US chip makers try to reverse Trump’s moves to block sales to Huawei

WASHINGTON D.C., Feb 12, 2021, SCMP. Semiconductor firms are seeking extra time to appeal last-minute Trump administration moves to block sales to Chinese telecoms company Huawei, hoping against the odds that the Biden administration will reverse course, five sources said, South China Morning Post reported.

Several company executives who declined to be identified by name said they ultimately did not think the Biden administration would significantly soften the hardline position. “Everyone is deflated,” one company executive said.

Billions of dollars of US technology and chip sales to Huawei hinge on how the Biden administration applies export restrictions the Trump administration put in place.

The companies hope that, with more time to make their cases before an interagency panel and a potential policy shift, at least some of the rejected Huawei sales will be allowed.

The US Commerce Department did not respond to requests for comment. A Huawei spokeswoman said the company did not have any insight into the licensing process at the agency.

Days before Republican President Donald Trump left office on January 20, the administration notified Huawei suppliers, including chip maker Intel Corp, that the government was revoking certain licences to sell to Huawei and intended to reject dozens of applications for others, Reuters reported.

The surprise flurry of “intent to deny” notices were among last-minute, tough-on-China moves aimed at boxing Democratic President Joe Biden into hardline policies against Beijing and cementing Trump’s legacy.

Among the decisions, the Trump administration denied 116 licence applications worth US$119 billion and approved four worth US$20 million, according to a Commerce Department document dated January 13 and seen by Reuters. Another 300 applications with stated values of US$296 billion were pending, the document said.

Some companies whose licence applications were rejected asked the Commerce Department for more than the standard 20 days to appeal their denials, the sources said. The department has granted 90-day extensions to some of the companies, the people said.

Huawei was placed on a trade blacklist by Trump in May 2019 over national security concerns after it was accused of being capable of spying on customers, as well as intellectual property theft and sanctions violations. Huawei has denied wrongdoing.

Before the January decisions, the US government approved about US$87 billion worth of applications for sales to Huawei and denied US$11 billion since Huawei was blacklisted, according to the Commerce Department document.

The Biden White House has described Huawei as an “untrusted vendor” and a national security threat. Biden’s nominee for commerce secretary, Gina Raimondo, pledged to protect US telecoms networks from Chinese companies but declined to commit to keeping Huawei on a trade blacklist.

To remove the company from the blacklist, the Commerce Department would have to certify to Congress that Huawei has mitigated the national security threat it poses and that the firm has resolved charges of sanctions violations, according to a 2019 law.

“I don’t think you will see a change in policy on Huawei,” said James Lewis of the security think tank CSIS. “I think [the Biden administration] is mainly signalling, ‘We are going to do the same thing, but try to do it in a more business-friendly way’.”

The Biden administration is reviewing China policy, and sources say it is too early to know what path the president will take on Huawei.

Trump had an inconsistent approach to Huawei, opening the door to more sales when he was seeking a trade deal but then coming down harder as tensions began rising over the coronavirus and Beijing’s crackdown on democracy activists in Hong Kong last year.

But few companies expected the big batch of rejections in mid-January, including licence requests for chips used in 4G phones.

“Eventually, we determined if the item – it could be a memory chip or it could be something else – was capable of supporting a 5G application, then we denied it, even if it was not exclusive to 5G,” said former commerce official Corey Stewart, a China hardliner who joined the Trump administration in November and authored the document seen by Reuters.