Category Archives: Propaganda

US may relax some restrictions on Huawei as it aims to retain its global tech lead

Just a couple of years ago, Huawei had been one of the biggest smartphone makers and was even set to topple both Apple and Samsung for the throne. However, it soon got hit with sanctions from the US, which essentially crippled its smartphone operations as a whole. But now, it appears that there might soon be some changes that help improve its situation.

For those unaware, the Chinese tech giant got hit with various restrictions that took away its access to technologies that originate from America. This basically had it lose its supply to crucial technology for its products. Furthermore, the US had followed up this with more sanctions that cut off Huawei from its primary chip supplier, TSMC. Since then, the company has launched just two flagship series, with both of them only supporting 4G networking despite the chips being used were flagship top end Qualcomm Snapdragon chips.

After Joe Biden became the new president, many had hoped that the new administration would lift some restrictions against Huawei. But this was not the case. However, it appears there will be some changes, with a Bloomberg report claiming that the US Commerce Department’s Bureau of Industry and Security issued a rule allowing certain low level technologies to be shared. In other words, some technologies can be shared to sanctioned entities like Huawei.

Alan Estevez, the Commerce undersecretary for industry and security stated that “US stakeholders need to be fully engaged in international standards organizations, particularly where the critical but sometimes invisible standards that they set have important national security as well as commercial implications.” In other words, this might be some positive news in a while for the Chinese smartphone maker.

Tensions deepen as U.S. makes move away from Chinese supply chain

Political events, COVID-19, and a quest for primacy in advanced technologies have seen the United States making recent moves to shift away from China’s supply chain.

Last week, in a Securities and Exchange Commission filing, the U.S. government had told Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD), leaders in the semiconductor chip space, to restrict exporting some of its most advanced chips to China and Hong Kong.

These restrictions are the latest attempt by the U.S. to reduce their reliance on China and dominate the advanced technology space.

Previously, the U.S. and China were mutual trade partners, forming a partnership in the 70s that helped strengthen the Chinese economy whilst delivering low prices to American consumers.

Over the past several years, however, this relationship has been falling apart.

In 2016, President Obama made a pivot toward other Asian nations, meeting with the leaders of the Association of Southeast Asian Nations (ASEAN), a group of neighbours involved with fierce territorial disputes with China.

Then, in 2018, tensions grew further when President Trump made several public complaints about the trade relationship with China and sanctioned their unfair trade practices. He then imposed extra tariffs on goods imported from China and in 2020, reduced China’s access toward various semiconductor manufacturing technologies.

China responded with many countermeasures along the way, including suspending cooperation on both the repatriation of illegal immigrants and against transnational crimes.

The feud has only worsened since President Biden took office in early 2021.

In May of this year, Mr. Biden imposed more sanctions on Chinese companies such as Chinese video surveillance company Hikvision, claiming they were permitting human rights abuses by supplying the Chinese government with cameras used in the repression of the Uyghurs.

The following month, Mr. Biden banned American citizens from investing in a number of Chinese tech and surveillance companies with alleged military ties, stating, “I find that the use of Chinese surveillance technology outside the PRC and the development or use of Chinese surveillance technology to facilitate repression or serious human rights abuse constitute unusual and extraordinary threats.”

The President has also made several complaints about human rights issues in Xinjiang.

Meanwhile, the COVID-19 pandemic has only exacerbated the separation of using Chinese supply chains.

Amid the pandemic, China’s zero COVID policy disrupted the supply chain running through China, forcing many U.S. companies to temporarily shut down operations, leading to major delays and interferences with production.

As such, many major U.S. companies have shifted operations elsewhere.

In 2020, Apple made the move to start producing AirPods in Vietnam. More iPhone production will start to be done there as well.

This year, Microsoft has shifted its Xbox game console shipping operations from China to Ho Chi Minh City, Vietnam.

And recently, Google announced plans to move manufacturing from Foxconn facilities in Southern China to Vietnam, where it will begin assembling its latest model, the Pixel 7.

Major companies are not the only ones.

Over the past year, roughly 20% of supply chain executives had brought back production to neighbouring counties in the past year, almost double the number from the previous year, according to a survey conducted by consulting firm McKinsey & Co.

In addition, the recent surge in fuel prices, have resulted in higher ocean freight and other transport costs of goods to the States.

As a result of these factors, U.S. companies have begun shifting operations back to the U.S., or nearby, where cheap labour and easy access to factory capacity outweighs the costs of shipping products across the sea.

Apple manufacturers Foxconn and Pegatron are considering building new factories in Mexico for producing iPhones, taking advantage of the lower cost of labour and the free-trade agreement between the U.S. and Mexico.

