Biden Administration Weighs Cutting Off Huawei From U.S. Suppliers

The Biden administration is considering cutting off Huawei Technologies Co. from U.S. suppliers over national-security concerns by tightening export controls targeting the firm, according to people familiar with the matter. This would be a major blow to the Chinese telecommunications giant, which has come under intense scrutiny from the U.S. government in recent years.

The potential move by the administration would be the latest development in the ongoing conflict between the world’s two largest economies. U.S. policy makers are seeking to counter China’s industrial policy, which they believe poses a threat to Western interests.

In 2019, the Trump administration added Huawei to the Department of Commerce’s “Entity List,” a roster of foreign companies deemed to be national-security threats. However, the Commerce Department later agreed to grant licenses to U.S. companies allowing them to sell technology to Huawei as long as it wouldn’t put national security at risk.

The Biden administration is now considering no longer granting such licenses, although no decision has been made, according to people familiar with the matter. The deliberations were previously reported by Bloomberg and the Financial Times.

The U.S. items exempted from the Huawei blacklist include less advanced chips used in the company’s lineup of smartphones and personal computers. Huawei has been unable to offer a 5G-enabled smartphone because U.S. restrictions cut it off from the most advanced chips needed to power such devices.

Huawei declined to comment. The company, which is the world’s largest maker of telecom equipment, has said in the past that its products are not a national-security risk.

The Chinese foreign ministry has condemned the prospect of any new action against Huawei, saying it would be a violation of market principles and international trade rules. Mao Ning, a spokeswoman for the ministry, said that such action would also damage confidence in the US business environment and amount to sci-tech hegemonism.

U.S. officials have signaled to Qualcomm Inc. and Intel Corp. that it would be a good time to wind down their sales to Huawei, said one of the people familiar with the matter. Intel and Qualcomm declined to comment.

One of the ideas being considered is to use more stringent controls that would not only ban direct dealings with Huawei, but also prohibit exports to other companies and intermediaries who then supply Huawei. This policy has the potential to suppress Huawei’s dealings outside the U.S. given the extent to which U.S. components are used internationally.

A Commerce Department spokeswoman said that the department does not publicly comment on discussions with or deliberations about specific companies.

"We work closely with our interagency export controls partners at the Departments of Energy, Defense and State to continually assess our policies and regulations, and we communicate regularly with external stakeholders," she said.

Huawei's placement on the entity list has had a negative impact on its bottom line, although the company said late last year that it had exited "crisis mode." Even so, Huawei didn't feature among the top five providers of handsets in China last year, according to research firm International Data Corp. The top five vendors, including Apple Inc. and Chinese manufacturers, accounted for about 84% of smartphone shipments in the country in 2022, according to IDC.

An outright ban on exports to Huawei could signal further deterioration in the already tense relationship between the United States and China. Although Huawei's dealings in the United States have been waning in recent years, such a ban could still have a direct impact on the company. This, in turn, could have ripple effects throughout the U.S. and Chinese economies.

U.S. policy makers are increasingly concerned about China's policies and the country's broader threat to Western interests. This has been exacerbated by Huawei's addition to the entity list, which has brought into sharp focus the national-security risk of China controlling critical segments of the telecommunications industry. The Covid-19 pandemic has only served to further highlight these concerns, as the disruption of global supply chains has made the reliance on China for critical components all the more apparent.

President Biden has tapped Thea Kendler, a former attorney on the criminal case against Huawei and its Chief Financial Officer Meng Wanzhou, as assistant secretary for export administration at the Department of Commerce. This is a vital position for controlling exports to China.

The United States and China have been locked in a trade war for the past year, with each side imposing tariffs on the other's imports. The latest round of tariffs came after the Trump administration placed export controls on Chinese telecom giant Huawei. The Commerce Department is currently deliberating a final rule for the Huawei export controls, and is expected to publish a final rule in the coming months.