At the end of last week we learned that the United States had extended the initial veto to Huawei, now also putting the giant TSMC, which provides components to Huawei’s Kirin processors , in restrictions. We now know that China is preparing a major counterattack against the Trump administration and its business interests, something that was seen to come.
Until now, Huawei’s semiconductor and chip business, which depends directly on Taiwan’s TSMC, had not been affected by US restrictions, until just a few days ago the veto was extended to this vital supplier for the Chinese firm. .
TSMC will no longer manufacture Huawei processors
It is clear that if the inability to use Google software on Huawei phones was one of the biggest challenges that the Chinese manufacturer has had to face at the time, this blow could definitely sink its business. Without the components TSMC supplies to Huawei, it is impossible to manufacture its Kirin processors, the true heart of its mobiles. Therefore, the measures China is preparing to respond to this “attack” by the United States will be proportionally forceful.
This has been revealed by the Chinese media Global Times , which quotes a source close to the Chinese government to talk about its plans to infringe the same commercial damage to North American companies. This source has told the Chinese media that ” China will take vigorous measures to protect its legitimate rights “, something that logically implies a harsh response to the actions of the United States, but what will these measures consist of?
Investigations, restrictions and wear on the great American technology companies
China’s intention is to start a process of monitoring the activities of large North American companies with interests in the Asian country. At the center of this strategy would be companies such as Apple, Cisco, Qualcomm and Boeing . These measures that China is considering are based on the declaration of these companies as “unreliable entities” for Chinese companies and organizations. This would imply that these North American companies would begin to undergo investigations by the Chinese government related to antitrust, cybersecurity laws and any other that could weigh down the business of these companies in that country.
In the case of Boeing, China threatens to veto the purchase of its aircraft , which could mean losses for the company, considering that there are at least 100 aircraft reserved. The Asian authorities even contemplate the payment of millions in compensation to the aeronautical company in order to infringe that damage to the United States commercially speaking. Although it is the measures that it would take against Apple, Cisco and Qualcomm those that from China consider as a true “nuclear bomb” in commercial terms.
Apple and Qualcomm, main victims
If Boeing has a large volume of business in the Chinese market, in the case of Apple and Qualcomm its dependence on it is very notable. Only in the case of Apple, this market represents 14.8% of its income , as has been verified in the first quarter of 2020. The measure that the Chinese government would take against these companies would be the sale in their country of chips manufactured by these , which means that the iPhone with its own technology, and the rest of the phones that integrate Qualcomm processors, manufactured in part by North American companies, could not be sold in China, thus replicating the latest restriction by the United States to Huawei processors.
Logically, the intention of China is that the US companies themselves are the ones that persuade the Trump administration of the enormous damage to their accounts that a veto of China to their products may entail, which would be proportionally greater than that received by China in the case Huawei. In fact, the semiconductor industry is one of the best health in the United States, being one of the main exporters.
A sector capable of generating a trade surplus, which has increased in recent years precisely due to the increase in sales to China . So the Asian government measures would surely have a significant effect on the balance of these companies. We are talking about an industry that contributes $ 36 billion in revenue to the American economy. Logically, a reverse ban on China will also generate significant losses to the supply chain in the development of the North American semiconductor industry.
So if these veiled threats from the Chinese government became a reality, both Apple, Qualcomm, Cisco and Boeing could become part of the list of foreign entities that harm the legitimate interests of Chinese companies, a list created in May 2019. in response to America’s initial veto on Google software.
The idea of the Chinese authorities is to start administrative litigation against these companies in the Chinese courts, in which investigations will be opened against them that will probably end in a revocation of these companies in order to operate in the Chinese market, always based on the legality of the Asian country. What it is to respond with the same yardstick to measure the United States where it can hurt the most, in the income of its largest, most representative and most important companies in the Chinese market.
For Huawei it is an arbitrary and pernicious decision
As a result of all this, Huawei today issued a harsh statement in which it once again defends itself against the accusations of the United States, and where it categorically opposes the measures taken by the United States Department of Commerce. A statement that begins by recalling that the US government unfairly included Huawei in the Entity List.
In its statement today, the Chinese firm says that ” This decision has been arbitrary and pernicious , and threatens to undermine the entire industry globally. This new regulation will affect the expansion, maintenance and operation of networks worth hundreds of billions of dollars that we have implemented in over 170 countries ”
A decision that for Huawei is not motivated by the security of the networks , since it is damaging the interests of millions of users of the firm in all the countries where it operates, since it is a decision by the North American government that will also affect to the communications services. The Chinese firm also assure that this new escalation in the restrictions imposed on Huawei suppliers, such as TSMC, will have a serious impact on various industries around the world, which could lead to more losses within the semiconductor market.
In the final part of its statement, Huawei talks about the future and the consequences these decisions will have on its business, which ” will inevitably be affected , but we will do our best to find a solution. We hope that our customers and suppliers will continue to support us and minimize the impact of this discriminatory decision, “concluded the Chinese firm.