The Commerce Department got 200-plus Huawei-related license requests since the Chinese company was added to the agency’s entity list, according to a Commerce spokesperson. “Given the complexity of the matter, the interagency process is ongoing to ensure we correctly identified which licenses were safe to approve.” Companies haven't received approvals or denials, said trade lawyers with clients that submitted license applications. Huawei didn't comment Wednesday.
The next few months include a "rapid-fire succession of trade and tech war deadlines" with much uncertainty for the fight between the U.S. and China, Bank of America economists Ethan Harris and Alexander Lin wrote investors Monday. What happens with Huawei's temporary general license is likely the most important unknown, they said. Huawei would be cut off from all U.S. exports Nov. 17, but "we expect an 'extend and pretend' scenario where Huawei remains on the 'entity list' but is allowed to keep buying US inputs." The other deadlines, all of which occur over the next three months, involve tariff increases on products from China and a decision on whether to impose tariffs on autos and car parts. The U.S. Trade Representative's office and the Department of Commerce Bureau of Industry and Security didn't comment Tuesday.
Revenue declined 23 percent in Micron Technology’s fiscal 2019 ended Aug. 29, but senior executives on a fiscal Q4 call Thursday wouldn’t break out how much of the decrease was attributable to the disruption in shipments to Huawei. Revenue in Q4 was down 42 percent from a year earlier, but up 2 percent sequentially, exceeding Micron’s previous guidance on better-than-expected demand in the quarter, said the company. “In recent months, we have seen increased demand from customers headquartered in mainland China,” said CEO Sanjay Mehrotra. Some customers “could be making strategic decisions to build higher levels of inventory in the face of increased trade tensions between the U.S. and China,” he said. The components Micron sells have heavy exposure in the first three rounds of Section 301 tariffs on Chinese goods. President Donald Trump announced in August he would hike those tariffs in October (see 1908230006). Micron, “with continued mitigation,” was able to limit the tariffs’ impact on Q4's consolidated gross margin to fewer than 20 basis points, said Chief Financial Officer David Zinsner. Micron resumed shipping “some products” to Huawei in Q3 that were “not subject” to the Trump administration’s export restrictions, said Mehrotra. Sales to Huawei in Q4 declined sequentially and “were down meaningfully from the levels we anticipated” before the Commerce Department put Huawei on the entity list, he said. Micron applied to Commerce for licenses “that would allow us to ship additional products, but there have been no decisions on licenses to date,” he said. “If the entity list restrictions against Huawei continue and we are unable to get licenses, we could see a worsening decline in our sales to Huawei over the coming quarters.” The stock plunged 11 percent Friday to $43.21.
China will impose tariffs on about $75 billion worth of U.S. goods in retaliation for the coming 10 percent U.S. duties on $300 billion in Chinese goods, said China’s State Council Friday. China said it will impose either 10 percent or 5 percent tariffs on more than 5,000 U.S. products. The tariffs will be imposed in two separate batches on Sept. 1 and Dec. 15, China said. Thursday, China’s Ministry of Commerce criticized the U.S. decision to add 46 new Huawei affiliates to the Commerce Department’s entity list, Gao Feng told a news conference. China “resolutely opposes the U.S. side’s practice of using state power to suppress Chinese enterprises for no reason.” The spokesperson said the U.S. move will hurt global supply chains and the country would retaliate with “countermeasures” if President Donald Trump follows through on his 10 percent tariff threat scheduled for December (see 1908150013). “Nobody wins a trade war,” said Myron Brilliant, U.S. Chamber of Commerce head-international affairs, in a statement. It’s time for an agreement on “the thorny issues” of technologies transfer, intellectual property enforcement, market access and “the damaging global impact of subsidies,” he said.
The Commerce Department’s Bureau of Industry and Security tried to answer questions from stakeholders about standards organizations' activities that involve Huawei and about its BIS entity listing. It calls for licenses for any activities involving “the exchange, transfer, or other disclosure of technology or software that is of U.S.-origin or is otherwise subject to the” export administration regulations, BIS said Tuesday. Examples include: “participating in a non-public working or study group involving the exchange ... of such technology,” “participating in electronic exchanges within a standards body, by email or other means, that contain or attach such technology or software” and “releasing or otherwise providing access to blueprints, flowcharts, schematics, prototypes, or similar materials that contain such technology.” U.S. carriers using Huawei got more time this week to adjust to restrictions pushed by President Donald Trump involving the company (see 1908190040).
