The U.S. government has spent the last year and a half making the case that Huawei is an international security threat — a telecommunications hardware company that could help China’s government surveil communications and seize control of 5G-networked assets. But President Donald Trump suggested yesterday that this “very dangerous” company may not be such a threat after all as the U.S. might be willing to look the other way if China agrees to a trade deal.
Does this sound like pay-to-play politics? Of course. After the last two years, is anyone even slightly surprised that Trump would shrug off international security concerns to settle an economic dispute? Of course not.
Regardless of how this situation plays out, Trump’s glib attitude toward trade relations with Huawei is inviting highly unpleasant and long-lingering consequences. The most obvious: Foreign rivals now can plausibly argue that the U.S. targets individual companies to force political outcomes, which is effectively an economic form of hostage-taking. That alone will become a huge land mine for U.S. diplomats going forward — a persistent blemish on the nation’s reputation for fair dealing and commitment to impartial justice, though admittedly just one of many such marks made over the last two years.
A less obvious consequence is that a leading Chinese company will be pushed to offer its own rivals to Android, Arm processors, and other technologies it can no longer reliably source. This consequence is now tangible — Huawei has explicitly said it’s being forced — against its preference — to develop alternatives. The less obvious ramifications will arrive as Chinese-made chips, operating systems, and other core components impact global trade, technology, and security over time.
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As it stands today, Huawei’s name appears on most of its devices and some of their components, but key internal technologies are foreign-made — a smartphone’s “Huawei” CPU uses Arm-designed cores, the operating system and most apps come from Google, and the screen glass might come from Corning. Even the company’s new 5G modems are manufactured elsewhere, at Taiwanese chip fabricator TSMC.
There are billions of reasons to prefer sourcing all these parts from the companies that originally developed them — the components are expensive to design and tricky to fabricate. But if that’s not an option, Huawei is the rare company with the financial wherewithal to make its own alternatives. And China’s government certainly would back it up.
It’s not as if there aren’t already third-rate chips, operating systems, or glass options available for Huawei to buy in China. If the company was willing to make decidedly less impressive products, it could switch to these components in a heartbeat, alienating many users but probably lowering its prices even further. But that’s not going to happen. Assuming the U.S. ban doesn’t get resolved out of nowhere ZTE-style, Huawei will eventually start making the parts it needs, and possibly even offer them to other companies.
For the U.S., the big risk is that fully Chinese-made options go from being third-tier to second- or first-tier once they’re properly funded, either by massive purchases from the world’s largest smartphone maker or by government subsidies. Moreover, just as the U.S. government is apparently willing to ignore security concerns for the right price, China tends to look the other way on international intellectual property violations when it benefits domestic companies. This means U.S. innovations could be folded into ethically questionable Chinese knockoffs without acknowledgement or compensation.
In other words, if the U.S. is concerned about security and trade imbalances, those situations could easily go from bad to worse. Once Chinese companies can purchase domestic alternatives, they won’t buy U.S. components and software and will instead start competing with U.S. vendors at lower prices, offering “insecure” products all over the world. That’s effectively what happened with Huawei’s now massive international 4G and 5G base station business, so there’s every reason to think it could happen again across other telecom devices.
Between the ban on Huawei and the trade war with China, the U.S. now has to resolve a thorny situation without making an even bigger mess of the country’s key trading and technology relationships. There may be no great way to repair everything that’s already been broken, but explicitly delinking Huawei’s fate from the broader Chinese trade war would be the right place to start. It might have seemed like a potent bargaining chip in a bid to fix everything at once, but even mentioning it further undermines the U.S’ moral authority and gives China’s government yet another reason to make things worse for U.S. companies and citizens in the future.
