By Asa Fitch and Kate O'Keeffe
The American chip company Qualcomm Inc. is lobbying the Trump
administration to roll back restrictions on the sale of advanced
components to the Chinese telecom giant Huawei Technologies Co.,
wading into the intensifying technology battle between the U.S. and
Qualcomm is telling U.S. policy makers their export ban won't
stop Huawei from obtaining necessary components and just risks
handing billions of dollars of Huawei sales to the U.S. firm's
overseas competitors, according to a presentation reviewed by The
Wall Street Journal that the San Diego-based company has been
circulating around Washington.
Qualcomm is lobbying to sell chips to Huawei that the Chinese
company would include in its 5G phones, which use the new standard
for superfast telecommunications. U.S. chip makers need a license
from the Commerce Department to ship many such components to Huawei
after the federal government placed the company on an export
blacklist and imposed other limits.
With those restrictions, the U.S. has handed Qualcomm's foreign
competitors a market worth as much as $8 billion annually, the
company said in the presentation.
U.S. officials have for more than a year argued that placing
restrictions on Huawei is necessary because they see it posing
significant national-security risks regarding links to the Chinese
government, a stance some U.S. allies are beginning to embrace.
Last month the British government said it would bar telecom
companies from purchasing new equipment made by the company. Huawei
denies it is a threat and says it operates independently of the
Qualcomm's campaign seeks to seize upon the Trump
administration's sometimes competing policy priorities of
confronting Chinese security threats while ensuring the financial
health of U.S. companies critical to American technological
competitiveness, many of whom have significant business interests
in China. It also underscores how U.S. efforts to restrict sales of
semiconductors to China are rippling through complex manufacturer
and customer relationships in an industry that spans the globe.
A Commerce Department rule change in May targeting Huawei's
chip-making arm, HiSilicon, has effectively shut down its future
production of the most advanced semiconductors. But U.S. companies
can't easily swoop in and supply replacement chips to Huawei
because of the license requirement, leaving the door open for
foreign companies to win that business. The policy has
"inadvertently created massive financial opportunities for the two
foreign competitors of Qualcomm," the company said.
Qualcomm said Taiwan's MediaTek Inc. and South Korea's Samsung
Electronics Co. would benefit.
"If Qualcomm is subject to export licensing, but its foreign
competitors are not, U.S. government policy will cause a rapid
shift in 5G chipset market share in China and beyond," the American
chip maker said. That would hamper American research and leadership
on 5G issues, it said, calling that "an unacceptable outcome for
Samsung declined to comment. MediaTek wouldn't discuss specific
customers, but it said its investment in 5G technology has allowed
it to win customers globally.
Granting a license would generate billions of dollars in sales
for Qualcomm and help it fund development of new technologies, the
company argued. Denying the license would help Qualcomm's foreign
competitors, it said, while hardly affecting Huawei because it can
source components elsewhere.
The lobbying coincides with Qualcomm's resolution of a
long-running patent-rights dispute with Huawei. Under the deal
reached last month, Huawei agreed to pay $1.8 billion to settle
past licensing fees and backed a multiyear license agreement going
The two sides had been negotiating a settlement for months, and
there wasn't a connection with the lobbying effort, according to a
person familiar with the matter. Qualcomm had applied for a license
to sell 5G chipsets to Huawei in June, before the settlement was
Huawei was a significant customer for Qualcomm until last year,
when the Commerce Department blacklisted the Chinese company.
Qualcomm Chief Financial Officer Akash Palkhiwala told analysts in
late July that the company's business with Huawei is now
"We're working hard to figure out how to sell to every
[manufacturer], including Huawei," Chief Executive Steve Mollenkopf
said during the earnings call.
Qualcomm has been at the center of the U.S.-China political
firestorm before. In 2018, President Trump blocked a $117 billion
bid for Qualcomm from Broadcom Inc., then based in Singapore, on
concern that the combination would hinder the U.S. in its
technological competition with China.
The Commerce Department's restrictions still permit chip makers
to do some business with Huawei, sometimes by moving manufacturing
overseas or supplying Huawei indirectly. In other cases, suppliers
have determined that certain products aren't subject to U.S.
restrictions and resumed selling them to Huawei. While Qualcomm
needs a license for its flagship 5G chips, the U.S. company has
been able to continue shipping some other components to Huawei
because those comply with government regulations.
Other American chip makers have applied for and in some cases
received licenses to deal with Huawei, including Intel Corp., the
largest semiconductor company in the U.S. in terms of revenue;
Micron Technology Inc., a major memory manufacturer; and Xilinx
Inc., a maker of programmable chips that are used in
Write to Asa Fitch at firstname.lastname@example.org and Kate O'Keeffe at
(END) Dow Jones Newswires
August 08, 2020 08:14 ET (12:14 GMT)
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