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More Huawei defiance was aimed at U.S. President Trump on Sunday [September 8], but this time it wasn't coming from Shenzhen, it was coming from much closer to home. Brad Smith, the President and Chief Legal Officer of America’s own Microsoft has criticized his government’s treatment of the Chinese tech giant—suggesting that the company’s U.S. supply chain restrictions should be revisited.
In an interview with Bloomberg Businessweek, Smith suggests that the action taken against Huawei should be revisited, ensuring that anything done has a “sound basis in fact, logic, and the rule of law.” He has seen this first-hand, when Microsoft has itself engaged with the U.S. bodies enforcing the restrictions. As has been reported, he explains, the justifications are thin and draped in inference and “need to know.”
“Oftentimes,” Smith told the newspaper, “what we get in response is, ‘well, if you knew what we knew, you would agree with us’. And our answer is, ‘great, show us what you know so we can decide for ourselves. That’s the way this country works’.”
September is set to be a significant month for Huawei as it prepares for life without access to the U.S. tech it has built its consumer business around. And now, as David Phelan reports for Forbes, all eyes are on the imminent launch of the Mate 30 Series to see just how Huawei intends to launch new products despite U.S. restrictions. An Android smartphone targeting the international market but lacking Gmail and Google Maps and access to the Play Store seems hard to imagine, but, as Phelan reports, that’s where Huawei now finds itself.
Smith’s warning, which will be welcome in Shenzhen, is that there will be material consequences for the global tech sector from the U.S. standoff with Huawei and resulting supplier restrictions, and those consequences will hit U.S. companies hard. Before any action is taken, he argues, the implications should be carefully evaluated. It is, of course, the loss of U.S. tech from Google that will hit Huawei hardest of all, and Google has also lobbied, reports suggest, for a softer U.S. stance.
In his interview, Smith levelled some pretty direct criticism at Trump himself over the Huawei situation, relating what is being done in the tech industry to what might take place in the leisure industry which is more familiar to the president. “To tell a tech company that it can sell products, but not buy an operating system or chips, is like telling a hotel company that it can open its doors, but not put beds in its hotel rooms or food in its restaurant. Either way, you put the survival of that company at risk.”
Microsoft has been criticized before for its work in China, particularly where that work might help developments in the security or military sectors. And Smith has now volunteered that tech trade with China might need some carve-outs.
Specifically with Huawei’s consumer business, though, such considerations do not apply. U.S. tech giants, including Microsoft, Google, Intel, Qualcomm, Nvidia and Facebook, all supply the Chinese company in some way, shape or form. There has been significant talk of U.S. firms lobbying their government to soften its stance, to give the Chinese company a break—at least until allegations are substantiated. And there are, of course, billions at stake—as much as $12 billion per year has reportedly been spent by Huawei on U.S. hardware or software components.
Following Trump’s meeting with President Xi, his Chinese counterpart in June, there was talk of exemptions for some of Huawei’s U.S. supply chain where national security concerns were not in play. This was confirmed by the Commerce Department—U.S. firms were encouraged to apply for licenses. But then the standoff hardened, and of the 100+ U.S. supplier applications none have reportedly been awarded.
At issue, of course, is the increasing likelihood that U.S. restrictions on Huawei will drive a global technology split. Huawei is getting set to launch its first smartphone absent U.S. tech, and analyst reports suggest this could cut its shipments by as much as 30%. This is driving an acceleration of the Chinese company’s plans for alternatives to U.S. hardware components, core operating system, software applications.
And such a split is a major risk for the U.S. giants that dominate the tech industry. “You can’t be a global technology leader if you can’t bring your technology to the globe,” Smith warned, made worse by the billions being invested by those same companies-including his own—to maintain their market-leading positions.
And, ultimately, the warning is for the U.S. itself, which benefits from controlling the global technology standard across so many domains. “The only way you can manage technology that’s global,” Smith warns Trump and others in Washington who may be listening, “is to have governments actually work with each other.”
“We are not dependent on the transitional periods of the U.S. government,” Huawei chairman Eric Xu told German newspaper Handelsblatt last week. “We are already self-sufficient today. If it were otherwise, we would have gone bankrupt.”
This follows developments in recent weeks which include the Huawei launch of a new OS, which ultimately will have to replace Android on smartphones if required, and rumors of other replacements for core apps, services, a developer ecosystem.
The warnings are clear—the stakes are high for the U.S., not just China and its tech champion. But whether any of those warnings will be heeded remains to be seen.
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Update, 10 September: The original version of this story included the phrase “un-American” used in Bloomberg’s report of the interview. This was an interpretation of what was said by Brad Smith, and not a direct quote, and so has been removed.
