U.S. eases curbs on Huawei; founder says clampdown underestimates Chinese firm
* U.S. grants Huawei license to buy U.S. goods until Aug. 19
* Huawei still barred from buying U.S. goods to make new
* Founder says reprieve means little because firm prepared
By Brenda Goh and Karen Freifeld
SHANGHAI/NEW YORK, May 21 (Reuters) - The United States has
temporarily eased trade restrictions on China's Huawei to
minimize disruption for its customers, a move the founder of the
world's largest telecoms equipment maker said meant little
because it was already prepared for U.S. action.
The U.S. Commerce Department blocked Huawei Technologies
from buying U.S. goods last week, a major escalation in
the trade war between the world's two top economies, saying the
firm was involved in activities contrary to national security.
The two countries increased import tariffs on each other's
goods over the past two weeks after U.S. President Donald Trump
said China had reneged on earlier commitments made during months
On Monday, the Commerce Department granted Huawei a license
to buy U.S. goods until Aug. 19 to maintain existing telecoms
networks and provide software updates to Huawei smartphones, a
move intended to give telecom operators that rely on Huawei time
to make other arrangements.
Shares of U.S. suppliers to Huawei including Qualcomm
, Intel Corp and Lumentum Holdings Inc
rose on Tuesday morning, with the Philadelphia Chip Index
up more than 1%.
Radio frequency chipmaker Qorvo was the latest U.S.
supplier after mobile parts maker Lumentum to halt shipments to
It is unclear what the U.S. government extension permits,
but if it allows Huawei to keep purchasing components, the
company will likely order more to build inventory, said Mark
Kelleher, an analyst at D.A. Davidson.
Huawei is still prohibited from buying American-made
hardware and software to make new products without further,
Huawei founder Ren Zhengfei on Tuesday told Chinese state
media that the reprieve bore little meaning for the company as
it had been making preparations for such a scenario.
"The U.S. government's actions at the moment underestimate
our capabilities," Ren said in an interview with CCTV, according
to a transcript published by the Chinese state broadcaster.
The temporary license suggests changes to Huawei's supply
chain may have immediate, far-reaching and unintended
consequences for its customers.
The Commerce Department said it will evaluate whether to
extend the license period beyond 90 days.
China's yuan firmed versus the dollar on Tuesday as news of
the reprieve eased some worries that trade tensions would be
further inflamed and inflict deeper losses on the currency.
Beijing has struck an increasingly defiant tone as the trade
war has escalated, saying it will take measures to safeguard the
interests of its companies, but has not said whether or how it
may retaliate over the U.S. action against Huawei.
President Xi Jinping's Monday visit to a rare-earth company
in southern China sparked speculation that the sector could be
the next front in the trade war, driving up shares in Chinese
rare-earth related firms on Tuesday.
China produced 80% of rare-earths, a group of 17 chemical
elements used in electronics, imported by the United States in
"Given the Huawei decision, I feel they (China) have no
choice but to retaliate, for face sake," Cliff Tan, head of East
Asian research at MUFG Bank in Hong Kong, told the Reuters
Global Markets Forum on Tuesday.
Chinese Foreign Ministry spokesman Lu Kang, at a media
briefing, rebuffed Trump's claim that his tariffs were causing
companies to move production away from China, saying foreign
investors remain enthusiastic about the country.
Huawei is currently on the receiving end of a U.S.
government accusation that it engaged in bank fraud to obtain
embargoed U.S. goods and services in Iran and move money via the
international banking system. Huawei has pleaded not guilty.
The trade blacklist has added to its woes, following which
Alphabet Inc's Google suspended some business with
Huawei, Reuters reported on Sunday citing a person familiar with
the matter, raising worries about the Chinese firm's smartphones
that run on Google's Android operating system.
Monday's temporary license is likely to allow companies such
as Google to continue providing service and support, including
software updates or patches, to Huawei smartphones that were
available to the public on or before May 16.
"Keeping phones up to date and secure is in everyone's best
interests and this temporary license allows us to continue to
provide software updates and security patches to existing models
for the next 90 days," a Google spokesperson told CNBC in an
email on Tuesday.
The license also allows Huawei to engage in the development
of standards for fifth-generation (5G) telecom networks.
Ren put up a brave front on Tuesday, reiterating claims that
the restrictions will not hurt Huawei's prospects and that no
other company will be able to catch up with Huawei in 5G
technology in the next two to three years.
China was nevertheless still "far behind" the United States
in technology, he said.
Chip experts have called out Huawei on its claims that it
could ensure a steady supply chain without U.S. help, saying the
technology it buys from American companies would be "hard to
Nearly 16 percent of Huawei's spending on components in 2018
went to U.S. firms including Qualcomm, Intel
and Micron Technology, analysts said.
Ren said Huawei was at odds with the U.S. government, not
U.S. firms, and in a comment that trended on Chinese social
media, he praised Apple Inc's iPhones, saying he gifted
the American firm's devices to family members.
"Apple has a good business ecosystem ... We cannot think
narrow-mindedly that loving Huawei equals loving its phones."
U.S. firms could lose up to $56.3 billion in export sales
over five years from stringent export controls on technologies
involving Huawei or otherwise, the Information Technology &
Innovation Foundation said in a report. Missed opportunities
threatened as many as 74,000 jobs, the foundation said.
(Reporting by Karen Freifeld in New York, David Shepardson in
Washington and Brenda Goh in Shanghai; Additional reporting by
Diane Bartz in Washington, Angela Moon, Ryan Woo, Cate Cadell
and Lusha Zhang in Beijing, Supantha Mukherjee in Bengaluru;
Editing by Christopher Cushing, Sayantani Ghosh, Himani Sarkar
and Arun Koyyur)
First Published: 2019-05-21 02:09:35
Updated 2019-05-21 16:22:17
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