Trump Administration Imposes Supply Chain Restrictions on Huawei - The National Law Review

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Wednesday, September 2, 2020

INTRODUCTION

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) recently adopted measures substantially impacting Huawei-affiliated companies and their non-U.S. supply chains.  Earlier this year, on May 15, 2020, BIS issued a proposed, but immediately effective, amendment to the Foreign Direct Product Rule (hereafter, the “FDPR”) of the Export Administration Regulations (“EAR”; 15 CFR part 730 et seq.) that substantially restricted the supply of certain non-U.S. produced products to Huawei companies on the U.S. Entity List (“Huawei”).  Under the amendment, a non-U.S. produced product that was the direct product of certain designated U.S. software or technology (or produced by plant facilities that were the direct product of such software or technology), was considered “subject to the EAR,” and thereby subject to a U.S. export license requirement, even if transferred from outside the United States, if the non-U.S. product was: (1) designed or produced by Huawei; and (2) being supplied to Huawei (hereafter, the “Huawei Direct Product Rule” or the “Rule”).

On August 17, BIS adopted the amendment as a final rule, but substantially expanded the scope of the FDPR with respect to Huawei by extending coverage to any subject non-U.S. produced product, even if not designed or produced by Huawei (such as off-the-shelf products), if either: (1) Huawei is a party, in any capacity, to the supply transaction; or (2) the product is supplied with knowledge that the product will be incorporated in a product that will be supplied to Huawei (directly or indirectly).  In conjunction with the final adoption of this new Rule, BIS also placed additional Huawei companies on the Entity List and terminated the Temporary General License (“TGL”) which had previously authorized certain activities with Huawei relating to cyber security and product development.

MAY 15 AMENDMENT TO THE DIRECT PRODUCT RULE

On May 15, 2020, BIS amended the FDPR (General Prohibition Three of the EAR) as applied to Huawei entities designated on the Entity List.  The FDPR generally provides that any non-U.S. produced item that is produced using national security-controlled U.S. software or technology is considered subject to the EAR and, thereby, to any export license requirement that would be applicable if the product was produced in the United States.  Under the May 15 amendment, an add-on to the FDPR was adopted in connection with the supply of certain items to Huawei companies on the Entity List (this was implemented through a new footnote 1 to the Entity List which applies to all the Huawei companies included on the Entity List).  The new Rule potentially applied to any non-U.S. produced product that: (1) was the direct product, or was produced by a plant (or major equipment of a plant) that was the direct product, of U.S. software or technology enumerated in the new Rule (“subject product”); and (2) was produced or developed by, and being supplied to, Huawei.

Subject Products.  As implemented on May 15, the Rule potentially applied to any non-U.S. produced product that:

is the direct product of technology or software subject to the EAR and specified in the following Export Control Classification Numbers (“ECCNs”) of the EAR’s Commerce Control List: 3D001, 3D991, 3E001, 3E002, 3E003, 3E991, 4D001, 4D993, 4D994, 4E001, 4E992, 4E993, 5D001, 5D991, 5E001, or 5E991; or
is produced by any non-U.S. plant or major component of a plant that is a direct product of U.S.-origin technology or software subject to the EAR that is specified in ECCNs 3D001, 3D991, 3E001, 3E002, 3E003, 3E991, 4D001, 4D993, 4D994, 4E001, 4E992, 4E993, 5D001, 5D991, 5E001, or 5E991.
However, as implemented on May 15, a product was subject to the EAR and required a U.S. export license only if it was a product that was produced or developed by Huawei and was being sold to Huawei.

AUGUST 17 FINAL HUAWEI DIRECT PRODUCT RULE

When adopting the final Huawei Direct Product Rule on August 17, however, BIS implemented amendments to the Rule to further “prevent Huawei’s attempts to circumvent U.S. export controls to obtain electronic components developed or produced using U.S. technology.”  As described by BIS, “[t]his amendment further restricts Huawei from obtaining foreign made chips developed or produced from U.S. software or technology to the same degree as comparable U.S. chips.”  Under the final, amended Rule, although the scope of subject products potentially subject to the new Rule remains the same (the direct product, or a product produced by a plant or major component that is the direct product, of U.S. software or technology specified in the enumerated ECCNs), there is no longer a requirement that the subject product have been produced or developed by Huawei.