Inter Parfums, a prestige perfume and cosmetics company, has agreed to shift almost all of its contract manufacturing to the U.S.

“How good is it to have cheaper components when you cannot get them?” Jean Madar, founder, and chairman of Inter Parfums states.

More recently however, Mr. Biden’s latest measures to restrict the exportation of high-quality semiconductor chips to China reveal further steps to move away from China.

China has made it very clear that it wants to overtake the U.S. in artificial intelligence, 5G, aerospace, electric vehicles, and biotech, recently spending an all-time high of 2.44 trillion Chinese yuan (US$378mn) on research and development in a push for advanced technologies.

And semiconductor chips are integral to the development of these advanced technologies.

The move could damage Chinese firms’ ability to perform advanced work, and thrive in the technology space, as well as obstruct Nvidia and AMD’s business in China.

As such, following the announcement of the restrictions, Nvidia’s share price fell 7.7% overnight.

In a battle for world dominance, the U.S. currently has the upper hand, and by continuing to stray away from Chinese supply chains, the economic gap will widen and allow it to remain as the world’s technology superpower.

However, China’s efforts also remain strong in the quest to figure out ways to eliminates its reliance on the U.S.

This arm-wrestle for technological supremacy and economic independence is far from over.

The paradox of Washington’s 5G sanctions (Opinion)

Written by Hosuk Lee-Makiyama, Director of the European Centre for International Political Economy and Fellow at the Department of International Relations at the London School of Economics and Robin Baker, Research Associate at the London School of Economics.

Sanctions and embargoes are precarious policy tools that can lead to inadvertent consequences without careful targeting, planning and coordination. In the absence of focussed application, Washington’s attempts to break China’s 5G dominance may have helped Beijing to strengthen its grip on the sector. Meanwhile, US government agencies are promoting alternative technologies that have opened a back door for sanctioned entities to enter the US market.

Consecutive US administrations have voiced concerns over the likes of Huawei and ZTE — particularly over their obligation to conduct surveillance on behalf of Chinese authorities under the country’s National Security Law. The US government has unleashed a raft of sanctions, not least to curb China’s commercial successes in European and Asian 5G markets.

Huawei — China’s most successful network equipment vendor — has been subject to the full weight of US sanctions. It seems irrelevant that the quasi-private conglomerate has far fewer ties to China’s military or ruling party than outright state-owned companies like ZTE.

The US National Defense Authorization Act (NDAA) codified an informal ban on Huawei radio units in US networks. Most importantly though, the US Department of Commerce designated Huawei to its ‘Entity List’ of embargoed companies in May 2019.

This designation continues to prohibit all US firms and their affiliates from supplying Huawei with goods, services and intellectual property without a government-issued waiver. Huawei has been obstructed from sourcing vital components — like chipsets and virtualisation software — from US suppliers.

By contrast, ZTE — the less successful and self-professed state-owned vendor with military links — has dodged the brunt of US sanctions. ZTE and other state-owned enterprises with stronger ties to Beijing evaded the Entity List after the Chinese government negotiated with Washington on their behalf. The US Treasury does not consider ZTE a ‘Chinese Military Company’, despite the vendor being open about its ties to the People’s Liberation Army. As a result, ZTE continues to enjoy unfettered access to US technology, suppliers and financial markets.

Observing consequences, it must be acknowledged that the NDAA has had virtually no effect on the current or future security of US mobile networks. The legislation is limited to five Chinese tech firms and both of the mobile network vendors it covers have been de facto banned since a US House Intelligence Committee report in 2012.

Elsewhere, the inconsistent and contradictory application of sanctions has led to some paradoxical market outcomes. Huawei is now increasingly reliant on its home market, where state-owned operators award 90 per cent of tenders to domestic firms.

Aside from its carrier division, Huawei’s consumer device business has been particularly affected by its Entity List designation. With limited access to high-density chipsets and the Android ecosystem, the tech giant was forced to offload its smartphone brand, Honor, to state-backed buyers in September 2021.

State funds have also tried to wrestle away the firm’s highly profitable cloud and enterprise business to create a Chinese version of the US technology giant, IBM. In response to its place on the Entity List, Huawei has since intensified its own chip production as it attempts to curtail its dependency on Western suppliers.

The biggest beneficiary of US 5G sanctions seems to be ZTE, a Chinese state-owned enterprise with military origins. ZTE’s revenue increased by 14 per cent last year, propelled by local 5G rollouts, a burgeoning consumer business and the relative demise of its competitor Huawei. Recently, the firm’s Hong Kong share price briefly leapt by 60 per cent after it completed five years of US probation for an earlier criminal offence.

