After Trump’s Huawei U-Turn, What’s Next for US Tech Companies?

Business leaders and politicians are scratching their heads after President Donald Trump lifted some sanctions on the Chinese technology giant Huawei but kept others in place — and did not remove the company from a blacklist.

Huawei is the world’s leading provider of smartphones and telecom gear, particularly equipment used in next-generation 5G networks. In May, the  Trump administration banned American firms from doing business with Huawei on grounds it could pose a threat to national security.

The company reacted with indignation that it could be considered a security threat and denied it had stolen U.S. trade secrets. Nor has it emerged in public that Huawei had ever done so. Nevertheless, the ban triggered repercussions for many US technology companies, and now some are likely wondering what Trump’s change of mind means for their businessesOpens a new window .

Following Trump’s meeting at the G-20 summit in Japan with Chinese leader Xi JinpingOpens a new window , both presidents’ attempted to tone down the  trade war and resume talks. Trump tweeted: “At the request of our High Tech companies, and President Xi, I agreed to allow Chinese company Huawei to buy product from them which will not impact our National Security.”

Trump also pledged he would not impose further tariffs on Chinese goods as the trade talks continue, and Xi pledged China would buy more agricultural products from American farmers.

Partial Lifting

White House economic adviser Larry Kudlow later clarified the scope of Trump’s order, saying it would only apply to mainstream consumer products rather than those that pose threats to national security.

“All that is going to happen,” Kudlow said, “is Commerce will grant some additional licenses where there is a general availability” of the parts. He added: “This is not a general amnesty.”

The change is likely to mean that American companies could buy and sell some consumer items such as handsets and computers but that Huawei’s networking gear will remain off-limits.

While Huawei has been the hardest hitOpens a new window  by the ban, predicting it will loose $30 billion in sales over the next two years, the sanctions have also affected many American tech companies. They include Google, which has withdrawn support for Huawei smartphones running its Android operating system.

Chip suppliers to Huawei have also been affected. Broadcom says it will take a $2 billion hit to its annual sales from the ban, while Micron, which counts Huawei as its biggest customer, accounting for 13% of its income, reported a $200 million drop in sales in its most recent quarter.

Several chip companies, including Western Digital and Intel, have made changes to their supply chainsOpens a new window .

Mixed Reactions

The initial response from industry and politicians to the partial listing of sanctions has been mixed.

Shares in chip companies, including Qualcomm and Broadcom, took an upward bounce at the start of the week on the news from the summit meeting and then leveled off.

Microsoft, which had stopped selling Huawei’s laptops, but had remained silent about whether the ban would also halt sales of the Windows operating system, reacted to Trump’s change of heart by saying it would “continue to offer Microsoft software updates to customers with Huawei devices.”

John NeuffeOpens a new window , president of the semiconductor industry trade association, said: “The progress made (by Trump and Xi) is good news for the semiconductor industry, the tech sector and the world’s two largest economies. We are encouraged the talks are restarting, and additional tariffs are on hold, and we look forward to getting more detail on the president’s remarks on Huawei.”

The association, which represents the chipmakers Qualcomm, Broadcom and Intel, had lobbied hard in Washington for targeted action against Huawei rather than a blanket ban, Bloomberg reports.

‘Permanent Damage’

But one semiconductor executive was quoted by The New York TimesOpens a new window as saying that the industry has already suffered permanent damage because the Chinese can no longer depend upon American component makers and are moving away from them.

Other executives agreed, saying Chinese officials and companies will develop their own chip-making industry or turn to vendors from Asian neighbors including Japan, South Korea and Taiwan.

Some political figures, too, have criticized Trump’s change. Senator Marco Rubio of Florida, a leading Republican voice on foreign affairs, said Trump’s U-turn would “destroy the credibility of the administration’s warnings about the threat posed by the company.’ He added, “No one will ever again take them seriously.”

Since previous truces in the trade talks having been short-lived, the biggest question remains whether Trump’s current line of thinking will hold in the short term or if he will harden his stance on a dime, leaving American tech companies struggling once again to find workarounds.