Xiaomi’s rare victory against US blacklist could pave the way for other Chinese tech giants
- Smartphone maker has reached an agreement with the US government to remove itself from a blacklist that targets firms with Chinese military links
- Xiaomi’s example will give hope to other Chinese tech firms, analysts say
The Beijing-based company reached an agreement with the US Department of Defense to set aside its blacklisting, which had prohibited US investors from owning shares in the company and which would have led to delisting from US exchanges and deletion from global benchmark indices.
The 11-year-old firm, founded by billionaire Lei Jun, took several key steps to create an effective solution for its US problems, according to Cameron Johnson, a partner at Tidal Wave Solutions.
“Xiaomi used the US legal system as its ally, including filing a lawsuit and getting it before a judge quickly,” said Johnson. As the company was suing the government, it simultaneously started negotiations with the US government in an attempt to mitigate their concerns, he added.
Xiaomi, currently the third-largest smartphone vendor in the world according to research firm IDC, claimed in its lawsuit that affiliating it with the Chinese military was “unconstitutional” as it would deprive the company of its rights “without due process of law”.
Will Wong, a research manager at IDC, said that he would not have expected Xiaomi to achieve this victory in such a short space of time if Trump was still in power.
The rise of Chinese smartphones
The decision between the two parties is set to be finalised by May 20, according to the court filing. In the meantime, Xiaomi has taken a cautious stance, saying in its response that they are “paying close attention to the development of this issue”, without elaborating.
Analysts said the development will give hope to other Chinese tech firms that have come under US scrutiny.
“What Xiaomi has done is to create a template for Chinese businesses on how to deal with US sanctions and other concerns in the future,” said Cameron, adding that the decision is being discussed very seriously throughout the Chinese business world.
However, Chinese tech companies continue to face considerable legal risks in the US.
On the same day that Xiaomi was blacklisted in January, the US Department of Commerce released an interim final rule on “Securing the Information and Communications Technology and Services (ICTS) Supply Chain”.
Among other stipulations, the rule places restrictions on transactions involving internet communications software with more than one million US users.