uploads///US ban on Chinas Huawei eased

Trade with Huawei: US Chip Firms Get Some Good News


Jul. 16 2019, Published 10:58 a.m. ET

  • US companies can restart trade with Huawei in two to four weeks.
  • US companies need a license to trade with Huawei.

The United States eased the ban on China’s smartphone and network equipment supplier Huawei at the end of June. Huawei is a key customer of many US-based semiconductor companies. 15 days after the announcement, a senior US official told Reuters that the government may approve licenses to trade with Huawei in two to four weeks. What does this mean to US semiconductor companies?

Let’s rewind a little and understand what the ease on the Huawei ban means. When Trump announced the ease, he didn’t provide details on how the government would process the policy change. He stated that US firms can ship generic technology to Huawei that’s also available outside the US and is not a national security threat.

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After the President’s announcement, the Commerce Department clarified that Huawei is still on the Entity List. If a US company wants to trade with Huawei, it has to apply for a license. Plus, the license could likely be denied. This means that US companies cannot restart trade with Huawei unless they obtain the license. However, the ease in the ban will grant US companies licenses to ship generic technology to Huawei in two to four weeks.

US companies found ways to trade with Huawei ban

After the Huawei ban was implemented on May 15, the US gave a 90-day waiver to allow US and Chinese companies to adjust accordingly. So, this waiver allowed US companies to sell goods and services to Huawei’s existing networks and handsets. The ban applied to shipping goods and services for Huawei’s new products.

Moreover, US companies’ manufacturing operations outside America were exempt from the US trade ban on Huawei. This means US companies can leverage their global supply chains and ship Huawei components manufactured abroad. Micron Technology (MU) started its trade with Huawei by shipping products that didn’t fall under the ban in mid-June.

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What does the license approval mean to US chip companies?

Even after the Huawei ban ease, some analysts believed that applying for a license is a waste of time. As the Commerce Department would view all applications as per the “presumption of denial” licensing policy, there was little chance of approving the license. However, the news that the commerce department could grant licenses in as few as two weeks revived semiconductor companies’ confidence. Two unnamed US semiconductor companies told Reuters that they would apply for more licenses.

A license will allow chip companies to supply generic technology for Huawei’s new products, which form a bigger portion of chip orders. Qualcomm (QCOM), Broadcom (AVGO), and Xilinx are among Huawei’s US-based chip suppliers. Qorvo revised its earnings guidance for the second quarter of this calendar year to account for the Huawei ban. The ease in the ban could help the above chip companies mitigate the impact of a complete ban on Huawei. The above stocks rose above 0.5% in the first half of the July 15 trading session.

US government’s criteria to grant license still unclear 

While the US Commerce Department is accelerating the implementation of policy change related to Huawei, there are a lot of grey areas left. The US Commerce Department didn’t state the criteria to review the applications. It also didn’t clarify which products can get licenses. The officials stated that the department will grant licenses on a case-by-case basis. Former Under Secretary of commerce, Eric Hirschhorn stated that rapid changes in policies have left the government officials confused on the direction ahead.


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