Last week, an executive order emerged from the White House, giving the US government the ability to blacklist telecoms equipment from non-American companies. Widely interpreted as a move to break a deadlock in the China-US trade wars, a wild card played by Tariff Man designed to force concessions, Huawei is battening down the hatches, as Arm and Google break ties with it. Meanwhile, Qualcomm was going about its business, still glowing from its settlement with Apple, when Judge Lucy Koh ruled it was a monopoly. Qualcomm had evidently run out of good-boy points.
After the executive order, it seemed that there was a glimmer of hope for Huawei, as the US Department of Commerce (likely realizing how much mess was on the cards) granted US companies a 90-day exemption on Huawei products. Tellingly, Huawei isn’t mentioned directly in the executive order, neither are China or Russia, nor perpetual US bogeyman Iran. Reading between the lines, it was always very clear to whom the order was directed, and we’ve written about the complexities of carrying on amid a potential Cold War.
“The Temporary General License grants operators time to make other arrangements and the Department space to determine the appropriate long term measures for Americans and foreign telecommunications providers that currently rely on Huawei equipment for critical services,” said Secretary of Commerce Wilbur Ross. “In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks.”
Now, this came after months of warnings from the US that Huawei’s equipment was a national security threat, and perhaps the Department of Commerce thought it wouldn’t have to accommodate an executive order. Even though it had reportedly been on the cards for the past year, especially with the near-collapse that ZTE suffered when it was added to the list of entities with which US businesses were forbade from trading with. Tariff Man has now escalated things, and the fallout is having global impacts.
One of the first out the gate was Google, which said it would be cutting off its Google Play access, meaning Huawei has to make do with just the open source Android components. Then came Arm, which told its employees to halt “all active contracts, support entitlements, and any pending engagements” with Huawei, in a memo seen by the BBC, due to its belief that its IP constitutes “US origin technology,” and is therefore subject to the ban.
Now, Huawei could probably string together replacements for all the US components in its smartphone designs, and turn out a pretty decent phone. However, as EPSNews notes, “procurement costs have increased; partnerships have been severed; and companies have been forced to relocate manufacturing. Global procurement operations are shifting away from China-reliant suppliers.”
A grand irony would be that this dispute leads to China fueling sufficient investment to surpass the US firms, but that’s likely a long ways off yet. Huawei also says it has been stockpiling inventory ahead of such a move, so then the question becomes one of which lasts longer; the Trump administration or Huawei’s reserves. Given the uptick in mentions of ‘impeachment’ in the press, that could be quite a close-knit race.
Still, Huawei is being blocked from a very large market in the US, and as the nation throws its weight around globally, Huawei is getting knock-on blows. UK MNO EE has confirmed it won’t be using Huawei gear in its 5G core network, and is planning on removing Huawei equipment from live deployments – following a similar decision from Vodafone. In addition to Arm, Broadcom, Intel and Qualcomm are also rumored to have stopped doing business with Huawei, which brings us on to our related piece of news.
In an FTC case against Qualcomm, Judge Koh ruled that the company had suppressed competitors in the wireless chip market, and used its dominant position to force unnecessary licensing fees. Deals will have to be renegotiated, and Qualcomm has been ordered to submit assessments to the FTC for the next seven years. “With practices that result in exclusivity and eliminate opportunities to compete for OEM business, Qualcomm undermines rivals in every facet,” Koh wrote.
As expected, Qualcomm is very upset with the decision, and is seeking an immediate appeal, saying that the decision is based on “flawed legal theory.” This is a decision that has been two-years in the making, after the FTC accused Qualcomm of monopoly practices – a move that likely emboldened Apple into taking a stand against Qualcomm, which ultimately led to Apple recently caving and settling with Qualcomm in their court case.
If enforced, Qualcomm is going to have to completely reinvent its licensing model, wherein it charges an additional fee derived from the value of the phone, for its standards-essential intellectual property in cellular technologies. This led to the ‘no license, no chips’ policy, in which the phone makers had to license Qualcomm’s IP portfolio in order to get access to its chips. If it is reduced simply to selling processors, then its financial outlook is going to be rather hamstrung. It will be interesting to see if Apple tries to renege on its settlement with Qualcomm, and it is still unclear as to why it settled when it knew this FTC decision was pending.