(Bloomberg) -- The Trump administration said restrictions on Huawei Technologies Co. announced this week will take effect Friday, placing China’s largest technology company and scores of its affiliates around the world on a blacklist that curtails its access to critical U.S. suppliers.
In a Federal Register notice released on Thursday, the Commerce Department said the curbs, apply to Huawei and 67 of its affiliates scattered across 26 countries from Germany to Madagascar. They were mainly private subsidiaries that the networking giant owns and uses to trade or conduct business in different cities or countries, and hence prime targets should the White House decide to pursue export restrictions.
The Trump administration is pulling out the big guns in its push to slow China’s rise, with potentially devastating consequences for the rest of the world. If the U.S. blocks the sale to Huawei of critical components such as semiconductors, it could cripple Huawei’s businesses, depress the business of American chip giants from Qualcomm (NASDAQ:QCOM) Inc. to Micron Technology Inc (NASDAQ:MU)., and potentially disrupt the rollout of critical 5G wireless networks around the world.
The Commerce Department said Wednesday it will soon put Huawei on an “Entity List” -- meaning any U.S. company will need a special license to sell products to the world’s largest networking gear maker and second-largest smartphone brand. Commerce Secretary Wilbur Ross told Bloomberg Television the measures limiting its access to U.S. components become official on Friday. Separately, he said President Donald Trump had given his department 150 days to establish a process to screen U.S. companies’ purchases of equipment from the Chinese firm, and other equipment providers with which officials have concerns.
The threat is likely to elevate fears in Beijing that Trump’s broader goal is to contain China, igniting a protracted cold war between the world’s biggest economies. In addition to a trade fight that has rattled global markets for months, the U.S. has pressured both allies and foes to avoid using Huawei for 5G networks that will form the backbone of the modern economy.
Ross dodged questions about whether the new moves against Huawei could lead to a negotiation with the company or the Chinese government. He insisted the growing campaign against Huawei remained a separate matter from broader trade negotiations between the U.S. and China, which have stalled in recent days.
“The purpose we have in mind here is we think there is a significant danger to national security and to our foreign policy of the existing situation at Huawei,’’ Ross said.
In notice published Thursday, the Commerce Department’s Bureau of Industry and Security said the U.S. was adding Huawei’s affiliated companies around the world because they “pose a significant risk of involvement in activities contrary to the national security or foreign policy interests of the United States.’’
“This decision is in no one’s interest,” Huawei said in a statement on Thursday. “It will do significant economic harm to the American companies with which Huawei does business, affect tens of thousands of American jobs, and disrupt the current collaboration and mutual trust that exist on the global supply chain.”
The U.S. has long accused the telecommunications equipment giant of facilitating Chinese espionage and sought to convince allies not to purchase its equipment for new 5G networks. The Justice Department is prosecuting Huawei over accusations of bank fraud, technology theft and violating U.S. sanctions against Iran.
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Huawei’s chief financial officer Meng Wanzhou, the daughter of its founder, was detained in Canada in December at the request of the U.S., which seeks her extradition over allegations of violating Iran sanctions. Huawei has denied any wrongdoing and sued the U.S. separately for a ban on American government entities from purchasing its equipment.
Teresa He, president of Huawei’s chip-making unit HiSilicon, called the U.S. ban “crazy” and “groundless” in a letter sent to employees and seen by Bloomberg. While HiSilicon was seen as a backup plan for Huawei’s semiconductor supply, the ban will make it a primary supplier, she said in her letter.