Instead, as finally adopted, the Huawei Direct Product Rule now applies to any subject product when the company exporting, reexporting, or transferring the item (including transfers within the same country) has “knowledge” that either: (1) a Huawei company on the Entity List will be a party to a transaction involving the item (including as a purchaser, consignee, or end-user); or (2) the item will be incorporated into or used in the production or development of any part, component, or equipment produced, purchased, or ordered by Huawei.  “Knowledge” is defined as actual knowledge or reason to know based on the circumstances of a transaction.

As a result of this revision to the Huawei Direct Product Rule, non-U.S. manufacturers and other suppliers involved in Huawei supply chains must carefully determine which, if any, of their products are within the scope of the Rule and ensure such products are only exported, reexported, or otherwise transferred in compliance with the new Rule.  The changes to the Rule became effective immediately upon its issuance on August 17, 2020.  However, there is a savings clause that allows for shipment without a license of items that are within the scope of the Rule because they are the direct product of covered “plants or major components of plants,” provided: (1) production of those items started by August 17, 2020; and (2) they are exported, reexported, or transferred before midnight (local time) on September 14, 2020.

OTHER MEASURES IMPACTING HUAWEI

Huawei Affiliates Added to Entity List.  The Rule also further expands the scope of Huawei export restrictions by adding 38 additional entities affiliated with Huawei to the Entity List, bringing the total to 153 Huawei companies.  As a result of these designations, companies must obtain a BIS export license before exporting, reexporting, or transferring to these entities any item, software, or technology that is “subject to the EAR.”  This includes any item (commodity, software, or technology) that is: (1) U.S.-origin; (2) located in the United States; (3) non-U.S.-origin but incorporating more than a de minimis percentage of controlled U.S. content; or (4) non-U.S.-origin but subject to the EAR as a result of the direct product rules discussed above.  License applications in this context are subject to a general policy of denial by BIS.

Export restrictions for the 38 Huawei affiliates added to the Entity List became effective on August 17, 2020, although shipments that were already in transit by August 17 can be delivered without a license.

Temporary General License.  The Rule also expands the Huawei export restrictions by providing for the expiration of a TGL issued originally in May 2019 that authorized certain transactions with Huawei related to cybersecurity research, ongoing support and operations of networks and equipment, and 5G standards conducted by an established standards body.

The original TGL, which has been renewed and modified over time, expired effective August 17, 2020.  However, BIS has issued a more limited authorization by adding a footnote to the license requirements for designated Huawei entities on the Entity List which authorizes the export, re-export, or transfer of items subject to the EAR, provided it is limited to “information regarding security vulnerabilities in items owned, possessed, or controlled by Huawei or any of its non-U.S. affiliates when related to the process of providing ongoing security research critical to maintaining the integrity and reliability of existing and currently ‘fully operational network’ and equipment.”

CONCLUSION

These actions by BIS represent the latest in a series of measures by the U.S. government to cut off Huawei from U.S. commodities, software, and technology, most recently by focusing on preventing reliance on U.S. software and technology in producing products outside the United States for Huawei supply chains.  These measures are intended to send a signal, not only to Huawei’s suppliers who are most directly impacted by the new BIS Rule, but also to Huawei’s customers who are being urged by the United States to develop non-Huawei sources for technology and equipment.

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September 03, 2020 at 04:59AM
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Trump Administration Imposes Supply Chain Restrictions on Huawei - The National Law Review

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Regulators Issue Huawei, ZTE Interim Rule - National Defense Magazine

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9/2/2020
By Ryan Burnette, Susan Cassidy and Samantha L. Clark

Photo: iStock

The Federal Acquisition Regulatory Council recently released an interim rule governing Section 889(a)(1)(B) of the 2019 National Defense Authorization Act. All U.S. government prime contractors should take heed.

The rule — effective Aug. 13 with a 60-day comment period — implements the statutory prohibition on agencies contracting with any “entity” that “uses” covered telecommunications equipment or services “as a substantial or essential component of any system or as a critical technology of any system.” That includes all telecomm equipment or services produced and provided by Huawei or ZTE, and video surveillance and telecommunications equipment or services produced and provided by Hytera, Hikvision, or Dahua, or any subsidiaries or affiliates.

This prohibition applies to all U.S. government prime contractors, whether domestic or international, including those selling commercially available off-the-shelf items.
Leading up to the highly anticipated release of these regulations, compliance questions from industry focused on definitions of key terms, requirements, and the process for exceptions and waivers.

