Headwinds facing Huawei Technologies and ZTE Corp is likely to shoot up to gale force.
In a development that comes in the wake of federal prosecutors investigating alleged stealing of trade secrets by Huawei from T-Mobile and other businesses, a bipartisan group of U.S. lawmakers have introduced bills that aims to ban the sale of U.S. chips or other U.S. components to Chinese telecommunication companies, including Huawei Technologies Co Ltd and ZTE Corp, that violate U.S. sanctions or export control laws.
A sper a report from the Wall Street Journal, an indictment could be coming soon on allegations that Huawei stole Tappy, a technology which mimicks human fingers and was used to test smartphones, from T-Mobile technology.
In a statement, Huawei said, it has settled the dispute with T-Mobile in 2017 following a U.S. jury verdict that found “neither damage, unjust enrichment nor willful and malicious conduct by Huawei in T-Mobile’s trade secret claim”.
The proposed legislation is the latest in a long list o U.S. action on the Trump Administration’s effort to bring China to task for its cheating, forced transfers and theft of U.S. intellectual property theft as well as hampering U.S. corporates to sell their wares in China.
To this end, in November 2018, the U.S. Department of Justice unveiled an initiative to investigate China’s trade practices with a goal of bringing to light trade secret theft cases.
At that time, the U.S. had announced an indictment against Fujian Jinhua Integrated Circuit Co Ltd, a Chinese chipmaker, for stealing trade secrets from U.S. Micron Technology related to research and development of memory storage devices.
Jinhua has been put on a list of entities that cannot buy chips and components U.S. companies.
The upcoming bipartisan bills, introduced by Senator Tom Cotton and Representative Mike Gallagher, both Republicans, along with Senator Chris Van Hollen and Representative Ruben Gallego, both Democrats, aim to bring about a ban of U.S. exports to any Chinese telecommunications company that violates U.S. sanctions or export control laws.
Intelligence agencies view Huawei and ZTE with suspicion due to fears that their equipment could be used as trojan horses for Chinese intelligence given that both companies are close to China’s ruling communist party. Both companies have been accused of not complying with U.S. sanctions on Iran.
“Huawei is effectively an intelligence-gathering arm of the Chinese Communist Party whose founder and CEO was an engineer for the People’s Liberation Army,” wrote Cotton in a statement. “If Chinese telecom companies like Huawei violate our sanctions or export control laws, they should receive nothing less than the death penalty – which this denial order would provide.”
These potentially upcoming laws as well as U.S. investigations are several of the challenges facing Huawei, not only in the U.S. market, but in many other countries as well.
In 2017, ZTE agreed to pay a $1 billion fine to the United States as it was found in non-compliance to U.S. embargo on trade with Iran.