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Published: 02:27, September 15, 2023 | Updated: 09:42, September 15, 2023
Huawei's success reveals futility of US sanctions
By Tony Kwok
Published:02:27, September 15, 2023 Updated:09:42, September 15, 2023 By Tony Kwok

In a recent media interview, Peter Wennink, president and chief executive officer of ASML Holding, the world’s leading manufacturer of lithography machines used for chip manufacturing, criticized the US restrictions on technology sales to China. He predicted that isolating China is a futile exercise because of the country’s abundance of talented individuals, who will inevitably develop competitive products, resulting in the West losing business. 

ASML has been a victim of US political pressure since Sept 1, forcing it to restrict sales of its machines to China, leading to significant financial losses for the company. Wennink cited China’s success in manufacturing electric vehicles and batteries despite Western restrictions on technological transfers as an example. He appealed for greater cooperation between the US, the West and China rather than attempting to isolate China.

Wennink’s perspective is supported by another example in space technology. While the US cooperated with Russia on space projects, including joint ventures such as space stations, it refused to collaborate with China. It banned Chinese astronauts from visiting its space station. In response, China built an even more advanced space station by itself.

Furthermore, Huawei’s recent announcement of its new handset, the Mate 60 Pro, powered by advanced 5G chips made in China, took the world by surprise. This development marks Huawei’s return as a front-runner in the smartphone market despite US restrictions barring its access to advanced American technologies since May 2019. 

During the three years when Huawei could not obtain the necessary chips and use the iOS or Android smartphone systems, it was out of the smartphone business. Introducing the new phone, featuring Huawei’s self-developed 5G chipsets and the HarmonyOS operating system, demonstrates the technical prowess and resilience of China’s semiconductor industry and technological capabilities. Huawei’s latest 5G smartphone series has been hailed as a victory for China and a breakthrough in the country’s struggle to achieve tech self-sufficiency. A recent China Daily editorial aptly said the Mate 60 Pro “thumbs the nose at US sanctions”!

Huawei’s breakthrough new product has several ramifications:

First, it highlights the futility of US sanctions or restrictions. On the contrary, these restrictions have spurred China’s determination to achieve self-sufficiency in semiconductors, a theme expected to be repeated in other technological and scientific spheres.

China’s Foreign Ministry spokesperson, Mao Ning, expressed Beijing’s opposition to the US abuse of its state power to suppress Chinese companies, emphasizing that further US sanctions will only strengthen China’s resolve for technological self-sufficiency.

Second, it reveals that the real victims of US sanctions are US companies. The shortsighted sanctions have devastated the revenues of leading US providers of advanced chips, such as Qualcomm and Nvidia. Qualcomm, in particular, suffered heavy losses as China used to account for approximately two-thirds of its revenue. Upon the unveiling of Huawei’s new smartphone, Qualcomm’s stock plunged 7.2 percent, along with shares of other US cellphone suppliers. US citizens who invested in these companies have valid reasons to express discontent with their government.

Third, Apple’s dominance in China’s top smartphone market will be challenged. China used to make up 20 percent of Apple’s global sales. After the news of Huawei’s latest product broke, Apple’s shares in the US stock market dropped by 5.5 percent. It’s worth noting that Apple has received significant support from the Chinese government over the years, including the establishment of manufacturing bases in China, which benefited from low-cost factory infrastructure and efficient Chinese assembly-line production. 

However, under pressure from the US government, Apple has started moving some of its manufacturing facilities to Mexico and has even attempted to pressure its local suppliers to relocate. This has raised concerns about Apple’s reliability as a partner and its potential to become a national security risk by spying on China for the US. As a result, there were unconfirmed reports that the Chinese government had prohibited its employees from using Apple iPhones. Although the report was denied by a Chinese official, Apple lost nearly $200 billion in market capital in several days, and this drew criticism from US President Joe Biden, who accused China of changing the “game rules”. He conveniently forgot that the US government has banned the use of Huawei products by its departments and employees for many years, displaying hypocrisy and double standards.

Fourth, Huawei’s new product has been a hit in the Chinese mainland, with 1 million units sold in days, and people queuing for hours to purchase the new phone, which was priced between 6,499 yuan ($893) and 7,999 yuan. Huawei's sales target for the year is 40 million sets. The consumers’ enthusiastic response demonstrates that the Chinese economy is far from collapsing, as alleged by Biden in his concluding media conference at the G20 meeting.

Fifth, Huawei’s strategic timing and approach are evident. After “lying low” for three years and stockpiling millions of units, Huawei chose the perfect time to release its latest smartphone during US Commerce Secretary Gina Raimondo’s high-profile visit to China. The visit attracted global media attention, and everyone witnessed the landmark moment and the product’s instant success firsthand. This completely contradicted the negative remarks made by the US secretary about China’s business environment during her visit. Some even jokingly referred to Raimondo as Huawei’s best saleswoman.

Furthermore, the release of the new product is by no means a one-off event. It was followed by the announcement of two additional models, the Mate 60 Pro+ and the Mate X5, all in advance of Apple’s release of its new iPhone 15, demonstrating a clever marketing strategy with great foresight. Apple's share price in the US dropped a further 2 percent after its news conference on the new product.

Sixth, this situation also highlights the CIA’s apparent incompetence and lack of awareness of Huawei’s “covert” operations over the past three years and the agency’s failure to warn Raimondo of the challenge posed by the impending news conference announcing significant new products by Huawei during her visit.

Finally, Huawei’s latest product has instilled a great sense of national pride and patriotism among the Chinese population. Many people shared on social media a derogatory picture of Huawei Chief Financial Officer Meng Wanzhou with a GPS tracker attached to her ankle while she was under illegal detention in Canada, with a message saying: “This is why I want to buy Huawei’s new phone!”

Huawei’s technological advancements have prompted some US lawmakers to call for tougher restrictions. Wisconsin Republican Representative Mike Gallagher, chairman of the House Select Committee on Competition with China, suggested that the US should cease all exports to both Huawei and its suppliers, even those involving older technologies that are currently allowed.

The US should now realize that its decoupling or “de-risking” efforts serve no useful strategic purpose but only harm its own interests. It should also take note that China has just announced the launch of a $40 billion State fund to boost the chip industry. Soon, it may be more likely that China does not want to purchase products from the US. The most sensible strategy would be for the US to abandon its containment strategy toward China and engage in discussions with Chinese counterparts on enhancing economic cooperation, as desired by the international community.

The author is an honorary fellow of HKU Space and a council member of the Chinese Association of Hong Kong and Macao Studies.

The views do not necessarily reflect those of China Daily.

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