The interim rule clarifies that, for now, the term “entity” refers to only the prime contractor because the prime contractor is the only entity with whom the agency “enters into a contract.” The FAR Council, however, highlighted the possibility that the final rule could be expanded to entities beyond the contracting party.

The new rule does not clarify all aspects of what is meant by “use” of covered telecommunications equipment or services. However, the council noted that the prohibition applies “regardless of whether that usage is in performance of work under a Federal contract.” This confirms that even commercial activities that bear no connection to the contracting entity’s performance of a federal contract are within the scope of the prohibition.

The regulations focus on whether the prime contractor itself uses covered telecommunications equipment or services. However, the prime contractor will still need to ensure that it is not procuring any such equipment or services from its subcontractors, suppliers and vendors for the prime contractor’s use.

The rule requires a contractor to represent to the government that after conducting a “reasonable inquiry,” it does or does not use the covered equipment or services. “Reasonable inquiry” is defined as “an inquiry designed to uncover any information in the entity’s possession about the identity of the producer or provider of covered telecommunications equipment or services used by the entity that excludes the need to include an internal or third-party audit.”

This definition raises several compliance challenges. First, the scope of “any information in the entity’s possession” is ambiguous though the interim rule states that it is “primarily documentation or other records.”

Second, the terms “producer” and “provider” are not defined in the regulation, but the common usage of producer would include the manufacturer of the product, whereas the provider could be a reseller.

Finally, the language that “excludes the need” for audits appears to alleviate the need for reverse engineering. A question remains, however, as to how broadly to extend diligence for the entity’s own use of telecommunication equipment and services for purposes of complying with Section 889(a)(1)(B).

Contracting officers must include the updated clause when exercising options under existing U.S. government contracts. Such an addition could present issues because the contractor may not have factored compliance into their prices for performance of those option periods.

The FAR Council has outlined an expectation for contractors to prepare plans in the first year that demonstrate how they are complying with the new requirements. Therefore, it is important for contractors to develop a compliance plan that will allow them to submit accurate representations to the government in the course of their offers.

The interim rule confirmed that only the exception for covered telecommunications equipment that cannot route, redirect, or permit visibility into any user data or packets applies to Subsection 889(a)(1)(B). All of these terms remain undefined. However, the statute uses the term “cannot,” rather than “do not.” This structure suggests that the government will apply the exception narrowly, by examining the equipment’s capabilities and functionalities, regardless of whether the equipment is actually being used for those functions.

In general, an agency head may grant a waiver on a contract-by-contract basis until Aug. 13, 2022. Where a contractor sells the same products or services to multiple agencies, the contractor must initiate the waiver request with the contracting officers in each agency responsible for the potential contract. Although Section 889 allows an entity to receive a national security waiver from the Office of the Director of National Intelligence, we expect those waivers to be rare.

If the contractor is unable to certify compliance at the time a bid is submitted, it will be presumed that a waiver will be required. A contracting officer may choose not to initiate the waiver process and award to a compliant offeror. Contractors who anticipate needing a waiver should begin preparing the information in advance to include with their proposals so as to not cause any self-imposed delays to a process with many steps.

Susan Cassidy is a partner, Samantha Clark is special counsel and Ryan Burnette is an associate at Covington & Burling LLP.

Topics: Defense Department

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September 02, 2020 at 09:37PM
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5 things to know before you buy a Huawei P40 Pro phone - CNET

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Andrew Hoyle/CNET

Huawei's P40 series of smartphones are available in Europe and the UK. The range includes the base P40, the P40 Pro and the P40 Pro Plus, and Huawei hopes they'll take the fight to the likes of the iPhone 11 Pro, Galaxy S20 and OnePlus 8. I've been using the P40 Pro -- the middle child of the three -- and have been putting it through its paces. The phone is available for £900 (about $1,120 or AU$1,770) here in the UK, but due to the US ban on Huawei products, it's not officially on sale in the US. 

That ban also means it doesn't use Google apps -- including access to the Google Play Store -- but the phone does have 5G and a good camera. That said, its big brother, the P40 Pro Plus, is even more photography-focused, with the first 10x optical zoom seen on a phone.

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If you're in one of the countries where Huawei does sell phones and are curious about the P40 Pro, here are five things you should know about this phone before you consider spending your money. 

