USA vs China Phone Wars – Round 2

The tech conflict between USA and China doesn’t seem to tone down. After being declared national security threat, Huawei and ZTE, both prominent Chinese manufacturers, are looking at the ban to buy parts which are made in the USA. This is all stated in the proposed legislation a few days ago by a bipartisan group of lawmakers. Based on these drafted bills, Huawei and other Chinese telecommunication companies won’t be able to purchase any parts made in the United States like chips and other components needed for the manufacture of phones and other related equipment. This legislation would be enforced if any of the said companies don’t respect U.S. sanctions on exporting their products on the USA soil.

These bills were made public on Wednesday when also the news of criminal investigation against Huawei was also reported by the Wall Street Journal. Namely, in 2014, T-Mobile sued Huawei for stealing their robotic technology used for testing phones. T-Mobile asked for $500 million but received $4.8 million three years later in a jury verdict. However, federal prosecutors now plan a criminal investigation due to this alleged theft of tech secrets related to testing robot Mr. Tappy.

Mr. Tappy Testing Robot

Two Republicans and two Democrats proposed this new legislation, Senator Tom Cotton and Representative Mike Gallagher, and Senator Chris Van Hollen and Representative Ruben Gallego, respectively.

“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. 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,” said Senator Tom Cotton.

Naturally, this legislation didn’t go well with the Chinese government and will definitely put more strain on an already troubled relationship between the two countries. One of the Chinese government official Hua Chunying, a Foreign Ministry spokeswoman stated that this legislation is “hysteria”, as well as those other US lawmakers should declare against these bills.

The background of this conflict is the fear that Huawei, ZTE and other Chinese tech companies use their devices to spy on American people, which is something strongly denied by the accused. The USA is also telling its allies to boycott Huawei phones although in 2018 that didn’t hurt this Chinese giant with their revenue surpassing iPhone’s last year and getting them to second place after Samsung as the world’s largest phone manufacturer and vendor.

USA And China Phone War

Additionally, the situation escalated again last year when Canadian authorities arrested Meng Wanzhou, the CFO of Huawei and daughter of Ren Zhengfei, Huawei founder. She is awaiting extradition to the US after US authorities accused her of bank fraud to cover up Huawei’s business dealings in Iran and Syria which are under US sanctions.

ZTE already experienced ban to buy parts made in the US last year when the company was penalized for selling to Iran and North Korea. Due to this, ZTE closed down certain operations but was able to settle and the ban was lifted. However, the settlement required ZTE to pay $1 billion fine, place $400 million in escrow for any possible future penalties, change executives and board of directors.

It seems that this situation will continue in 2019 since the US government is adamant to control Chinese tech companies’ business activities in the USA. It remains to be seen what the Chinese government will do and how these companies will compensate financial losses that these legislations carry.

Do you want to know how it came to this? This is where the phone war began!