Editorial | Trump’s strategy on Huawei will result in a loss for his country

The United States’ actions are unlikely to kill off China’s leading technology company yet they will speed up Chinese self-reliance and directly harm American interests

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FILE PHOTO: A Huawei sign is seen outside its store at a shopping complex in Beijing, China July 14, 2020. REUTERS/Tingshu Wang/File Photo

Published: 10:32pm, 22 Aug 2020Updated: 10:31pm, 22 Aug 2020

The latest United States’ actions to stifle the rise of Huawei, China’s leading technology company, have taken effect. Announced in May by Donald Trump’s administration, they are aimed at plugging perceived loopholes to prevent the telecommunications giant from being able to acquire the US-made semiconductors so vital to its core business. Beijing has vowed to take “all necessary measures” to protect the interests of Chinese firms, although an effective workaround will take time. The White House may sense victory, but attempting to crush rivalry in such a way is counterproductive.

Huawei, the world’s largest smartphone maker and leading provider of 5G mobile technology, has a huge appetite for chips, parts and software, and US companies are major suppliers. Such prominence was bound to make the firm a target of the Trump administration’s efforts to diminish Beijing’s power and influence, and the company has been accused of being a threat to national security through alleged intellectual property theft and state-sponsored spying. Although no evidence has been produced, ever-tougher sanctions and penalties have been rolled out and the latest involve a ban on US firms providing chips without a special licence and 38 Huawei affiliates in 21 countries being blacklisted. The steps are likely to cause short-term financial damage and affect supply chains and perhaps cause the loss of some markets, but are unlikely to kill the company.

The firm has a stockpile of imported chips that will last into the coming year and is working with overseas companies in an effort to develop parts free of US elements. But even though China is pushing development of its semiconductor industry, it faces major hurdles. The leading players in chip design software are American and control about 90 per cent of the market. Still, Huawei is determined to succeed and has considerable research and development resources, so instead of seeing off competition, Trump is speeding up Chinese self-reliance.

His actions are also directly harming American interests. The 1,200 US firms that are suppliers to Huawei have lost business, while 5G development will be set back. But targeting Huawei and other Chinese tech companies could also make China less open to the world. They are among the nation’s most multinational, with large numbers of foreign staff and overseas offices. Chinese working for such firms are exposed to outside ideas and influences, vital elements of better understanding the world and improving China’s international stature. The more the US pushes, the greater will be the rise of Chinese nationalism and a resistance among hardliners to economic reforms and change. Trump wants to score a win, but his strategy is instead leading to little more than loss for his country.