Read more: 10 best phones under $500

Now playing: Watch this: Huawei P40 Pro and Plus first impressions: CNET editors...

5:24

Huawei P40 Pro has no Google apps

Due to the company's ongoing difficulties with the US government, Huawei phones do not use Google services. That means no Google Play Store for apps and no support for services such as Gmail, YouTube, Maps or the Chrome browser. For many of you this will be a deal breaker, particularly if you rely on Google's suite of apps for your work. 

Andrew Hoyle/CNET

But that doesn't mean there are no apps at all. Huawei has its own email client, browser and calendar on board and it also has its own app store. There are plenty of big name apps already available, such as Amazon, TikTok, Adidas Running, SnapChat, PicsArt and the ever-popular Fortnite. There are many more, however, including Instagram and photo-editing apps like Adobe Lightroom that simply aren't available through Huawei's store.

While Facebook and WhatsApp aren't available directly, the store will take you to those apps' web pages, where you can download and install the app (in a .apk file) through the browser. The apps will then appear on the phone and work as normal.

It's important, then, to check and see whether the apps you rely on are available right now. Huawei says it's working closely with developers from all over the world to try and bring many more apps to its store, so it's likely we'll see bigger names appearing over time. 

Andrew Hoyle/CNET

P40 Pro does have 5G

No flagship phone worth its salt in 2020 would launch without 5G connectivity and the P40 Pro is no exception. You'll need to be in an area that has 5G and have a 5G-enabled phone plan to take advantage of the next-gen network. If you're hoping to get those blazing-fast speeds straight away, make sure to check what availability you have in your area before upgrading to any 5G phone.

The P40 Pro's camera is good, but needs improvement

Huawei has a track record of equipping its phones with awesome cameras. The P40 Pro packs four lenses: a standard zoom, a super wide-angle lens, a 5x optical zoom lens and a depth-sensing lens. While the phone's camera skills are certainly up there with the best, it needs some tweaking in the software before it can take the crown as the best of the best. 

Edinburgh's Dean Village, captured with the P40 Pro's standard camera.

Andrew Hoyle/CNET

A statue, taken with the P40 Pro's standard camera mode.

Andrew Hoyle/CNET

The same statue, taken with the P40 Pro's 5x zoom lens.

Andrew Hoyle/CNET

Night mode on the P40 Pro.

Andrew Hoyle/CNET

My main issue is with the white balance, or the overall color temperature, of the photos the cameras capture. Often, it seems to tint images with more of a magenta hue than what was present in real life, which made various test shots from the phone look less natural than the same shots taken on the iPhone 11 Pro or Galaxy S20 Ultra. It's only a slight shift, and if you're not taking direct comparisons with other phones you might not notice.

Besides that though, the phone takes great images, with even exposures and lovely contrast. Its 5x zoom produces crisp shots of faraway subjects, and images takin in low light and at night time are easily up there with the best.

If you want a great camera, you should get the P40 Pro Plus instead

If you're tempted to get the P40 Pro instead of the standard P40, it may be because of camera upgrades to the base model, like the 5x optical zoom. 

But the P40 Pro Plus ups that to include a whopping 10x optical zoom, which promises amazing magnification without loss of quality. It's the highest optical zoom ever seen on a phone and I really loved trying it out.

Andrew Hoyle/CNET

Don't buy the black version

Huawei's last few launches, including the P30 and P20 series, came with some vibrant color options that looked amazing. While the P40 Pro was shown off in some delightful-looking hues, the review model that landed on my desk was plain black and, like all plain black phones, it looks dull and forgettable. 

Nobody wants dull and forgettable -- not when you could have happy and vibrant and exciting. So if you do plan on forking over the cash for the P40 Pro, at least grab it in its deep blue, shimmering pink or soft gold varieties.

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September 02, 2020 at 04:00PM
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Huawei's new tone - The Mobile Network

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This article was sent to The Mobile Network's TMN Quarterly subscribers as our second monthly "Inside TMN Quarterly" email. A dedicated monthly email going in depth on a story is just one of the extra benefits of a TMN Quarterly subscription.

Huawei's new tone (sent to TMN Quarterly subscribers on 01 September)

Occasionally, over the past year or two, TMN has returned to what you might term the Huawei situation. We are doing so now again in this email because of something quite interesting.

