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US firms still selling to Huawei despite ban

American technology firms are still selling components to Chinese technology giant Huawei despite a ban imposed by US President Donald Trump on national security grounds, the New York Times reported on Tuesday.

[WASHINGTON] A number of the United States' biggest chipmakers have sold millions of dollars in products to Huawei Technologies despite a Trump administration ban on the sale of US technology to the Chinese telecommunications giant, according to four people with knowledge of the sales.

Since the US Commerce Department enacted the ban in May, US companies including Intel and Micron have found ways to sell technology to Huawei, said the people, who spoke on the condition they not be named because they were not authorised to disclose the sales.

The components began to flow to Huawei about three weeks ago, the people said.

Goods produced by US companies overseas are not always considered US-made, and the suppliers are taking advantage of this. The sales will help Huawei continue to sell products such as smartphones and servers.

The deals underscore how difficult it is for the Trump administration to clamp down on companies that it considers a national security threat, like Huawei.

They also hint at the possible unintended consequences from altering the web of trade relationships that ties together the world's electronics industry and global commerce.

The Commerce Department's move to block sales to Huawei, by putting it on a so-called entity list, set off confusion within the Chinese company and its many US suppliers, the people said.

Many executives lacked deep experience with US trade controls, leading to initial suspensions in shipments to Huawei until lawyers could puzzle out which products could be sent. Decisions about what can and cannot be shipped were also often run by the Commerce Department.

US companies may sell technology supporting current Huawei products until mid-August. But a ban on components for future Huawei products is already in place. It's not clear what percentage of the current sales were for future products. The sales have most likely already totalled hundreds of millions of dollars, the people estimated.

While the Trump administration has been aware of the sales, officials are split about how to respond, the people said. Some officials feel that the sales violate the spirit of the law and undermine government efforts to pressure Huawei, while others are more supportive because it lightens the blow of the ban for US corporations.

Huawei has said it buys around US$11 billion in technology from US companies each year.

Intel and Micron declined to comment.

"As we have discussed with the US government, it is now clear some items may be supplied to Huawei consistent with the entity list and applicable regulations," John Neuffer, the president of the Semiconductor Industry Association, wrote in a statement on Friday.

"Each company is impacted differently based on their specific products and supply chains, and each company must evaluate how best to conduct its business and remain in compliance."

In an earnings call Tuesday afternoon, Micron's chief executive, Sanjay Mehrotra, said the company stopped shipments to Huawei after the Commerce Department's action last month.

But it resumed sales about two weeks ago after Micron reviewed the entity list rules and "determined that we could lawfully resume" shipping a subset of products, Mr Mehrotra said.

"However, there is considerable ongoing uncertainty around the Huawei situation," he added.

The Commerce Department did not immediately respond to requests for comment.

The fate of Huawei, a crown jewel of Chinese innovation and technological prowess, has become a symbol of the economic and security standoff between the United States and China. The Trump administration has warned that Chinese companies like Huawei, which makes telecom networking equipment, could intercept or secretly divert information to China. Huawei has denied those charges.

Chinese President Xi Jinping and US President Donald Trump are expected to have an "extended" talk this week during the Group of 20 meetings in Japan, a sign that the two countries are again seeking a compromise after trade discussions broke down in May. After the talks stalled, the Trump administration announced new restrictions on Chinese technology companies.

While the Trump administration has pointed to security and legal concerns to justify its actions, some analysts have worried that Huawei and other Chinese tech companies have become pawns in the trade negotiations.

Along with Huawei, the administration blocked a Chinese supercomputer maker from buying US tech, and it is considering adding the surveillance technology company Hikvision to the list.

Kevin Wolf, a former Commerce Department official and partner at the law firm Akin Gump, has advised several US technology companies that supply Huawei. He said he told executives that Huawei's addition to the list did not prevent US suppliers from continuing sales, as long as the goods and services weren't made in the United States.

In some cases, US companies aren't the only source of important technology, but they want to avoid losing Huawei's valuable business to a foreign rival.

For instance, Idaho-based Micron competes with South Korean companies like Samsung and SK Hynix to supply memory chips that go into Huawei's smartphones. If Micron is unable to sell to Huawei, orders could easily be shifted to those rivals.

Beijing has also pressured US companies. This month, the Chinese government said it would create an "unreliable entities list" to punish companies and individuals it perceived as damaging Chinese interests. The following week, China's chief economic planning agency summoned foreign executives, including representatives from Microsoft, Dell and Apple.

It warned them that cutting off sales to Chinese companies could lead to punishment and hinted that the companies should lobby the US government to stop the bans. The stakes are high for some of the US companies. Apple, for example, relies on China for many sales and for much of its production.

Mr Wolf said several companies had scrambled to figure out how to continue sales to Huawei, with some businesses considering a total shift of manufacturing and services of some products overseas.

The escalating trade battle between the United States and China is "causing companies to fundamentally rethink their supply chains," he added.

That could mean that US companies shift their know-how, on top of production, outside the United States, where it would be less easy for the government to control, said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics.

"American companies can move some things out of China if that's problematic for their supply chain, but they can also move the tech development out of the US if that becomes problematic," he said. "And China remains a large market."

"Some of the big winners might be other countries," Mr Chorzempa said.