The US government continues to fight itself over just how to curb Huawei's dominance in 5G. One thorny issue in that fight is how to choke back sales of US semiconductors and other technologies to Huawei, even though the revenue those sales provide is helpful to the development and funding of US 5G efforts.
In the latest twist to the saga, courtesy of a report in The Wall Street Journal this morning, the Pentagon has objected to a new move by the Commerce Department to further restrict US technology sales to Huawei. Officials told the publication the restrictions would harm the US and its efforts to catch up in 5G development.
The Commerce Department's earlier effort to slow down the supply of US tech to Huawei didn't have the desired effect as US companies simply found ways around the restrictions. Back in May, the Commerce Department put Huawei on its export entity list, banning US firms from supplying the Chinese vendor. But the entity list designation simply told companies "you have to move your production offshore to sell to Huawei -- that's all the entity list does," said Derek Scissors, a resident scholar at the American Enterprise Institute (AEI), during a July panel discussion on the US-China trade war. "We took an action that does not preclude US firms from doing business with Huawei -- only the location of that business."
It's worth noting, too, that US officials have not been successful in convincing other governments -- especially European allies -- to keep Huawei gear out of their 5G networks, either.
Under the entity list designation, if something produced overseas had less than 25% US-made content, it could be sold without a special license to Huawei.
"Recently, the Commerce Department sent to the Office of Management and Budget a rule that would reduce that percentage to 10% when it comes to Huawei, said administration officials, which would sharply limit the items that U.S. companies could sell without an export license," The Wall Street Journal wrote this morning. The new rule would have required the State, Commerce, Defense and Energy departments to sign on, but Pentagon officials (the Defense Department) objected, The Journal story said, citing unnamed government sources.
"After the Pentagon's objection, the Commerce Department pulled the rule back from OMB [the Office of Management and Budget], the people familiar with the matter said," The Journal wrote. "Pentagon officials believe the change would harm U.S. companies, as do some officials at the Commerce Department, which is split internally on the proposed rule."
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