This time we would like to study Huawei’s external communications, which have taken a notable turn since roughly the start of the year.

The first thing to say is that certain senior Huawei accounts are getting much more aggressive at pushing back on what they perceive to be slights against the company.

This includes labelling certain journalists liars and casting doubts on their impartiality  and engaging with and amplifying near-anonymous accounts that push certain lines of attack - often related to Huawei but also including messages on Covid-19 and the Black Lives Matter protests. Huawei-affiliated accounts are often keen to tweet about anything that puts the USA, or more specifically the Trump administration, in a bad light. Conversely the efforts of Huawei and China to be helpful to other countries gets highlighted.

So let’s take item 1. Increased aggression from main accounts, often via a tweets-length engagement with much more aggressive smaller accounts.

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September 02, 2020 at 05:35PM
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Samsung shares could rise 50% as chip business gets a boost and Huawei struggles in smartphones - CNBC

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Samsung Galaxy Z Fold 2

Samsung

Analysts are bullish on Samsung after the company unveiled a foldable phone on Tuesday and U.S. semiconductor company Nvidia said its next-generation gaming chip will be manufactured by the South Korean electronics giant.

They see Samsung's shares trading at 70,376.32 Korean won ($59.35) in the next 12 months. That represents a 29% upside from Wednesday's trading price, according to an average target price collated by Refinitiv. 

Some analysts are even more bullish on Samsung. Daiwa Capital Markets' SK Kim has a 12-month price target of 82,000 Korean won, a more than 50% rise from Wednesday's trading price.

New orders for Samsung's chip manufacturing operations or foundry, next-generation smartphone launches and a recovery in memory pricing next year are factors behind the analysts' optimism.

"For SEC (Samsung Electronics), we maintain our positive view as we expect a favourable memory market environment in 2021, new foundry opportunities and attractive valuation compared with its peers such as TSMC," Kim told CNBC in an email. 

Nvidia deal

On Tuesday, Nvidia launched the GeForce RTX 30 Series of graphics processing units (GPUs). The chips are designed for PC gaming and promise to offer more realistic images on screen, thanks to so-called "ray tracing." This technology simulates how light reacts with objects around it. 

Nvidia chose Samsung to manufacture the chips using a so-called 8 nanometer process customized for these semiconductors.

The move was seen as positive for Samsung. Daiwa's Kim told CNBC he expects the Nvidia deal to be worth $1 billion in revenue for Samsung. 

Samsung's semiconductor business is very important for the company. It includes the foundry business as well as the sales of so-called NAND and DRAM chips Samsung produces, which are used in devices such as laptops and smartphones, through to data centers. Semiconductors accounted for two-thirds of Samsung's operating profit in the second quarter of this year. 

DRAM pricing, which has been under pressure in the second quarter, is expected to face further weakness for the rest of the year, according to a note released by UBS last week. The investment bank sees DRAM prices falling 8% quarter-on-quarter in the third quarter of this year. 

But the start of 2021 could bring a recovery. 

"First, we continue to expect DRAM pricing to start to recover in 1H21 as industry supply growth will not match demand when smartphones demand is closer to normalized levels," UBS said, referring to the first half of next year.

Foldable phones to drive earnings

On Tuesday, Samsung announced the Galaxy Z Fold 2 — the company's third folding phone. The device launches on Sept. 18 for $1,999. 

While foldable phones remain a "niche" product for now, according to Sanjeev Rana, senior analyst at CLSA, who sees the number of these devices Samsung sells increasing each year.

Rana told CNBC's "Street Signs Asia" on Wednesday he expects foldable phones to account for 2 million to 3 million of Samsung's overall smartphone shipments of 250 million this year. That figure will increase to between 8 million and 9 million in 2021, he said.

"From 2022, foldable phones will become mainstream and given Samsung's positioning in this business ... Samsung is the first mover in this important product category. We expect foldable to become a major earnings driver for its smartphone business in the coming years," Rana said.

Samsung to gain from Huawei woes

Meanwhile, Huawei, one of Samsung's fiercest rivals, is facing troubles of its own. Last year, it was put on a U.S. blacklist which cut off the Chinese phone giant's access to Google's Android mobile operating system. That's not a big deal in China where Google services are blocked.

However, in May, Washington amended the foreign-produced direct product rule (FDPR) requiring foreign manufacturers using American chipmaking equipment to get a license before they're able to sell semiconductors to Huawei. The move threatens to cut Huawei off from the key chips it requires for its products. 

