Huawei Technologies is facing two major U.S. hurdles – from two developments — that have the potential to block its business growth globally.
First, United States as President Donald Trump on Wednesday signed an executive order barring companies from using telecom equipment made by firms deemed to pose a national security risk.
Second, the Trump administration hit Huawei with severe sanctions on Wednesday, adding a new incendiary element to the U.S.-China trade dispute.
The Commerce Department added Huawei Technologies and 70 affiliates to its “Entity List” — a move that bans the tech company from acquiring components and technology from U.S. firms without government approval.
Huawei generated revenue of 47.885 billion yuan (+21.3 percent) from Americas, 204.536 billion yuan (+24.3 percent) from EMEA, 372.162 billion yuan (+19.1 percent) from China and 81.918 billion yuan (+15.1 percent) from Asia Pacific in 2018.
Huawei’s sales includes 294.012 billion yuan (–1.3 percent) from carrier business, 348.852 billion yuan (+45.1 percent) from consumer business and 74.409 billion (+23.8 percent) from enterprise business.
Both developments have the potential to block the growth of Huawei in the ICT business. The first decision will ban Huawei from telecom equipment to US-based telecom operators – both small and big – and US-government agencies.
The second decision will block Huawei from sourcing ICT components from the US. This will impact US-based technology companies such as Google, Microsoft, Qualcomm, Intel, among others, as well.
Huawei in a statement said it is the unparalleled leader in 5G. “We are ready and willing to engage with the US government and come up with effective measures to ensure product security,” Huawei said in a statement on Thursday.
Restricting Huawei from doing business in the US will not make the US more secure or stronger; instead, this will only serve to limit the US to inferior yet more expensive alternatives, leaving the US lagging behind in 5G deployment, and eventually harming the interests of US companies and consumers.
Mobile service providers such as AT&T, Verizon, T-Mobile, Sprint, among others, will not be able to source 5G network from Huawei. This will escalate the cost of rolling out 5G network as the number of key players will be reduced to Nokia, Ericsson and Samsung.
North America is the largest telecom market for all telecom network makers because all top carriers spend heavily in their telecom networks. AT&T alone has an annual Capex of nearly $23 billion in 2019 — ahead of its 5G launch.
While the big wireless companies have already cut ties with Huawei, small rural carriers continue to rely on both Huawei and ZTE switches and other equipment because they tend to be cheaper, Reuters reported.
The executive order invokes the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the United States. The order directs the Commerce Department, working with other government agencies, to draw up a plan for enforcement within 150 days.
Senator Ted Cruz said the order would help protect 5G networks from Huawei. The order does not specifically name any country or company, but U.S. officials have previously labeled Huawei a threat and actively lobbied allies to not using Huawei network equipment in 5G networks.
The United States has been actively pushing other countries not to use Huawei’s equipment in next-generation 5G networks that it calls “untrustworthy.” In August, Trump signed a bill that barred the U.S. government itself from using equipment from Huawei and ZTE, another Chinese provider.
Federal Communications Commission (FCC) Chairman Ajit Pai, who has called Huawei a threat to U.S. security, said Wednesday that given the threats presented by certain foreign companies’ equipment and services, this is a significant step toward securing America’s networks.
The order directs the director of U.S. National Intelligence to produce an assessment by late June on the risks to the United States and critical infrastructure from information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary.
FCC in April 2018 voted to advance a proposal to bar the use of a $9 billion government fund to purchase equipment or services from companies that pose a security threat to U.S. communications networks.