https://www.newsweek.com/opinion
Bulls usually lose bullfights not because they fail to charge, but because they charge at the matador’s cape rather than at the matador himself. President Trump has no qualms about charging at China’s national champion Huawei, but he is charging at the equivalent of the matador’s cape.
Consider Huawei’s handset business, which depends on high-end chips manufactured by Taiwanese foundries. Because the Taiwanese use some American equipment to manufacture the chips, the U.S. has imposed an effective blockade on Huawei’s outsourcing, and China does not (yet) have the domestic capability to make high-end chips. A similar ban blocks Huawei’s access to key American chip-design software.
Huawei will lose market share in the low-margin handset business, and Chinese competitors like Xiaomi will pick up the slack (which explains why the latter’s stock price has jumped this year from HK$8 to HK$22). Huawei will have little difficulty using older chips for 5G base stations, installing the lion’s share of the six million units that China has ordered to build out its 5G network over the next two years.
Huawei’s most important business, though, will emerge unscathed from U.S. sanctions. American strategists think that Huawei is a telecom equipment company. Among other things, Huawei is the world’s largest telecom equipment manufacturer, with a 31 percent market share during the first half of 2020—more than the combined share of the second and third position companies, Ericsson and Nokia. Huawei, though, is first and foremost a big data and artificial intelligence (AI) company—the most inventive and imaginative one in the world. Let’s call this combination “BD/AI,” for short.