The US government has not only banned Huawei from being a supplier to any US telecom operators wanting to build a 5G network. It has placed the Dongguan-based tech conglomerate on a special blacklist that will effectively kill large parts of its business if implemented the way it seems intended.
This is a whole new level of the China-US standoff, in our view. As the Reuters report points out:
U.S. officials told Reuters the decision would also make it difficult if not impossible for Huawei, the largest telecommunications equipment producer in the world, to sell some products because of its reliance on U.S. suppliers.
Under the order that will take effect in the coming days, Huawei will need a U.S. government license to buy American technology. Huawei did not immediately comment.
A quick recap: When the US government did this to Shenzhen-based ZTE last year, it nearly bankrupted the company, which lost more than US$1bn as a result. That damage was quickly undone by the Trump administration in a series of measures after the initial order had been signed, once it became apparent how serious a move it was. This time around, given the state of play in China-US relations, it seems unlikely that any backsliding will happen.
Huawei is a different beast than ZTE. It has a robust smartphone business and other product lines that may withstand this attack. But this will be a very serious blow. We cannot imagine how the Chinese government will not retaliate, and so a very messy situation lies ahead. China-US relations are entering uncharted territory.