US Restrictions Against Huawei, China Will Help Long Term, US Official Says

A top U.S. intelligence official urged companies to avoid supply chains involving Huawei, and said there is a strong push within the administration to bolster domestic production of 5G technologies. Constance Taube, National Counterintelligence and Security Center deputy director, said U.S. companies should approach Huawei and other Chinese state-controlled companies with a high degree of skepticism, saying their supply chains will ultimately benefit from more trusted actors.

“It's fair to say that supply chain risk can probably never be entirely eliminated,” Taube said during an Aug. 19 webinar hosted by the Intelligence and National Security Alliance. “But supply chain risk must be managed.” Taube said Huawei is “subject to the whims of an authoritarian government,” adding that its strong links to the Chinese military should dissuade any U.S. companies from trading with it.

While recent U.S. restrictions, such as increased license requirements on exports to Huawei (see 2008170029) and Chinese military end-users (see 2007090075), might cause industry pain in the short term, Taube said the U.S. will ultimately be better off. “We've taken a number of actions, which I think when they are fully implemented, will place [us] … in a much better position to have that trust in our supply chain for critical elements.” China has heavily criticized the U.S. restrictions (see 2008180013 and 2005010021).

Taube said the COVID-19 pandemic has highlighted the risks of doing business with China and stressed the importance of supply chain diversification. “What we have learned during the COVID crisis is that we are so deeply integrated in terms of supply chains on critical areas, that we may want to rethink and readjust to ensure that when we are in crisis periods, we are well positioned to get through the crisis without a reliance on partners that might not gain full trust.”

Although Huawei is the world’s top telecommunication equipment maker, Taube said U.S. companies should turn to other sellers and buyers of 5G technology that are trusted. “Indeed, Huawei is a one-stop shop for 5G equipment, but other equipment, services, and software … exist,” she said. The administration wants to incentivize U.S. companies to better compete with Huawei, Taube added, saying that would be a “very positive end-goal. I do believe that that is something that is shared by many across the U.S. government.”

Taube also cautioned U.S. companies against doing business with other Chinese companies, saying they are subject to “different kinds of scrutiny and different requirements than companies that operate in environments that are democratically managed.” She said it is often unclear which companies are aiding the Chinese government. “Chinese government provides subsidies to their organizations that they feel are vital to their own national or economic security,” Taube said. “And I'm putting it bluntly: They don't necessarily always represent them as subsidies.”