2019-12-15 08:55:251970-01-01 00:00:00

Rising Tension Despite Huawei Reprieve

On Tuesday 21,  the U.S. Commerce Department issued a partial reprieve over the block on Huawei. It came after Trump’s order to blacklist Huawei last week. Consequently, Google decided to revoke Huawei’s Android licenses on the earlier day. The department created a temporary general license that would allow the U.S. suppliers and customers of the Chinese telecom giant a 90-day reprieve from suffering the trade penalties. It was intended to provide time for companies to address how to handle export restrictions and for the Commerce Department to evaluate its long term process.

Due to this, U.S. technology shares and the U.S. index raised. Later that day, the Philadelphia Semiconductor Index turned to gain 2.1% after three consecutive day’s slump.  The relative company such as Huawei’s supplier Intel Corp, Qualcomm Inc, Xilinx Inc and Broadcom Inc witnessed a rise between 1% to 4.6% in the share price. The 1.2% increase in  Technology shares contributed the most gains to the S&P 500, the benchmark climbed 0.85%, to 2,864.36. At the same time, the Dow Jones Industrial Average added 0.77% to 25,877.33 while the Nasdaq Composite gained 7,785.72. Europe saw the same trend because of European semiconductor companies restored market confidence. After Washington’s temporary easing of trade limits on Huawei, AMS, STMicroelectronics and Germany’s Infineon added 2% to 5.6%. The European index gained around 1.1% during the early deals.

On the other hand, Ren Zhengfei, the founder of Huawei stated on China’s state media CCTV that the reprieve “doesn’t mean much”.He suggested that the current action of Trump administrations underestimated the strength of Huawei. The company could “not easily” without the supply of U.S. chips to support its devices, but the founder also added the main target market of Huawei was the government rather than U.S. firms. So far, Chinese officials announced that it was “bullying” that the U.S. curbed Huawei’s business and warned that China would retaliate to the U.S.   

The issue about Huawei

Last Wednesday, the U.S. president Donald Trump signed an executive order to restrict the use of technology and equipment from unreliable foreign telecommunications companies. Huawei was banned as the government considered it to have a national security risk. Google followed this order and cut ties with Huawei by ceasing licensing the Andrioid mobile operating system to Huawei. Following the announcement of the ban, three giants of the world’s chip designers and suppliers, Intel, Qualcomm and Broadcom,  joined Google to ban Huawei. It was reported that they cut off the supply deals of chips immediately. Microsoft kept silence but removed Huawei laptop from store. The chip suppliers in Europe were also expected to fall in line after German chipmaker Infineon Technologies suspended shipments to Huawei.

It has been a long time for the U.S. government to accuse Huawei’s equipment of spying on behalf of the Chinese government. Last December,  Canadian authorities arrested Huawei’s Chief Financial Officer Meng Wanzhou, who is also the daughter of Huawei’s founder Ren Zhengfei. Ren was considered to have a Chinese military background. The action was under the requirement of the U.S. and caused a series of political and legal issue. At that time, the U.S. government even tried to seek Meng’s extradition over allegations of violating the sanctions on Iran. The event triggered a serious response from the Chinese government. Moreover, the U.S. intelligence department told that there was a special relationship between Huawei and the People’s Liberation Army, China’s National Security Commission, and another branch of the Chinese intelligence service. Huawei denied all these allegations. The company accused that the U.S. took action to stop its expansion as Huawei had become the world’s largest telecommunications equipment supplier and the second largest smartphone maker.

The rising tensions between the U.S. and China

Amid the tension of  U.S.-China trade war, people were more sensitive to the issue of Huawei. The anti-U.S.  sentiment was sweeping over China this week. On the Chinese state-owned media CCTV, propaganda movies had replaced pre-arranged television programming. On the internet, an anti-US song from a retired government official was going viral after president Xi started the propaganda machine. He also reminded the Chinese of past glories as China had been holding on for 5000 years. It was interesting that finale of Game of Thrones was blocked in China’s streaming platform Tencent Video on Monday night. This blockbuster series was from HBO television series, an American cable and satellite television giant. All the phenomenon indicated that China was preparing for a prolonged trade war with the U.S.

By Steven Gao

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