More than two years after being locked out of the U.S. market following the Trump administration’s stringent sanctions, Huawei is reportedly looking to regain access to critical components and possibly sneak back into the U.S. market by exploiting a legal loophole. The Chinese telecom giant was blacklisted by the U.S. government in 2019, severely hurting its global sales. Called the ‘Entity List,’ the blacklist prevented the company from selling its goods and services in the U.S. and restricted American firms from selling specific hardware and software components.
Unable to access critical components, the company hived off its ‘Honor’ smartphone brand into a separate company and sold it off to a consortium of buyers in China to help the unit survive in the face of U.S. sanctions. The blacklisting also resulted in the company losing access to global semiconductor foundries for manufacturing its HiSilicon Kirin smartphone SOCs and other chips. It also meant that the company no longer had access to Google’s Android operating system, something that negatively impacted its smartphone sales globally.
Huawei is reportedly planning to bypass U.S. sanctions in a novel way to access critical components needed for its telecom equipment and consumer electronics businesses. According to sources quoted by Bloomberg, the company is planning to license its handset designs to a unit of a Chinese state-owned company called China Postal and Telecommunications Appliances Co. (PTAC). The company is operated by a state-owned heavy machinery manufacturer called China General Technology Group Holding. Since PTAC is not under U.S. sanctions, it can legally purchase the components that Huawei cannot buy from U.S. vendors currently, thereby giving the Chinese tech giant access to U.S.-made technology in a roundabout manner.
Multiple Companies Will Sell Huawei-Designed Phones
The unit of PTAC that Huawei is partnering up with is reportedly called ‘Xnova.’ It already has an existing relationship with Huawei, and is selling the latter’s Nova smartphones on its e-commerce site. The new deal will reportedly expand that partnership, enabling Xnova to “offer self-branded devices” based on Huawei’s designs. Another unnamed source quoted by the report claimed that Chinese telecom equipment maker T.D. Tech will also sell some Huawei-designed phones under its own brand as part of the new licensing agreements.
Huawei’s business has been badly affected by the U.S. sanctions, and the company will be hoping that the new deals will bring at least some respite from its troubles. The company is reportedly expecting that its new partnerships will be able to lift its total annual smartphone sales to 30 million units next year. However, with the Biden administration tightening restrictions on Huawei and other Chinese firms with its ‘Secure Equipment Act of 2021,’ it remains to be seen if this idea will work as planned or if there will be further impediments towards its implementation. This could include additional sanctions on Huawei, PTAC or any of the associated firms.
