President Joe Biden this week signed a law gutting one of Huawei and ZTE’s last lifelines into U.S. markets just days before a summit meeting with China’s president, Xi Jinping.
Dubbed The Secure Equipment Act, the legislation received a rare unanimous approval from the senate and was overwhelmingly approved by a 420-4 House vote in a stark reminder that bipartisanship is dead… except when it comes to China. The news rules will effectively bar the Federal Communications Commission from considering granting licenses for companies the U.S. has deemed national security threats, an increasing number of which are based out of China.
By passing the law, legislators hope to close what some have called the “Huawei Loophole” that lets companies like Huawei and ZTE apply for licenses so long as those applications didn’t involve federal funds. That technicality is part of the reason why the Federal Communications Commission was able to approve more than 3,000 Huawei applications since 2018, FCC Commissioner Brendan Carr told Reuters. Those applications are part of the reason the agency is spending $1.9 billion in reimbursements to small ISP’s to rip out and replace their Huawei and ZTE equipment.
In a statement sent to Gizmodo, FCC Chairwoman Jessica Rosenworcel said the legislation sends a “strong bipartisan signal” that the U.S. is serious about creating a robust, secure market for 5G alternatives. “The Secure Equipment Act of 2021 will improve our safety as a nation by ensuring that untrustworthy communications equipment is not authorized for use within our borders,” Rosenworcel said.
During the transition period between Donald Trump and Joe Biden’s presidencies, there was some uncertainty about whether the new administration would maintain its predecessor’s hawkish attitude towards Chinese companies. At least in the case of Huawei and ZTE, this news marks the clearest evidence of a continuation.
Earlier this year, the FCC formally named five Chinese companies—Huawei, ZTE, Hytera, Hikvision, and Dahua Technology—as threats to U.S. national security. Then in July, Biden added 14 more Chinese companies to the Commerce Department’s economic blacklist, which prohibits U.S. firms from doing business with them. That all built up from a 2019 move by then-president Trump to add Huawei to the blacklist.
Squeezing out licenses from the FCC was one of the last real shots Huawei had at penetrating U.S. markets, something now nearly impossible. That’s important because previous political decisions to block off Huawei’s access have had a dramatic impact on the company’s business.
The company, which was once the world’s number one smartphone maker by shipments as late as the second quarter in 2020, has seen its international smartphone sales nosedive and quarterly revenues tank. Similar restrictions (or in some cases outright bans) on Huawei’s telecommunications equipment, in the UK, Australia, Canada, and elsewhere, have also left Huawei backed into a corner.
Update 12 p.m. ET: Added comment from the FCC.