Arrest Shakes Huawei as Global Skepticism of Its Business Grows

This was all before Washington nearly put out of business Huawei’s main Chinese rival, called ZTE.

In April, the Commerce Department banned ZTE from using components made in the United States after saying the company had failed to punish employees who violated American sanctions against Iran and North Korea. The move was effectively a death sentence because ZTE relied heavily on American microchips and other technology.

In building its case against ZTE, the United States government began investigating Huawei as well.

When the Commerce Department first announced its findings against ZTE in 2016, it released an internal ZTE document illustrating best practices for evading American sanctions.

In describing the approach, the document cited a company it nicknamed F7 as a model for how to pull it off. The description of F7 in the document matched Huawei.

A few months later, the Commerce Department subpoenaed Huawei and requested all information about its export or re-export of American technology to Cuba, Iran, North Korea, Sudan, and Syria, according to a copy of the subpoena seen by The New York Times.

The probe widened this year when the Treasury and Commerce Departments asked the Justice Department to investigate Huawei for possible sanctions violations. Prosecutors in the Eastern District of New York took on the case.

Eventually, the Trump administration decided to ease its punishment of ZTE, in an effort to cool tensions with China’s leader, Xi Jinping, ahead of a historic North Korea meeting. But the power that Washington wielded over the fates of Chinese tech companies had been made very clear to people on both sides of the Pacific. In October, the Commerce Department imposed export controls on Fujian Jinhua, a state-backed semiconductor company that has been accused of stealing American chip designs.

Should Huawei be subjected to a ban on using American technology, the consequences would be significant, though perhaps not as life-threatening as they were for ZTE.

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