A prominent Republican who advised President Donald Trump called the US 5G strategy "the greatest strategic disaster in US history." US efforts to prevent China's telecom giant Huawei from dominating the global market for fifth-generation mobile broadband have failed, while disruptive regulation and corporate abuse have held back US 5G efforts at home, the politician told a closed-door collection of Republican donors and activists.
The adviser has urged President Trump to make a radical political shift to ensure that the United States is not late to roll out 5G. The US president has not yet made a decision, the adviser said. The US military controls most of the spectrum that civilian 5G broadband will use, and major US telecom providers are holding back from a full 5G commitment, the adviser added.
In a separate development, Secretary of Commerce Wilbur Ross told Bloomberg Television Sunday morning that the United States would grant licenses "very soon" to allow US manufacturers to sell components to Huawei and other Chinese technology companies. President Trump in July said he would "easily" restore technical exports in connection with a trade agreement with China, and asked the Department of Commerce to begin approving export licenses at a White House meeting in early October, the New York Times reports on time. Reflecting on other Trump administration officials, Secretary Ross predicted that the first phase of a trade deal with China could be signed this month.
It looks like the Trump administration may be ready to cut losses on a losing strategy. Huawei has signed equipment agreements with all telecom operators in the Eurasian continent, despite high-profile US threats to cut intelligence sharing with allies that include Huawei equipment in their networks.
China rolled out its 5G network, the world's largest, at the end of October.
Huawei is expected to sell 600,000 5G base stations by the end of 201[ads1]9 and two million by the end of 2020, according to the company's estimates, despite a US embargo on sales of US components to Huawei and 28 other Chinese companies.
Over the past year, Huawei released their own chipset to operate their smartphones with artificial intelligence, as well as ultra-fast processor chips. Huawei's first-half revenue in 2019 grew 24% year-over-year, and the company sold 24% more smartphones, despite a US government block on access to popular Google applications.
American semiconductor shares have risen by more than 11% since October 9, the best performing sector in the US stock market, as investors looked for an early solution to the export ban. US semiconductor design companies are very dependent on the Asian market, and US high-tech companies have aggressively lobbied the White House to allow them to continue exporting. Most components the US industry sells to Huawei and other Chinese companies can be obtained from Japan, Taiwan or South Korea, or can be manufactured in China itself.
In March 2018, the United States virtually closed China's second-largest telecommunications equipment company, ZTE, by placing an embargo on the Qualcomm chips that operated its handsets, in retaliation for ZTE's breach of sanctions against Iran. By the end of 2018, however, ZTE's much larger counterpart Huawei had developed the Kirin chipset, with performance comparable to Qualcomm.
If President Trump withdraws from the global campaign against Huawei championed by US intelligence agencies and instead focuses on accelerating America's own rollout of 5G, the prospects for an early end to the US-China trade war will be greatly improved.
China does not like US pressure to reduce the bilateral trade deficit, but is willing to buy more US agricultural products and energy to place a protectionist president. However, US attempts to stifle Huawei are viewed by China as an existential question: If the United States cannot accept the fact that China has taken leadership in an important technology field, the Chinese believe, it means that America will stifle China's development. In that case, China would chase down a protracted trade war.
China has focused its domestic policy on increasing domestic consumption to offset the fall in exports during the trade war. Investors responded by bidding the prices of Chinese consumer staple companies, the best in the sectors of the Shenzhen 300 stock market.
China's growth has slowed to the lowest rate since the 1990s, although it is still by far the highest of all economies in the world by around 6%. Last week, the Caixin index of Chinese manufacturing activity showed a surprise, even though the government procurement manager's index remained below 50, that is, in the contraction area. The Caixin study includes several private companies.