pleading from US tech sector

Following talks with the Chinese leader, US President Trump has announced US companies will be able to flog Huawei some gear if they really must.

It looks like Trump got the memo that the collateral damage from his decision to ban US companies from doing business with Huawei was starting to mount up. As part of trade talks with Xi Jinping Trump announced on Twitter, as it his wont, that US companies can resume selling Huawei stuff, so long as it doesn’t cross some arbitrary, unspecified ‘national security’ line.

Here’s Trump making it official.

It doesn’t look like there was significant progress on the underlying trade war that seems to have at least had an amplifying effect on the Huawei situation, but at least the two leaders are talking and making the right public noises. The mutual decision not to impose further tariffs, as had been threatened in advance, is one positive sign, but it looks like the final resolution for Huawei remains closely tied to the broader talks

That said the Trump administration has been keen to counter any perception that this concession amounts to a more general weakening of the Trump position. Speaking to Fox in the clip below, Director of the US National Economic Council Larry Kudlow didn’t really add much on Huawei, but made it clear that the move is part of a general process of horse-trading in which each party makes small, symbolic concessions to show good faith.