U.S. chipmakers are using a legal loophole to get around Trump's Huawei ban

What you need to know

  • In spite of a trade ban by the Trump administration, a few U.S. companies resumed selling components to Huawei three weeks ago.
  • Component sales to Huawei have reportedly totaled hundreds of millions of dollars in just three weeks.
  • The companies are "lawfully" getting around the Trump ban by not labeling the components as American-made.

U.S. chipmakers are continuing to sell products to Chinese smartphone and telecommunications equipment maker Huawei, despite a ban issued by the Trump administration last month, according to a new report from The New York Times.

Citing four people with knowledge of the sales, the report says U.S. chipmakers such as Intel and Micron have found a way to get around the trade ban by not labeling the products as American-made. Goods that are produced overseas by American companies are usually not considered to be American-made. The companies began shipping components to Huawei about three weeks back and will help the Chinese company to continue selling its products such as smartphones and servers.

Since a complete sales ban of components to Huawei is expected to come into effect after mid-August, it is possible that a certain percentage of the components shipped to Huawei could be for use in the company's future products. According to estimates, U.S. chipmakers have sold components worth hundreds of millions of dollars to Huawei already.

Micron CEO Sanjay Mehrotra had mentioned during an earnings call on Tuesday afternoon that the company had ceased shipments to Huawei after it was put on the Entity List by the Commerce Department. However, Micron resumed sales two weeks ago after it reviewed the entity list rules and "determined that we could lawfully resume" shipping a few products.

The Trump administration, claims the report, has been aware of the sales but most officials are unsure about how they should respond. "As we have discussed with the U.S. government, it is now clear some items may be supplied to Huawei consistent with the entity list and applicable regulations," wrote John Neuffer, president of the Semiconductor Industry Association in a statement on Friday.

Each company is impacted differently based on their specific products and supply chains, and each company must evaluate how best to conduct its business and remain in compliance.

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Babu Mohan
  • Legally valid, morally reprehensible.
  • Only if you believe the ban is for legitimate reasons and not politically motivated.
  • The root of the problem is Israel.
  • I thought the security issues were mainly centered around the US using Huawei products. So what's morally wrong with American companies still finding a way to make a profit off off Huawei without compromising US security? Personally, I'm not sure what the disadvantage is. I only see a benefit in that a US company won't take as big of a financial hit as previously estimated.
  • So far, I've seen one account saying that 10 years ago a single Huawei product had a bug in it that could possibly allow unauthorised remote access to a consumer level product, but that Huawei fixed it. Since then, nobody has even come close to providing evidence that there are backdoors, or even the potential for back doors in their hardware or software. This whole business stinks. Huawei make good reliable products, using their own IP, or IP which they pay the required fees for. If there is evidence of wrongdoing, then Trump should share it. If I have compromised hardware then I'd like to know how it is compromised and what the potential risks are. If Microsoft know of a vulnerability in their own software and refuses to share it I can at least "try" to claim back any losses that I suffer from them with a class action suit. But If I suffer losses due to the US government withholding information? Maybe Washington should launch a buyback scheme. I will sell them any Huawei hardware I have for the price of an American made equivalent. I'll take some Cisco equipment please … oh wait, Cisco hasn't released this yet, which is why we bus Huawei.
  • Morally, it's actually pretty clear. The trade restrictions were put in place to protect America's domestic markets from a foreign competitor. These companies are following those restrictions, and are supplying non-American goods to be sold on non-American markets. If these companies were taking Huawei products, rebadging them as American products, and then selling them on the American market, that would be different. But they aren't.