The Commerce Department gave rural U.S. carriers that use Huawei equipment a 90-day reprieve Monday from a ban on doing business with the company. At the same time, the U.S. ratcheted up pressure on the Chinese vendor, adding 46 more of Huawei’s non-U.S. affiliates to a list of subsidiaries subject to export restrictions. Three months ago, the U.S. similarly gave U.S. carriers more time to deal with sanctions (see 1905210013). The delay means Huawei can continue to send updates to handsets and maintain existing networks and equipment.
Samsung’s share of the European smartphone market jumped to 41 percent in Q2, with 18.3 million shipments, from the year-ago quarter, as its main rival Huawei “suffered the impact of political restrictions” in the U.S., Canalys reported Monday. Huawei’s shipments fell 16 percent to 8.5 million units, giving it 19 percent share, while Apple shipments dropped 17 percent to 6.4 million iPhones for 14 percent share, it said. Xiaomi grew 48 percent to 4.3 million units, for 10 percent share. Samsung has been “quick to capitalize on Huawei’s US Entity List problems, working behind the scenes to position itself as a stable alternative in conversations with important retailers and operators,” said analyst Ben Stanton: Lack of brand loyalty among low-end and mid-range Android smartphone buyers drove Samsung’s “best performance in years.” Europe, said the analyst, remains “one of the most brand-volatile smartphone markets.”
Huawei tablet shipments grew 4 percent in Q2 from the 2018 quarter, despite Commerce Department placing Huawei on the entity list in May (see 1907050003), said a Strategy Analytics tablet report Friday. But an intensifying trade war could foreshadow a shift in Android demand “from a bruised Huawei brand to its fiercest competitors, Samsung and Lenovo,” said analyst Eric Smith. Samsung and Lenovo shipments were ahead of the industry but showed declines of minus-1 percent and minus-6 percent in a category down 7 percent year on year, said Smith. In a widening trade war, “Lenovo could be among a group of Chinese companies that are targeted by the Trump administration,” he said. Apple iPad shipments dropped 7 percent year on year in Q2 to 10.7 million units, to 29 percent market share. New iPad Air and iPad mini tablets pushed average selling prices higher alongside continued strong demand for iPad Pro; ASPs grew year on year from $410 to $469, SA said. Bucking the trend, Amazon had 38 percent higher tablet shipments in Q2 to 2 million units, behind Apple (10.7 million), Samsung (4.9 million) and Huawei (3.9 million), it said. Trailing Apple’s 29 percent market share were Samsung (13 percent), Huawei (10 percent), Amazon (5.4 percent) and Lenovo (5 percent).
Members of Congress continue introducing or working on bills targeting national security concerns with Chinese telecom equipment manufacturer Huawei, including a pending bill from House Commerce Committee Chairman Frank Pallone, D-N.J., lawmakers and lobbyists told us. Some on Capitol Hill said they're holding out hope that a conference committee to marry the disparate House and Senate versions of the FY 2020 National Defense Authorization Act will agree to include a trio of House-passed amendments that target Huawei and ZTE. But they and others said legislative vehicles and these recent stand-alone bills should be considered as an alternative if the conference process fails to bear fruit.
A China-U.S. trade deal would lead to lifting the ban on Huawei, speakers agreed during a Brookings Institution panel. All suggested a U.S.-China deal will eventually get done. The Commerce Department added Huawei to the Bureau of Industry and Security’s entity list in May, and recently showed willingness to loosen restrictions to mitigate impacts on U.S. exporters (see 1907100013). Blacklisting was more political than practical, said Information Technology and Innovation Foundation President Robert Atkinson and American Enterprise Institute Resident Scholar Derek Scissors. The Trump administration and Congress cited fears Huawei products can be used as state-monitored surveillance equipment. That was addressed with import restrictions, Atkinson said Thursday. “The Huawei ban had nothing to do -- nor should it have anything to do -- with national security,” he said. “Could we damage Huawei -- their national champion -- as leverage in a trade war? That's what that was about.” Atkinson said U.S. export controls against Huawei are “a total trade tactic” and China is never “going to accept a deal if the Huawei ban is still on.” Adding the company to the entity list was a trade tactic that will be easily undone, said Scissors. “We are much less linked to Huawei than some of the Europeans are and some of our other allies are,” he said. “The president will just say it doesn't matter to us.”