Even though Huawei managed to become the number one smartphone player by market share in the second quarter, that was driven by increased shipments in China, even as its international markets declined.

"We think Samsung is also a big beneficiary of U.S. sanction on Huawei and resulting decline in its smartphone market share globally. We believe Huawei's weakness will present significant opportunities to Samsung next year," Rana said. 

Rana has an above average price target of 72,000 Korean won on Samsung's stock, representing over 31% upside. 

"Our view is that Samsung stock offers great value, it's undervalued right now ... but given its positioning in global semiconductors and smartphones and looking at what other semiconductor stocks have done globally year-to-date we think market is being too conservative in valuing the company," said CLSA's Rana.

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Mobile Antenna Competition Intensifies as 5G Radio Access Network Deployment Grows; Huawei Remains Market Leader - PRNewswire

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SINGAPORE, Sept. 1, 2020 /PRNewswire/ -- Competition in the antenna vendor market is heating up as 5G rolls out and market share is coming under serious pressure. In its recent analysis of the worldwide mobile cellular 4G and 5G antennas market, global tech market advisory firm, ABI Research, finds that Huawei remains the market leader in the base station antenna market, retaining first place in both the market share and vendor rankings. Following Huawei, other companies within the top five for market share includes, CommScope, Kathrein Mobile Communication, Rosenberger, and ACE Technologies.  Together, these five vendors comprise more than 70% of the total market in terms of revenue. While the names of the top 5 remains the same, there has been a shuffle in the order with CommScope has taking the second position in 2019.

2019 was the year that 5G started to roll out and trialed. By the end of 2019, South Korea reported more than 90,000 5G base stations had been deployed and China had built out more than 130,000 5G base stations. "The move toward the 5G rollout is creating new challenges as the antenna and radio must be integrated for optimal utilization of site space and network performance. The successful performance of the 5G network will increasing depend on the antenna, making antenna an essential component in the operator's network," explains Dean Tan, Research Analyst at ABI Research.

ABI Research forecasted growing demand for higher order number of antenna ports, such as 6 & 8 port and 10 to 16 ports. These two segments will make up more than 80% of the antenna shipments by 2025. In preparation for 5G, most antenna vendors (e.g., Huawei, Kathrein, RFS) have released their versions of the Active-Passive antenna or are working with OEMs for its development. This configuration allows for an active or a Massive-Multiple Input Multiple Output (m-MIMO) antenna array to be deployed along with the passive antenna array. The m-MIMO is key to achieving the higher capacity gains and throughput that 5G is expected to bring. However, challenges, such as limited site space and difficulty of acquiring new sites, requires vendors to develop innovative ideas for the 5G deployment. "With the deployment of 5G, we have seen remarkable growth and innovation in the integrated active antenna segment. To tackle the challenges of 5G deployment, there is a vital need for antenna vendors and OEMs to work closely in an integrated fashion," says Tan.

Aside from the 5G focus, antenna vendors continue to develop innovative solutions to overcome physical challenges. Kathrein released their "378-antenna platform" that generates air vortices to reduce the wind load experienced by an antenna. Wind load is a key challenge that antenna vendor wrestle with to ensure reliability and safety of the antenna and its tower. "While more 5G deployment is expected to come, operators in emerging and developed Markets are still upgrading and replacing their 4G antenna architecture.  Almost 90% of antenna sales in 2019 were still catering for the 4G LTE market. But that will change," adds Jake Saunders, Vice-President for Asia Pacific at ABI Research.

These findings are from ABI Research's Worldwide Mobile Cellular 4G and 5G Antennas Market application analysis report. This report is part of the company's 5G & Mobile Network Infrastructure research service, which includes research, data, and ABI Insights. Based on extensive primary interviews, Application Analysis reports present in-depth analysis on key market trends and factors for a specific technology.

About ABI Research

ABI Research provides strategic guidance to visionaries, delivering actionable intelligence on the transformative technologies that are dramatically reshaping industries, economies, and workforces across the world. ABI Research's global team of analysts publish groundbreaking studies often years ahead of other technology advisory firms, empowering our clients to stay ahead of their markets and their competitors. 

