U.S. Could Revoke Huawei's Export Licenses

Biden administration officials are considering revoking export licenses that were issued to U.S. suppliers for sales to Chinese telecom company Huawei Technologies Co., according to people familiar with the matter, part of a broader tightening of technology trade due to national security concerns.

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In the past, the administration has indicated that it was considering not granting any new export licenses to companies such as Qualcomm Inc. and Intel Corp., which provide chips used in smartphones and other devices, such as tablets and laptops. This action would cover products that use advanced 5G technology as well as products that are older than 4G technology. 

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With this new action, the government is taking things a step further by revoking licenses that have already been granted. The escalation coincides with heightened U.S.-China tensions following the discovery of a suspected Chinese spy balloon traveling through the U.S., as well as intelligence that suggests that Beijing is considering providing lethal assistance to Russia in its ongoing war against Ukraine.

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“In spite of the fact that Huawei was listed as an entity in the government's export control list, the policy that allowed exports to Huawei is being wound down," said a former senior security official familiar with the administration's policy deliberations. "Now that the White House has told Commerce, 'Cut off the 4G sales,' the time has come for more pain to be inflicted on Huawei, in order to end Huawei's present existence,'" the former official said.

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As part of the Commerce Department's export controls oversight, the Bureau of Industry and Security, the department's office responsible for export controls, placed Huawei on the so-called entity list in 2019. In issuing the punitive listing, the BIS referred to possible national security threats as the reason for issuing the listing, which requires exporters to obtain special licenses that allow U.S. technology to be sold to the firm. It is reported that U.S. officials are concerned that China's government may be able to use Huawei's telecommunications technology to spy on Americans. 

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Intel declined to comment on the matter. A request for comment from Huawei and Qualcomm was not immediately responded to. There is no national security risk associated with Huawei products, according to Huawei. There was no comment from the Commerce Department on the matter.

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Revocation of existing licenses for Huawei's older-generation phone processors, as well as other processors that are widely available globally, could have a significant impact on U.S. chip makers, many of whom have been given permission to continue selling Huawei's older-generation phone chips as well as other processors. A number of chip companies have argued that restrictions on such products are detrimental to the U.S. chip industry because they, in turn, deprive them of revenues to fund research and development within the country.

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Based on data released by Rep. Michael McCaul (R., Texas) in 2021, the BIS approved Huawei licenses worth $61.4 billion between November 2020 and April 2021, indicating that the company may be in danger of losing billions of dollars of revenue if existing licenses are revoked. A company is typically granted an export license for a period of several years and the license specifies the type and value of products that can be shipped under the license.

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Even so, some security analysts point out that older-generation chips are still used in military applications, including precision-guided bombs, which still have military uses. This issue has been highlighted by the flow of semiconductors from China to Russia in spite of U.S. export controls that bar the provision of such goods to the country.

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Officials in China have repeatedly criticized the sanctions, saying they are not providing material support to Russia as a result of the conflict in Ukraine.

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In the face of simmering tensions between the United States and China, policymakers in the administration and on Capitol Hill are scrambling to close what they say are gaps in U.S. trade policy which could lead to the transfer of Western technology to rivals such as Iran and Russia and strategic competitors like China.

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Among the senior administration officials expected to face questioning Tuesday before the House Foreign Affairs Committee, chaired by Rep. McCaul, is Alan Estevez, the Undersecretary of Commerce for Industry and Security.

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It is believed by some industry officials that the administration may be considering the Huawei ban as leverage during broader negotiations with China, including those concerning trade and national security.

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Clay Lowery, a former senior national security official now with the Institute of International Finance, says, “Influencing China to dial down its economic support of Russia is going to be a tough sell.” 

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“Although, Chinese businesses have been careful about their relations with Russia since they also wish to maintain their relationships with the United States and its Western allies”, said Mr. Lowery, who is scheduled to testify at a Senate Banking Committee hearing on export controls on Tuesday.

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During the process of putting Huawei on its entity list in 2019, the Trump administration had also considered revoking existing licenses as part of its decision, said the former official. An official told this person that the Treasury Department had ruled out such an action because it was concerned about the potential fallout, which included the possibility of retaliation by Beijing and the loss of revenue needed to finance the research and development of chips.

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