An impending U.S. regulation targeting Huawei could pose a mortal threat to the Chinese telecommunications giant and trigger historic economic clashes between Washington and Beijing, according to a senior executive.
“I don’t think the Chinese government will just watch and let Huawei be slaughtered on a chopping board,” Huawei rotating chairman Eric Xu told reporters Tuesday. “I believe the Chinese government will also take some countermeasures.”
That stark warning came on the heels of reports that President Trump’s administration is developing export restrictions that would require a Taiwanese company that relies on American “technology or software” to stop providing Huawei with advanced semiconductor chips. The administration regards the tech giant as a tool of Chinese intelligence services and a threat to the United States and Western allies.
“This kind of destructive ripple effect on the global industry would be astonishing,” Xu said while unveiling the company’s 2019 earnings. “If the Pandora’s Box was to be opened, we are probably going to see catastrophic destruction to the global industry chain. And by then, it’s not going to be only one company of Huawei that could be destroyed.”
Huawei profits increased in defiance of an international lobbying campaign that Secretary of State Mike Pompeo has waged over the last year to discourage countries from purchasing the company’s next-generation wireless technology, Xu said. Yet he acknowledged that the U.S. attacks have hurt the business in countries around the world, as even longtime clients of Huawei have decided not to purchase 5G contracts.
“The pressure coming from the United States on Huawei’s 5G systems has brought about a quite substantial impact,” he said. “At the very least, it has created a lot of extra workload that we had to take on. We had to take a lot of time explaining to our customers, partners, and also government regulators.”
Pompeo’s team hopes that the fallout from the coronavirus pandemic, which spread from Hubei province after Chinese officials censored early warnings, will discourage other nations from entrusting their 5G networks to the Beijing-backed company.
“If this COVID-19 pandemic doesn’t clarify for the world where everyone stands, what’s truly behind the curtain, I’m not sure what else could,” State Department spokeswoman Morgan Ortagus said Tuesday morning during an Atlantic Council event. “We will continue obviously to take a firm position as it relates to Huawei and any 5G that would be beholden to an authoritarian regime. And I think — maybe I’m overly optimistic — but I think this pandemic, an unintended consequence is that this pandemic is shedding a ton of light on our policies as it relates to Huawei, as it relates to 5G.”
The coronavirus pandemic could damage the tech giant’s international deals quite apart from any political backlash, as the contagion spreads in other countries where they do business. “If some individual suppliers cannot continue supplying us, it will cause long-term challenges, as well as uncertainty over whether Huawei will continue supplying the market,” Xu said.
The prospective regulations would intensify that pain. “If the Chinese government also followed with countermeasures, we can imagine what kind of an impact that would be on the global industry,” Xu said. “We might be seeing an endless blow of disastrous aftermath. If that happens, not a single player in the global value chain can stay immune.”
