September 26, 2021


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US increases restrictions on Beijing Telecommunications company Huawei.

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Donald Trump’s administration has placed additional constraints on Huawei technologies in a clear move of restricting the company access to US technology. The focus of these restrictions is to prevent Huawei from purchasing computer chips manufactured using US technology, or that were not particularly developed for Huawei.

The US commerce department had in May of 2020 issued a demand for global chipmakers US technologies to first acquire licenses from the US government before working on the designs for their technologies including Huawei. New orders issued widens the scope of restrictions, necessitating companies to first seek permission before selling off the shelf designs for general purpose.

US Commerce Secretary Wilbur Ross said “As we have restricted its access access to US technology, Huawei and its affiliates have worked through third parties to harness US technology in a manner that undermines US national security and foreign policy interests,”

These actions show the US commitment to frustrate Chinese technology companies including, Huawei, TikTok as well as US technology companies with business in Beijing. It also speaks to other investors who might wish to enter the US market that the political environment is perhaps toxic to multinationals. Furthermore, it can also be seen as a way of the administration to try compel competitor technology companies to sell their businesses in US to companies based in the US as we saw with the rumor of Microsoft takeover of TikTok US operations, now rumor has it that trump has given the greenlight for Oracle to acquire TikTok.

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Just as TikTok was branded a potential loophole for China to spy on US citizens, Huawei is also under immense pressure operating in the US market, as well as across Europe given the US branded it a National Security Threat. Be that as it may, we cannot rule out economic competition as a motivator for these actions by the US. Europe has been the biggest market for iPhones manufactured by American technology company Apple, Huawei has been seen to be encroaching on that market and perhaps why the US is trying to persuade Europe to cut ties with Huawei.

Since Donald Trump got into office, trade wars with Beijing have intensified, with the administration perceiving China’s economic rise as a threat as well as the growing influence of China in areas previously seen as US allies. The US economy has also genuinely suffered previously as various American companies moved their operations offshore taking away employment opportunities for the American people. However, the approach taken by the administration is perhaps very wrong, focus should be on identifying reasons why such companies opted so and undertaking measures to cure that in an attempt to persuade them. This has to do with creating a conducive business environment.   

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