US government agencies are now effectively barred from purchasing any technology from Chinese vendors Huawei or ZTE, or even entering into a contract with any companies that use those vendors' technology, now that the new National Defense Authorization Act (NDAA) has been signed into law by President Trump.
The Act specifically states that government agencies cannot "procure or obtain or extend or renew a contract to procure or obtain any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system."
The term "covered telecommunications equipment" refers explicitly to telecoms technology produced by either Huawei Technologies Co. Ltd. or ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), or any of their subsidiaries.
In addition, agencies are not allowed to buy or order any product or service that uses, or is based on, Huawei or ZTE gear.
Other companies are impacted too: The ban extends to any communications or security technology produced by radio comms gear specialist Hytera Communications or video surveillance systems vendors Hangzhou Hikvision Digital Technology and Dahua Technology that might be used for "public safety, security of government facilities, physical security surveillance of critical infrastructure, and other national security purposes." Those three companies are all Chinese.
The Act, which also authorizes a 2019 defense budget of US$717 billion (among many other things), also notes that the ban can be extended to any "entity owned or controlled by, or otherwise connected to, the [Chinese] government" that produces or supplies telecoms or surveillance technology or services.
So it's a pretty comprehensive, if not unexpected, ban.
Huawei is dismissive of the move. In acomment emailed to Light Reading, it says: "Huawei supports the US government's goals for better security, but this random addition to the NDAA is ineffective, misguided, and unconstitutional. It does nothing to identify real security risks or improve supply chain security, and will only serve to stifle innovation while increasing internet costs for US consumers and businesses. We believe that the American people deserve equal access to the best possible connections and smart device options, and will keep working to make this happen."
The contents of the Act could have been worse for ZTE: Some US politicians were seeking to use the Act to reintroduce the denial order issued in April, and subsequently lifted in July, that barred US firms from selling components to ZTE. However, those efforts were thwarted and US companies are now supplying ZTE again. (See Acacia Spies Return of ZTE Revenues and ZTE Stock Rises After US Lifts Ban.)
For more on the impact of US developments on Huawei and ZTE, and associated security concerns elsewhere, see:
- ZTE Racks Up $790M Q1 Loss on US Ban
- Eurobites: Ageing VxWorks OS Raises UK Security Concerns Over Huawei – Report
- ZTE nearly back in business after inking US 'escrow' deal
- Huawei Faces Security Backlash in Australia
- Trump Admin Reboots $50B China Tech Tariffs
- Pentagon Blocks Huawei & ZTE Phone Sales on Military Bases
- US Ban on Huawei Would Trigger Turmoil in Telecom Industry
- ZTE Labeled Security Risk by UK Government
- Huawei Still Knocking on US Door – but AT&T Deal Thwarted
— Ray Le Maistre, Editor-in-Chief, Light Reading