ABI Research提供开创性的研究和战略指导，帮助客户了解日新月异的技术。 自1990年以来，我们已与全球数百个领先的技术品牌，尖端公司，具有远见的政府机构以及创新的贸易团体建立了合作关系。 我们帮助客户创造真实的业务成果。 

For more information about ABI Research's services, contact us at +1.516.624.2500 in the Americas, +44.203.326.0140 in Europe, +65.6592.0290 in Asia-Pacific or visit www.abiresearch.com.

Contact Info: 

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Tel: +1.516.624.2558       
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September 01, 2020 at 03:00PM
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Coalition countering Huawei faces hurdles - Asia Times

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This summer has seen the tech war between China and the US take on new dimensions. From new export controls via the US Department of Commerce banning the sale of US semiconductor “software” and “technology” to Huawei to the executive orders prohibiting transactions with TikTok and WeChat, the administration of President Donald Trump has been doubling down on its efforts to address China’s growing technology dominance. 

It has also witnessed many other countries take more legal measures against Huawei. For instance, the United Kingdom announced that it would formally exclude Huawei from its core network in mid-July. Similarly, Canada’s largest telecommunications company Telus has partnered with Ericsson and Nokia after receiving pressure from Canada’s intelligence authorities.

Both decisions represent a departure from previous commitments accepting Huawei earlier this year. 

In other places, such as Denmark, France and Slovenia, lawmakers have recently imposed “heightened security” requirements on telecom operators in order to weed out dependency on Huawei. In addition, Brazil has raised security concerns with 5G (fifth-generation telecom) equipment suppliers, going so far as to publish a normative instruction raising cybersecurity requirements for network operators. 

Finally, in Asia, both Singapore and India have taken a more defensive stance against the Chinese company, with the former excluding (but not banning) Huawei products in its 5G network while the latter announced in August it would phase out the company’s equipment over a period of time. 

Putting it into perspective

On closer examination, the rising tide against Huawei raises two fundamental yet paradoxical problems. 

First, since 2018, the Trump administration has at times blundered in its ability to persuade its allies formally to exclude the Chinese company from participating in their markets. By the beginning of 2020, it seemed that much of the world had simply snubbed US demands. 

But in August, some saw a reverse trend. Indeed, the launch of the US State Department’s “Clean Network Initiative” in late July coupled with the diplomatic reassertion of the Prague Proposals (and its more than 30 signatories) could signify a change in direction. 

Yet compared with the sheer size of Huawei’s presence in other countries and the tremendous progress the company has had through its recent R&D (research and development) initiatives, these victories seem rather negligible.

Huawei’s technology goals are much larger than 5G radio equipment deployment. They involve radically transforming digital connectivity, integrating cutting-edge IoT (Internet of Things) and cyber-physical technologies, and developing a cloud-based infrastructure for industrial platforms – initiatives that are still under way despite US pressure. 

Second, framing the US-China tech war as a binary choice of either accepting or rejecting Huawei is far too reductive. 

Many countries that have not formally excluded Huawei have raised concerns over the security of the ICT (information and communications technology) supply chain at large. Such concerns reflect the emergence of a new discipline centered on trust and cybersecurity within supply chains themselves.

And this discipline is drawing attention from many governments regardless of how they play the geopolitics because of the growing importance of the digital economy for nearly all aspects of life. 

Beyond these two paradoxical issues, an emerging trend in technology policy warrants attention, as it not only represents the creation of an industry-driven counterpoint to Huawei but could also become a major vehicle for the US to check China’s technological strength if Democratic contender Joe Biden becomes president.

Enter the O-RAN Coalition

Amid the larger US-China tech war, the Open Radio Access Network (O-RAN) has become a global buzzword for an anti-China coalition that bills itself as the pragmatic solution to the problem of relying too much on Huawei equipment for 5G networks. 

The O-RAN Alliance started as a loose organization comprising leading telecommunications companies including AT&T, Deutsche Telekom, NTT DOCOMO, Orange and China Mobile to develop the next generation of 5G architecture and interfaces.

By promoting network virtualization and software-defined networks centered on open-source architecture, proponents of O-RAN assert that 5G standards that foster open, transparent and interoperable networks will help build a supply chain ecosystem that minimizes the fear of technological fragmentation currently underscoring geopolitics. 

To be sure, the O-RAN Alliance is a standards-setting organization – in theory representative of global industry, not governments – and includes China Mobile as a major stakeholder. Indeed, Chinese companies have and continue to participate in ongoing 5G standards-development projects with their American, European and Japanese counterparts, including oneM2M. 

