JULY 2019 75HUAWEI OR THE HIGHWAY?Three days after Google’s
announcement, chip designer
ARM announced that it will cut
off ties with Huawei to comply
with Trump’s ban. While ARM is
a U.K. company and isn’t based
in the U.S., most of its high-end
processor R&D happens there.
As such, any intellectual property
designed in the U.S. falls under
the Trump ban.The news is strategically
troublesome for the Chinese
company. Although ARM will
keep supporting older products
(that Huawei already bought)
and previously signed licenses
likely empowers Huawei to build
its own ARM-based chips for
years to come, the loss of such
an important partner is likely to
produce serious complications
down the line. The company can
theoretically design its own chips,
but there’s no telling if it would
be anywhere as good as what it
has now.Other smartphone parts that
are affected by the ban include
the Gorilla Glass (by Corning)
that Huawei uses, flash storage
chips (by Micron), and front-
end modules (by Skyworks
and Qorvo) that enable Huawei
phones to work with 3G and LTE
bands around the world. And
while Huawei can either find
suitable alternatives to these
parts or develop them on their
own, all these things add up,
further complicating Huawei’s
manufacturing process in an
already demanding smartphone
market.Naturally, all these chaotic
shenanigans had a negative effect
on the stock market. After Google
announced that it will comply
with Trump’s ban, the S&P
500, an American stock market
index based on the market
capitalizations of 500 large
companies having common stock
listed on the NYSE, NASDAQ, or
the Cboe BZX Exchange, fell by
0.7%, led by a drop in information
technology stocks. NASDAQ, a
tech-heavy composite index, went
down by 1.5%. And while it is still
too early to determine the overall
effect of Trump’s ban on Huawei,
it is clear that the confusion
is having a negative effect on
various markets. For example,
Apple, for which China is a key
market, blundered down for more
than 3%.Currently, Huawei is enjoying
a 90-day reprieve, courtesy of
the U.S. Commerce Department
scaling back the restrictions. The
temporary license will last until
August 19 to provide time for the
various U.S. companies that deal
with Huawei to sort out how to
abide by the export restrictions.
The respite will also allow the
Commerce Department to assess
the steps it will need to take in
the long term.Dr. Song Liuping, Chief Legal Officer of Huawei