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US tech firms sidestep a Trump ban to keep selling to Huawei

Washington

US chipmakers are still selling millions of dollars of products to Huawei 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.

Industry leaders including Intel and Micron have found ways to take advantage of a provision on labelling US-made goods, said the sources.

Goods produced by US companies overseas are not always considered US-made. The components began to flow to Huawei about three weeks ago, the sources said.

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The sales will help Huawei continue to sell products such as smartphones and servers, and 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 tie 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 sources 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 sources estimated.

While the Trump administration has been aware of the sales, officials are split about how to respond, the sources 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.

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

President Xi Jinping of China and 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.

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 US.

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.

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.

Martin Chorzempa, a research fellow at the Peterson Institute for International Economics, said: "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. "Some of the big winners might be other countries." NYTIMES