The O-RAN Policy Coalition, a separate organization, has taken the spirit of O-RAN and attempted to politicize it as a more friendly face to countering China without adopting the aggressive rhetoric of the Trump administration. 

For its proponents, O-RAN offers an opportunity to check China’s technological ambitions without heavy-handed economic decoupling. The Coalition notably does not include any Chinese companies but represents a diversified selection of global industry titans. 

The basic thrust of the O-RAN Policy Coalition is to take the principles of O-RAN (for example, transparency and openness) and implement them into policy considerations, something almost all countries have been working on with respect to supply chains generally.

Indeed, echoing this sentiment, the next-generation technologies need not push the world down a path of technological fragmentation but rather could offer industry the opportunity to embed security and trust within newly defined networks and supply chains. 

This embeddedness, while not excluding Huawei outright, would make it harder for that company to compete in markets as it would incentivize telecom operators to choose products that meet certain security and trust thresholds.

And these thresholds would likely result from policy commitments formulated through O-RAN where the influence of Chinese companies is either neglected or cast aside. 

As stated above, many countries are beginning to take ICT supply-chain regulation more seriously. The rise of Huawei has upset the political configuration of global communications and given rise to a range of alleged 5G security concerns from back-door interventions to inappropriate data transfer. 

The rhetoric of openness and trust surrounding O-RAN may help crystalize a loose alliance-structure for the United States and its allies. Indeed many US lawmakers have iterated that O-RAN represents the best shot the United States has for building a long-term anti-China coalition in the technology space.

Perhaps echoing the Prague Proposals, O-RAN could spill over and affect larger military and strategic arrangements in different parts of the globe, including those that counter China’s Belt and Road Initiative. 

For many policymakers across the world, the O-RAN option seems the easier pill to swallow compared with an outright Huawei ban because it allows them to retain diplomatic credibility with their Chinese stakeholders while limiting their dependency on Chinese technology.

And even if China tries to depict O-RAN as disguised discrimination, policymakers may fall back on a central talking point of the coalition. Namely, O-RAN is not anti-China – in fact, China could and should be a participant in global 5G security conversations. 

O-RAN dead on arrival?

Yet for all the hype, O-RAN might be dead before it arrives. And this has to do with the fundamental nature of the ICT market.

First, the push toward virtualization via the O-RAN initiative will ultimately not solve some of the larger 5G security problems because Ericsson and Nokia, the two competitors to Huawei for 5G equipment market share, buy input components from Chinese manufacturers. 

And even if these companies could somehow limit the potential for back-door interventions in the components of their technologies, another more fundamental reason will undermine the goals of O-RAN.

Virtualization and software-defined networks may be great for security purposes and can help Western companies get an upper hand on their Chinese competitors. But they also promote the opening of the telecommunications architecture and general market structure that has thus far privileged a handful of heavily integrated corporations.

Moving from hardware-focused to software-defined networks will require the creation of new applications, software and enterprise solutions, a task that opens the door to more startups and venture-capital opportunities. And the introduction of new players threatens to upset the current market balance. 

Moreover, the open-source architecture that underpins interoperable standards makes it harder for companies that develop such standards to charge licensing fees based on propriety ownership and intellectual property – a fact that generally discourages robust participation of standards development bodies from O-RAN. 

Hobbled by high capital expenditure requirements, low return on investment targets for R&D, and increased global competition, many of the leading ICT firms in the world have struggled to find stable sources of profit. Indeed, this is one of the reasons many companies in the United States, such as Intel, Cisco and Qualcomm, have prioritized design over manufacturing in recent decades and indirectly contributed to the decline of manufacturing in the country. 

For this reason, although ICT and telecom companies around the world may embrace the concept and spirit of O-RAN, they will also be wary of losing their incumbent status. This is partially why of the major 5G equipment manufacturers, only Nokia has joined the coalition. 

O-RAN could ignite a regulatory push around the world that favors the entry of new companies to the marketplace. And this entry could at some point force the exit of existing firms or further disrupt the current configuration of supply chains. Whether incumbent companies will tolerate this in order to check Huawei remains to be seen. 

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The Link Lonk


September 01, 2020 at 10:59AM
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Coalition countering Huawei faces hurdles - Asia Times

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