Daily Management Review

US’s Tightening Of Sanctions On Huawei Will Jeopardize Nvidia’s Intention Of Selling To The Chinese Tech Firm


US’s Tightening Of Sanctions On Huawei Will Jeopardize Nvidia’s Intention Of Selling To The Chinese Tech Firm
According to a draft report by a government contractor, US chipmaker Nvidia Corp.'s plans to sell technology to China's Huawei would be thwarted if the US government moves forward with a proposal to further restrict shipments to the blacklisted company.
The Biden administration has been considering restricting the products that it permits American businesses to send to the world's largest manufacturer of telecom equipment, Huawei Technologies Co. Huawei was added to a US trade blacklist in 2019 but is still allowed to receive billions in American goods thanks to a special plan put in place by the Trump administration.
"The proposed 2023 amendment of (the Commerce Department's) licensing will likely have a high economic impact on Nvidia," according to excerpts of the draft report seen by Reuters, referring to the company's "pending license value."
Nvidia's plans to sell to Huawei were previously unknown.
"The China market presents a significant opportunity for the US semiconductor industry," said an Nvidia spokesperson. While we are unable to comment on any pending license requests, we work with customers and partners around the world to ensure that all applicable export controls are followed and that market demand is met."
According to a senior State Department official, the document was a contractor's preliminary draft, and the department "would not have approved the report in its current form." The government has also "written and contracted multiple reports on this subject, based on different contingencies, which arrive at very different conclusions," according to the report.
The White House and the Department of Commerce both declined to comment. A request for comment from Huawei was not returned.
The document demonstrates that the Biden administration is attempting to assess the impact of proposed Huawei policy changes on US companies before imposing new rules that could crimp projected revenue streams at a time when the tech industry is already reeling. It also provides unusual insight into the politically sensitive question of which US companies are seeking business ties with Huawei, one of Washington's most heavily sanctioned Chinese firms.
Reuters was unable to learn the specific policy change whose impact was being evaluated in the report.
In contrast to Huawei, the report claimed Qualcomm would probably experience a "moderate economic impact" from the policy change. Indeed, the report predicted that Huawei would be more affected by the loss of access to Qualcomm's modem chips because Huawei "relies heavily on Qualcomm's modem chips to support its smart phone offering."
Requests for comment from Qualcomm were not answered.
As trade restrictions crippled other business sectors, Reuters reported in 2021 that U.S. officials had approved license applications for Huawei to purchase chips for its expanding auto component business, including vehicle components like video screens and sensors.
In 2019, Huawei was added to the "entity list" due to concerns that it could be used to spy on Americans as well as claims that it was stealing intellectual property and breaking sanctions. When supplying American goods to businesses on the list, the U.S. demands that suppliers apply for a special license, which is typically declined. However, the Trump administration implemented a more lenient policy for Huawei, denying it access to 5G chips while allowing the company to receive other supplies like 4G chips.
Alan Estevez, the top export control official for the Commerce Department, stated this week that the Trump administration's policy allowing Huawei to receive American technology below the "5G level" was "under assessment."
However, according to sources, there are disagreements within the administration over how far to go. Some officials support blocking all licenses to Huawei suppliers and rescinding current authorizations, while others prefer to limit restrictions to 4G chips and other targeted technologies going forward.