US pushes for new crackdown on Huawei, raising concerns of retaliation against American companies

(CNN Business) The US Commerce Department said Friday it is moving to restrict Huawei's ability to manufacture and obtain semiconductor chips using American-made software and technology, which could cut the company off from a key component from its suppliers.

The move reflects the Trump administration's latest effort to crack down on the Chinese technology giant, which has come under strict scrutiny from US national security officials. It also risks further heightening tensions between the United States and China at an already tense moment, with the potential for retaliation against American businesses.

The decision will require companies that make Huawei's chips using US-made equipment to seek a license from the US government, a senior Commerce Department official told reporters on a conference call Friday morning.

In making its announcement, the Commerce Department accused Huawei of trying to circumvent an agency blacklist known as the Entity List, of which Huawei is a member, and which imposes restrictions on US trade with the company.

Huawei didn't immediately respond to a request for comment. In the past, it has said that putting limits on Huawei could lead to the US falling behind in the deployment of next-generation wireless networks.

Minutes after the announcement, a Chinese state media official suggested that retaliation could soon follow — potentially targeting large US companies including Apple (AAPL) and Boeing (BA).

"Based on what I know, if the US further blocks key technology supply to Huawei, China will activate the 'unreliable entity list', restrict or investigate US companies such as Qualcomm (QCOM), Cisco (CSCO) and Apple, and suspend the purchase of Boeing airplanes," tweeted Hu Xijin, editor-in-chief of the Global Times, an English-language newspaper controlled by the Chinese Communist Party.

Spokespeople for the US companies didn't immediately respond to requests for comment.

China has previously threatened to unveil an "unreliable entity list" modeled after the US Entity List, but has stopped short of introducing it. The suggestion of retaliation against major US technology firms could foreshadow a major escalation in the US-China relationship.

Asked about the rhetoric from China, a senior State Department official said on Friday's call that the Commerce Department move does not mean chips cannot be sold to Huawei, but rather that the US government will potentially be able to block transactions when reviewing license applications.

In a separate decision Friday, the Commerce Department said it will extend a temporary authorization for US companies to do limited business with Huawei. But Friday's extension, for another 90 days, could well be the last.

The Commerce Department said the so-called temporary general license may be "revised and possibly terminated after August 13, 2020. Companies and persons relying on TGL authorizations should begin preparations to determine the specific, quantifiable impact of elimination if they have not done so already."

Businesses will still have the opportunity to apply for individual licenses that may allow them to continue working with Huawei past Aug. 13.

For months, the Trump administration has signaled that it could terminate the so-called temporary general license. The license lets businesses such as Google (GOOGL), Microsoft (MSFT) and rural telecommunications carriers maintain support for customers using Huawei devices in the US and around the world — as administration officials have searched for ways to remove Huawei from US markets entirely. The Federal Communications Commission, for example, has voted to restrict federal funding from US telecom carriers that deploy Huawei networking gear.

US national security officials warn that Huawei's technology poses a spying risk. The issue has become enmeshed in the Trump administration's overall tensions with China, which continue to escalate as President Donald Trump seeks to lay blame for the coronavirus pandemic at Beijing's doorstep.

Huawei has strongly denied that it would allow China to eavesdrop on sensitive US communications, or those of its allies.

"We never participate in espionage and we do not allow any of our employees to do any act like that," Huawei founder Ren Zhengfei told CBS last year. "And we absolutely never install backdoors. Even if we were required by Chinese law, we would firmly reject that."

Against the objections of US officials, the United Kingdom has indicated it will give Huawei a partial role in building out its 5G wireless network.