Sanctions have also prompted some expected, but no less troubling, consequences. Beijing has so far refrained from taking retaliatory measures against Microsoft and Apple. But Scandinavian vendors Ericsson and Nokia — ‘trusted Western alternatives’ in US diplomatic parlance — are being squeezed out of China’s 5G tenders. It remains to be seen whether their businesses can remain viable without access to half of the world market.

There are other examples of disjointed US policy on 5G. In parallel with sanctions, the US government is championing ‘Open RAN’. This refers to efforts to build 5G radio access networks with off-the-shelf PC parts, as opposed to the integrated solutions offered by established vendors like Huawei, ZTE, Ericsson, Nokia or Samsung. Open RAN may offer a market opening to Silicon Valley’s PC and cloud giants in a sector otherwise absent of US competitors.

Problematically though, US government subsidies and policy support are directed to one specific industry consortium — the O-RAN Alliance. In addition to its ‘Western’ membership, the Alliance comprises ZTE and other Chinese state-owned enterprises, including six entities under US sanctions.

Common product development and the cross-licensing of patents violate the sanctions imposed on these entities. Nokia temporarily halted its O-RAN Alliance participation for this reason in September 2021. But thanks to the US government’s non-intervention, knowledge transfers from traditional telecommunications companies to China’s military contractors continue unabated.

On balance, US sanctions have undermined their stated objectives. Sanctions are not just penalties on adversaries, but precision instruments that are supposed to facilitate specific outcomes. US sanctions have not only failed to curb China’s 5G dominance but have assisted Beijing in consolidating its power over the industry.

Washington’s desire for indigenous vendors is even facilitating an alternative route for Chinese players to achieve what even Huawei could not — to finally break into the much-coveted US market.

S. Korea calls for digital pact with ASEAN under FTA framework

SEOUL, July 29 (Yonhap) — South Korea on Friday suggested a new agreement on digital technology and systems with the Association of Southeast Asian Nations (ASEAN) countries under their free trade pact in a move to further bolster bilateral economic ties, Seoul’s trade ministry said.

The proposal was made during a virtual meeting of the two sides’ FTA implementation committee, which was meant to discuss ways to revise their free trade deal that was signed in 2006 and came into force the following year.

South Korea called for ways to work closely on new trade issues, such as supply chains and food security, as well as the revision of norms regarding goods and services trade, according to the Ministry of Trade, Industry and Energy.

It also proposed the addition of a chapter on the digital sector to their FTA, which is expected to deepen trade ties and to better support South Korean firms’ advance into the ASEAN market, it added.

ASEAN is South Korea’s second-largest trading partner, with bilateral transactions reaching US$176.5 billion in 2021, nearly tripled from $61.8 billion tallied in 2006.

The economic bloc comprises 10 nations — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, Singapore and Vietnam.

“It has been 16 years since the launch of the FTA. We will continue consultations to reflect changing trade circumstances to the agreement so as to make the deal useful for companies,” the ministry said in a release.

Currently, the two sides are carrying out joint research on how to improve the bilateral FTA, after the regional mega trade pact of the Regional Comprehensive Economic Partnership (RCEP) took effect this year.

The RCEP has 15 members, including South Korea, China, Japan and 10 ASEAN nations. 

South Korea and ASEAN agreed to further lower trade barriers in 2016, but related talks have been delayed as they decided to focus on clinching the RCEP.

US may swallow bitter fruits over Huawei ban

Foreign Ministry spokesman Wang Wenbin said on Friday that the United States’ enterprises and people will eventually have to swallow the bitter fruits brought by the US government’s groundless suppression of targeted Chinese enterprises after the US Federal Communications Commission, or FCC, said the plan to strip Huawei from rural telecoms will cost billions more than estimated.

Reports said the FCC estimated that the cost of stripping Huawei and other Chinese firms from US telecom infrastructure would be as high as $5.3 billion, far exceeding the $1.9 billion budget passed by the US Congress last year.

“I have noticed comments saying that those US companies not getting compensation will get into trouble and may be forced to replace equipment at their own expense,” Wang told a daily news conference in Beijing.

China firmly opposes US politicians, out of their selfish interests, to overstretch the concept of national security and use national power to suppress China’s enterprises, Wang said.

Noting that US politicians run against the trend of history, Wang said their moves are doomed to fail.

The US continues to politicize, instrumentalize and weaponize economic cooperation in an attempt to forge the so-called small yard with high fences, Wang noted.

He warned that such a move will not only seriously damage Chinese enterprises’ interests, but will also severely harm US interests and impact the stability of global industrial and supply chains.

Washington is also urged to stop erroneous words and deeds that harm all but benefit none, and to provide relevant Chinese enterprises with a market environment that is open, fair, just and nondiscriminatory, the spokesman added.