There were huge sighs of relief in Shenzhen on July 9, as the U.S. Commerce Secretary Wilbur Ross finally confirmed a blacklist reprieve for Huawei and its U.S. supply chain. Ross announced at a departmental event in Washington that “to implement the president’s G20 summit directive two weeks ago, Commerce will issue licenses where there is no threat to U.S. national security.”
That said, Ross was quick to confirm that “Huawei itself remains on the entity list, and the announcement does not change the scope of items requiring licenses from the commerce department, nor the presumption of denial.” Ross also said that the relaxation needed to be more than just the “transfer [of] revenue from U.S. to foreign firms.”
For Huawei, though, this is all about smartphones and not networking equipment. It deems its consumer business outside the realms of national security concerns and has been struggling to make sense of its new reality. Now it can look to return to normal. And the positive impact that could have on the world’s number two player cannot be over-estimated.
There had been confusion after President Donald Trump’s surprise announcement at the G20 in Japan that “American companies “can sell their equipment to Huawei—a lot of people are surprised that we sell to Huawei a tremendous amount of products that go to various products they make… These are American companies producing those products. This is complex, highly scientific. We are the only one with the technology. I have agreed to allow them to continue selling the products.”
But that was followed by the issuing of instructions to Commerce officials that applications for sales to Huawei should be flagged to note that the company “is on the Entity List.” Such applications should be evaluated on the basis of a “presumption of denial,” as befits blacklisted companies. According to Reuters, “a presumption of denial implies strict review and most licenses reviewed under it are not approved.”
Now, though, Huawei can finally take that sigh of relief. In recent interviews, the company’s CEO Ren Zhengfei has been acknowledging the lack of ecosystem the company has for a “got it alone” approach to compete with Android. He has been clear that Huawei hopes the much-touted “Plan-B” centered on a new OS and app ecosystem is not necessary. It could be that this is now more than wishful thinking on his part.
There was a significant political backlash in the U.S. to the initial G20 announcement, with Republican Senator Marco Rubio accusing the president of “destroying the credibility of his administration’s warnings about the threat posed by the company, no one will ever again take them seriously,” and a warning from Democratic Leader Chuck Schumer that “if President Trump backs off, as it appears he is doing, it will dramatically undercut our ability to change China’s unfair trades practices.”
And so we can expect more of the same as the reaction to this latest move comes through.