Will Huawei become a pawn in a high-stakes U.S.-China technology war?

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The Justice Department investigation into Huawei recalls a similar probe into whether Shenzhen rival ZTE broke U.S. sanctions by exporting devices containing American components to Iran. ZTE was found guilty last year not only of breaking the sanctions, which resulted in an $892 million fine, but of breaking the settlement deal’s terms by failing to punish those involved.

The resulting seven-year ban on US firms selling to ZTE will severely hamper its growth efforts because it relies on chips and other components from the likes of Qualcomm and Micron Technology. [Editor’s note: The U.S. is considering lifting the ZTE sanctions as concession to avert an all-out trade war with China.]

The probe of Huawei, which is said to have been ongoing since early 2017, could result in similar punishment if the firm is found guilty of breaking sanctions. Washington has belatedly realized that China is supplanting the U.S. as the world’s pre-eminent tech superpower, resulting in increasing efforts to corral the number one telecom equipment maker and third-largest smartphone maker in the world.

National security concerns have been used to keep Huawei down, first in 2012 when it and ZTE were de facto banned from the U.S. telecom-infrastructure market after a damning congressional report, and more recently when AT&T and Verizon were compelled to drop plans to sell the latest Huawei smartphones, and Best Buy stopped selling its devices.

Like ZTE, Huawei could be severely restricted if it is hit with a components ban by the U.S. But Washington would likely be shooting itself in the foot with such a heavy-handed approach.

 A tech trade war with China looms

First, China and its new leader-for-life Xi Jinping is more than ready and willing to stand up against what it sees as unfair trade practices by the Trump administration. It has already fired back with tariffs on U.S. food imports and will do so again if a proposed additional $100 billion in tariffs from the U.S. goes through. By the same rationale, could China respond to a ban on sales of U.S. components to Huawei by prohibiting the sale of China-made components to U.S. tech firms?

Potentially, believes China-watcher Bill Bishop.

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