Sunday, 09 August 2020 16:22

Qualcomm lobbying Washington to allow chip sales to Huawei: report Featured

Qualcomm lobbying Washington to allow chip sales to Huawei: report Pixabay

New restrictions put in place by the US in a bid to prevent Chinese telecommunications equipment vendor Huawei Technologies from obtaining the parts it needs to manufacture its smartphones and 5G base stations appear to be showing cracks even before they come into force on 14 September.

The restrictions, which took effect on 15 May, but will be implemented only 120 days after that, are aimed at cutting off Huawei's supply of semiconductors which it gets mostly from Taiwan Semiconductor Manufacturing Company. To effect this, the Americans have used the Foreign Direct Product Rule that makes it necessary for any company — American or foreign — that sells American products or those made using American technology to obtain a licence from the US Department of Commerce before selling to Huawei.

But the The Wall Street Journal reported on Saturday that global semiconductor, services and software firm Qualcomm Technologies had already started lobbying the administration in a bid to roll back the restrictions.

The company had told American policy makers the restrictions would not stop Huawei from getting hold of the components it needed from other sources, the WSJ said.

Qualcomm said Taiwan’s MediaTek and South Korea’s Samsung Electronics would benefit.

“If Qualcomm is subject to export licensing, but its foreign competitors are not, US government policy will cause a rapid shift in 5G chipset market share in China and beyond,” Qualcomm said . That would mean a hit to American research and leadership on 5G issues, it said, describing it as “an unacceptable outcome for US interests".

The restrictions would prevent American companies from earning billions from sales to Huawei and this would end up in the pockets of Qualcomm's competitors in other countries, the semiconductor maker averred in a presentation that it has shown to people in Washington DC. The WSJ said it had reviewed the presentation.

Only two companies make the most advanced semiconductors that are used in equipment these days: 7nm chips. Samsung and Taiwan Semiconductor Manufacturing Company are the two firms in question.

Intel was expected to join these two companies in making 7nm semiconductors in six months, but announced in July that it would not be able to do so for at least a year.

The WSJ report comes just days after Huawei settled a pending payment with Qualcomm, at the same time signing a new long-term global patent licensing deal.

iTWire has contacted Qualcomm for comment.

In May 2019, the US placed Huawei on its Entity List; American firms cannot sell products made in the US with more than 25% of American content to companies placed on this list without obtaining a licence. But Huawei was able to easily work around this impediment by getting products it needed from branches of American firms located outside the physical boundaries of the US.

American companies have no objection to doing business with Huawei; indeed, they are eager not to lose this business because Huawei's orders are in the millions and, often, billions of dollars.

About the only outcome from the Entity List entry to affect Huawei was its inability to continue using the proprietary version of Google's Android mobile operating system; this includes apps like Gmail, Maps, Drive, YouTube, the PlayStore and Photos. Huawei has had to confine itself to using the open-source version of Android, which has none of these apps, and is trying to create replacements.

Google applied for an exemption to continue supplying Huawei, but did not get one. Microsoft was more successful, obtaining a waiver from the Department of Commerce to continue supplying the Shenzhen firm with its Windows operating system that Huawei uses on its laptops.

More than one expert opinion on the restrictions announced this year has argued that they would fail. As iTWire reported recently, China expert Doug Fuller has predicted that the US Government may end up shooting itself in the foot by weaponising the semiconductor supply chain.

Another word of caution has come from the British international magazine, The Economist, which said the May strictures could drive part of the semiconductor industry out of the US, not exactly the outcome that power brokers in the US expect.

And Scott Kennedy, a senior adviser and trustee chair in Chinese Business and Economics at the Centre for Strategic and International Studies in Washington DC, has said that while the US obsession with Huawei may be well-intentioned, it could end up seriously harming the country's economy and national security.

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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