When the Trump administration barred U.S. companies from doing business with Huawei back in May, Qualcomm complied with the mandate. However, the firm’s CEO Steven Mellonkopf recently said his company has resumed selling components to the Chinese telecommunications conglomerate once again. Furthermore, the executive noted he is working on a long-term supply deal with the controversial corporation.
Caixin broke the news that Qualcomm is selling chips to Huawei on Wednesday. However, the site noted the San Diego corporation didn’t explain how it’s been able to do so. The Trump administration has not rescinded the executive order banning American firms from trading with the Sino company. Moreover, the U.S. Department of Commerce has not taken the conglomerate off of its Entity List of organizations the federal government regards as threats to national security.
As such, Qualcomm has likely resumed trading with Huawei in one of two ways. Like its contemporary Micron, the company could have found a loophole around the Trump administration’s blacklist. In June, the Idaho-based chipmaker resumed selling components to its Chinese client because the federal government decided its foreign semiconductor sales did not threaten national security.
Qualcomm might have found some of its components are benign enough to escape Commerce Department scrutiny.
Conversely, the manufacturer might’ve received a trade license exempting them from the ban altogether. In July, President Trump told several technology industry executives the Commerce Department would begin issuing licenses giving them clearance to sell chips to Huawei. However, due to escalating trade tensions with the Chinese government, Washington changed tack.
In August, Reuters reported the Commerce Department received 130 requests for trade licenses but hadn’t granted a single one. The Trump administration might have shifted its position once again and issued a license to Qualcomm. However, if that is the case, neither the government nor the chipmaker has chosen to make that information public.
A Ray of Light
For both U.S. semiconductor makers and Huawei, Qualcomm’s new supply deal is a ray of light.
As Huawei previously pumped $11 billion into the American tech sector last year, the possibility that some of that capital is recoverable is good news. As Micron derived 13 percent of its revenue from the Chinese telecom, U.S. firms would’ve suffered from being completely excluded from its supply chain.
Similarly, while Huawei uses its own Kirin processors in its handsets, it’s still heavily dependent on U.S. chipsets. Like most smartphone manufacturers, the company is dependent on firms like Qualcomm for its memory and modems.
Now that the government is allowing American hardware producers to sell to Huawei, it’ll be interesting to see if it extends that selected exemption to local software companies. Microsoft and Google have asked the President to take the Chinese corporation off the blacklist. Moreover, the electronics maker’s efforts to build its own software ecosystem have not gone well.
Currently, the U.S. and Chinese officials will meet for another round of trade talks on October 10.