Loyola University Chicago School of Law, JD 2024
The Biden administration has considered not only ending all future export licenses between US microchip producers and Huawei, but also revoking existing licenses to sell microchips to the Chinese tech company. This move is just one section of increasing tensions between China and the United States but could have long-reaching consequences for the United States and the global tech market.
BIS and the entity list
The United States has already banned the exportation of new 5G technology to Huawei from US manufacturers, referencing national security concerns as the basis for the ban. The ban is implemented by the Bureau of Industry and Security (BIS), under the US Department of Commerce, through its entity list. The entity list is a list of business or political entities that are a security risk and can’t receive exports without a license being given to the US exporter. This doesn’t mean you can’t buy one of the new Huawei phones or even a processing chip from the company. The ban only limits the technology that can be sent to Huawei. This means companies can only export older chips and processors overseas to Huawei. However, companies like Qualcomm or Intel currently export older technology to Huawei using export licenses. The two companies received licenses to export microchips and other processors during the Trump administration. The licenses are projected to be worth billions of dollars and each company is expected to lose a great deal of value as a result of the proposed revocation.
Why does this matter to the average consumer?
Microchips are used in almost every kind of technology these days, with devices such as smart fridges and modern cars that have extensive features using artificial intelligence. Industries already ran into a serious issue during the Covid-19 epidemic because factories weren’t producing microchips. Both Qualcomm and Intel have stated the revenue from selling the chips to Huawei allows them to fund research and develop new technologies rather than have to seek to sell the outdated chips in the US. This proposed revocation then could cause a slowdown in innovation in the US chip market.
The most notable impact would be in the chips used in cell phones. Qualcomm is already in a dispute with ARM, a tech company that licenses rights to produce patented technology, about some licenses the company recently acquired in a merger. The two companies are set to litigate the situation in a California court but until the situation is resolved there are doubts about their future relationship. Qualcomm uses the licensed schematics from ARM to produce their chips and sell them in the US market. If the lawsuit causes an end to their relationship, and the Biden administration moves forward with revoking Qualcomm’s export license, the company will have a major issue developing new microchips and other technology. Qualcomm then would have to focus on production and most devices using their chips would be left without any substantial updates. Intel will likely run into similar issues if their export license is revoked, though they won’t have to deal with a lawsuit like Qualcomm. That means slower android phones that can’t compete with other phones. Apple will also still utilize Qualcomm chips for their phones for the foreseeable future, so iPhone enthusiasts likely won’t be spared the frustration. The only phones that likely won’t be impacted would be Huawei phones.
Would a revocation of the licenses even help?
The greatest irony of this decision, if implemented, is that the revocation of the export licenses could actually help Huawei and China in general. Huawei is a global manufacturer of microchips that would benefit from a lack of innovation in the United States. The lack of innovation in the United States means more opportunity for Huawei and other microchip manufacturers working overseas. International companies like Samsung or Motorola want the most modern and effective microchip in their products. The decision to revoke existing licenses approved by BIS would only hurt US manufacturers and benefit the very company that BIS was trying to regulate. The addition of Huawei on the BIS entity list already limits their access to new technology in the United States with a small exception for a few companies to send old technology overseas. The old technology does not create a risk because our 5G infrastructure in the US uses updated security measures that is not present in prior technology. The decision to revoke the licenses would not benefit national security nor protect US industries from Chinese competition. If the licenses are revoked it will only amount to a game of political chicken with the Chinese government that will ultimately hurt the American tech industry.