By Brenda Goh and Karen Freifeld
SHANGHAI/NEW YORK (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 Co Ltd 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 of negotiations.
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 Inc, Intel Corp and Lumentum Holdings Inc rose, with the Philadelphia Chip Index up 2.1%.
Radio frequency chipmaker Qorvo was the latest U.S. supplier after mobile parts maker Lumentum to halt shipments to Huawei.
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, hard-to-obtain licenses.
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 2017.
“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 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 replace.”
Nearly 16% 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)
Huawei says it got over $1.4 billion in licensing revenue since 2015
Moody’s, Israel’s Team8 to create cyber risk index for businesses
Former Olympic kayaker Ferguson to defend America’s Cup
SoftBank, Toyota’s self-driving car venture to add five more automakers: sources
Don’t care: Kyrgios the hottest ticket in town
Soccer: Australia’s World Cup preparations soured by injuries
Walmart relaunches service to deliver groceries to shoppers’ refrigerators
On fire Woodland takes U.S. Open lead, Tiger fumes
NHL: Blues on verge of maiden Stanley Cup after blanking Bruins
NHL notebook: Islanders lock up Eberle with 5-year deal
Investigation: One in Three Reviews on TripAdvisor Are Fake
Amazon Selling its own Mattresses
Roy Moore Sues Sacha Baron Cohen for $95 Million
A Tesla Surf Board? Yes, Tesla Invented a Surfboard
Tom Cruise, James Corden ‘Fall Out’ of Plane on ‘Late Late Show’ (Watch)
ENTERTAINMENT4 months ago
Can You Name the Celebrity from the ’90s Photo?
LIFE1 year ago
Russia Is Very Different Than You Thought
LIFE4 months ago
How well do you know European club football?
Sports10 months ago
29 Things You Need To Know About The Tiger Woods Comeback!
ENTERTAINMENT1 year ago
38 Photos Taken Moments Before Disaster Struck
ENTERTAINMENT3 years ago
This Guy Transformed His Ugly Backyard Into a Pool Paradise!
ENTERTAINMENT3 years ago
Just What Happened To These Stars of 80’s & 90’s Wrestling?
ENTERTAINMENT3 years ago
Insanely Funny Food Brands From Around The World
Sports10 months ago
Nike’s Colin Kaepernick Ad reactions range from support to outrage
ENTERTAINMENT2 years ago
The Oversized Monsters Of The Animal World # 15 Will Freak You Out