By Hope King and Rebecca Heilweil
Tensions between Washington and Beijing are tightening again this week with new measures taken against the Chinese telecommunications giant Huawei, and if the firm has to do business with other suppliers due to these restrictions, Andy Purdy, the company's chief security officer, warns that U.S. workers may be hurt along the way.
“We spend over $11 billion a year from American high-end suppliers, which translates into thousands of American jobs,” he said.
The U.S. has not directly responded to this economic argument, but has maintained for a long time that Huawei’s business activities pose a threat to national security.
President Donald Trump on Wednesday signed an executive order that allows the U.S. to ban any commercial transaction or telecommunications equipment use from “a foreign adversary”-controlled company, especially if a transaction poses national security risks.
The executive order did not name Huawei specifically. But the Department of Commerce soon after on the same day added the company and 70 affiliated businesses to its “Entity List.” U.S. companies looking to sell to companies on the Entity List are required to get approval by the U.S. government. And the new rules go into effect, Friday.
While Huawei may not see a big impact from the executive order — it’s estimated that Chinese hardware makes up less than 1 percent of U.S. telecom systems — the Department of Commerce decision could be a bigger problem.
Huawei’s biggest competitor ZTE landed on the same Entity List last year and had to shut down temporarily. Like Huawei, ZTE needs many supplies for its products that are sourced from U.S.-based companies, such as Qualcomm. Without access to components, ZTE couldn’t make its phones and and even some of its software.
ZTE surely served as a lesson for Huawei — with Purdy telling Cheddar that Huawei has been looking for more suppliers outside the U.S. According to Purdy about 30 percent of the company’s components come from American companies.
“We were beginning to ramp up our efforts [over a year ago] to increase the diversity of our suppliers so we don’t have to rely so much on this problematic U.S. market,” he said.
Purdy has repeatedly told Cheddar that the company does not give data to the Chinese government, and that its equipment is not compromised .
On Wednesday he called for “risk mitigation practices,” which European governments use.
“It worked for Nokia and Ericsson,” Purdy said, pointing out that Nokia has a joint venture with a company owned by the Chinese government. Cheddar has reached out to Nokia for comment.
This week’s penalties for Huawei came as no big surprise. President Trump banned the U.S. government from using any Huawei or ZTE equipment back in August. And Congress’ skepticism dates back to at least 2012, when an investigation into threats posed by Huawei and ZTE began.
The other big backdrop to this week’s measures is the ever-escalating trade war.
While U.S. Secretary of Commerce Wilbur Ross said the actions were not related to the ongoing trade dispute, Purdy seems to disagree.
“The pressures between the U.S. and China are flowing down to Huawei,” Andy Purdy, Chief Security Officer for Huawei U.S., told Cheddar Wednesday.
When asked if Huawei’s problems go away if trade negotiations were to be resolved, Purdy didn’t seem overly optimistic.
“What these trade negotiations could mean for us is that maybe then the U.S. government would be willing to talk with us,” he said.
According to Purdy, the U.S. government has ignored Huawei’s requests to understand specific cybersecurity investigations -- for years.
That leaves a very confounded situation for Huawei.
“The China government doesn’t speak for us and we don’t speak through the Chinese government.”