China Eyes Retaliation for More US Huawei Curbs; Industry Assesses Impact

China promised countermeasures to respond to increased U.S. restrictions against Huawei, slamming “abuse of export controls” and violation of international trade laws. License requirements on shipments to Huawei for foreign-made chips containing U.S. content (see 2005180018) are a “serious threat” to China’s chip industry, China’s Commerce Ministry said Sunday, per an unofficial translation. State media said China is considering placing U.S. companies on its unreliable entity list. The rule will “complicate” operations for communication equipment manufacturers and could lead to drops in revenue and R&D efforts, emailed a U.S.-China Business Council spokesperson. “More transactions will require export licenses, adding additional expense and delays with no guarantee that licenses will be granted.” Chinese companies “of course would very much like to ... indigenize all aspects of the supply chain,” said Keith Krach, State Department undersecretary-economic growth, to reporters last week. “But at least for the moment … U.S. companies still have a very significant comparative advantage when it comes to the largely software-facilitated design tools that are involved in producing the very best chips.” National Foreign Trade Council Vice President Richard Sawaya said the rule falls short of industry’s worst fears, and members “realize that national security-related technology controls are warranted.” He said industry would have appreciated more transparency as the rules were being considered and a comment period. “That’s really what industry is asking for,” Sawaya told us: “Due process.” Monday, Huawei criticized the increased restrictions, saying they “ignore the concerns of many companies and industry associations.” It said the rule will “undermine” the global semiconductor industry. “The U.S. is leveraging its own technological strengths to crush companies outside its own borders,” the company said. Huawei’s rotating chairman, Guo Ping, said he's “confident” the company will work around the curbs. “Our experience over the past year has made us confident that we can find a solution, that our customers and suppliers can continue to stand with us and minimize the impact of this discriminatory rule,” he said. Sen. Ben Sasse, R-Neb., called the rule “long overdue.” The U.S. “needs to strangle Huawei,” Sasse said. “Modern wars are fought with semiconductors, and we were letting Huawei use our American designs.”