US continues temporary authorization for Huawei

Huawei, ZTE could lose US business

The Department of Commerce has again extended the temporary general license allowing American companies to sell to Huawei, the embattled Chinese tech company. The existing temporary license was set to expire Monday.

The announcement is good news for Huawei and for American tech companies who rely on it as a key customer. The Commerce Department also said the extension is largely designed to help the rural US wireless providers who use Huawei’s inexpensive equipment in their networks. But it also represents continued isolation of Huawei, which has been working to become less reliant on American components in the face of US pressure, resulting in an increasingly independent Chinese tech giant.

“The Department will continue to rigorously monitor sensitive technology exports to ensure that our innovations are not harnessed by those who would threaten our national security,” Commerce Secretary Wilbur Ross said in a statement Monday.

The Trump administration says Huawei’s networking equipment carries risks to US national security because its telecommunications gear could be used for spying by Beijing. The US government has also accused Huawei of skirting sanctions and stealing intellectual property from American companies, all claims that Huawei staunchly denies.

In May, the Commerce Department put Huawei on the “Entity List,” a trade blacklist that makes it illegal for American companies to do business with it without a license. But the move posed a serious threat to its American suppliers — Huawei is the largest telecom company in the world, the second largest smartphone maker and it buys tens of billions of dollars in products from US companies every year. The action has also weighed on Huawei’s smartphone sales.

Soon after the Entity List action was announced, the Commerce Department granted the temporary general license. It allows American companies to sell certain products that don’t pose a security risk to Huawei, such as software updates and microchips used for older wireless equipment. It was first extended in August. Monday’s announcement is the third 90-day iteration of the license, which is now set to expire in February.

Earlier this month, Ross told Bloomberg TV that more permanent licenses for individual companies to sell to Huawei would be coming “shortly.” He said the Commerce Department had received 260 applications for such licenses. The Commerce Department did not immediately respond to a request for comment on the current status of those individual licenses.

Also counting on the ability to do business with Huawei is a group of about 40 small wireless carriers in the rural US that have built their networks using the Chinese company’s equipment. Those carriers say it could cost billions and take months to rip out the Huawei equipment and replace it. The temporary general license pushes out the timeline for them to have to do that, and could be a way of buying time until Congress could pass legislation proposed in September that would provide $1 billion to those carriers to help them replace Chinese equipment.

“The Temporary General License extension will allow carriers to continue to service customers in some of the most remote areas of the United States who would otherwise be left in the dark,” Ross said in the Monday statement.

The news also comes as a breakthrough in the US-China trade deal, in which Huawei has been implicated, remains just out of reach. President Donald Trump and Chinese leader Xi Jinping have been expected to sign a partial trade deal for about a month, though negotiations over the final text of the deal hit yet another snag last week.

In the meantime, Huawei has been working to become less reliant on American components for its products in case pressure from the US government does not let up. The company in August announced its own operating system, a backup plan to replace Google’s Android. It has also developed its own smartphone chipsets.

All that could make Huawei into an international tech player that competes even more directly with American companies, rather than relying on their technology for its success. Some worry that could threaten American dominance of the tech industry.

“If somebody from the government believes that Windows on a laptop sold by Huawei would create a national security risk to the United States, then of course that’s something that we want to talk about … but we don’t think that is the case,” Microsoft President Brad Smith told CNN’s Poppy Harlow last month. Microsoft has applied for an individual license to sell to Huawei.

“Right now, there is not a Chinese competitor for in the PC operating system space,” Smith said. “Is it really in the United States’ economic interest to create not only an incentive, but the necessity to go create a Chinese operating system? Because once it’s created, it will compete with us around the world.”

For its part, Huawei says extending the temporary general license will have little affect on its business and argues that it shouldn’t have been placed on the Entity List to begin with.

“This has done significant economic harm to the American companies with which Huawei does business, and has already disrupted collaboration and undermined the mutual trust on which the global supply chain depends,” Huawei said in a statement. “We call on the US government to put an end to this unjust treatment and remove Huawei from the Entity List.”

CNN’s Brian Fung contributed to this report.