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Tag: Entity List and Foreign Direct Product Rule

  • Huawei Throws In the Towel, Decides to Sell Smartphone Business

    Huawei Throws In the Towel, Decides to Sell Smartphone Business

    Huawei is selling its Honor line of smartphones in the midst of crippling sanctions by the US government.

    The US has been waging a campaign to isolate Huawei, painting the company as a threat to national security. While all Chinese companies are required to cooperate with the Chinese government, Huawei is believed to have stronger ties with military and intelligence officials than many companies. As a result, US officials have accused the company of being part of Beijing’s spying apparatus, a claim Huawei has vehemently denied.

    Despite the denials, the US has banned Huawei and pressured its allies to do the same. The UK, Australia and New Zealand have instituted similar bans, as have a number of other countries around the world. The US also used the Entity List and Foreign Direct Product Rule to cut Huawei from its suppliers, specifically TSMC, which manufactured Huawei’s line of smartphone chips. The company was forced to work out a deal with Qualcomm, with the latter receiving an exception to sell 4G chips to Huawei.

    It appears those measures were not enough to stave off disaster, as Huawei is selling Honor to salvage the smartphone unit. According to The Houston Chronicle, the buyers are a group of 40 Chinese companies, including a number of retailers that carry Honor. The deal is reportedly worth as much as $15 billion and will leave Huawei with no ownership stake in the smartphone line.

    It remains to be seen if this will result in sanctions being lifted.

  • Huawei Running Out of Smartphone Chips Amid US Pressure

    Huawei Running Out of Smartphone Chips Amid US Pressure

    Huawei is facing a critical shortage of smartphone chips as a result of pressure from the US.

    In the aftermath of concerted efforts by US officials to isolate Huawei, the company is reporting that it is running out of smartphone chips and will soon have to stop production of its own Kirin chips, according to The Associated Press.

    Officials have maintained that Huawei represents a national security threat to the US and its allies. Among other things, there have been concerns over the unusually close ties between Huawei officials and Chinese intelligence. The US has banned Huawei and pressured allies to do the same.

    The US Commerce Department even modified the Entity List and Foreign Direct Product Rule to restrict Huawei’s access to needed technology. The Entity List and Foreign Direct Product Rule prohibits companies from buying products containing US technology, even if the manufacturer is a foreign company. This rule enabled the US to cut off Huawei from TSMC, one of their primary chip suppliers.

    Like Apple, Huawei uses outside contractors to manufacturer their chips. Being cut off from those contractors means the company is losing the ability to continue manufacturing them.

    “Unfortunately, in the second round of U.S. sanctions, our chip producers only accepted orders until May 15. Production will close on Sept. 15,” said Richard Yu, president of the company’s consumer unit. “This year may be the last generation of Huawei Kirin high-end chips.”