Huawei may face criminal probe from US DoJ

30 Apr 2018

The building US-China trade war could have an even more substantial impact on the telecommunications sector following reports that Huawei may be facing a criminal probe from the US Department of Justice.

According to a report in the Wall Street Journal last week, the Department of Justice is investigating allegations that Huawei violated US sanctions by selling equipment with US components to Iran.

This is the same offense for which ZTE was recently hit with a seven year export ban prohibiting the company from procuring US components, although the ban was only put into effect after the department accused ZTE of violating its settlement agreement over the initial investigation.

Huawei's ambitions of gaining a foothold in the US already faced a potentially fatal blow earlier this month following a vote by the US FCC to prohibit US government departments from acquiring equipment from the vendor and rival ZTE. Now the company could face even more significant consequences.

Neither the department or Huawei have publicly confirmed that an investigation is underway, but analysts are already exploring the potential impact of the imposition of US sanctions on Huawei.

The worst case scenario would involve Huawei being banned from acquiring US components just like ZTE. But while the sanctions imposed on ZTE have put the vendor in survival mode, Huawei is thought to be in a better position to weather the potential impact.

One reason for this is that Huawei has been investing heavily in developing its own components, including with its Kirin chips. According to the South China Morning Post, Huawei has confirmed that it will be able to substitute its Kirin chips for the more high-end chips it acquires from the US should need arise.

Meanwhile the vendor is also said to have been developing its own smartphone OS since 2012 as a preparation for worst-case scenarios that would leave the vendor unable to continue licensing Android.

But according to sources cited in the report, the company has not yet released it because it is not as good or has as many third party apps available as Android.

The Chinese government is nevertheless appealing to the US to avoid undermining investor confidence by imposing any unilateral sanctions on Huawei.

The government is also making moves to reduce the nation's reliance on US semiconductors by establishing a nearly $19 billion fund to support the domestic chip sector, Reuters reported.

The second fund from the National Integrated Circuitry Investment Fund would focus on boosting local chip production and technologies, three sources told the news agency.

While the fund has been in the pipeline since before the flare-up of the US China trade war and the ZTE sanctions, the government now plans to invest more in the sector due to these tensions.

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