Could Huawei founder Ren Zhengfei give up on 5G to keep the company alive?

• Huawei’s short term strategy has been to stockpile chips from its key silicon supplier TSMC
• The company’s carrier business, which includes 5G, is about one third of total company revenue.
• Huawei Technologies founder Ren Zhengfei told the Post earlier this year that he 

  hopes to be forgotten

   after retiring from the company.

  “My biggest wish is to drink coffee in a cafe unnoticed,” said the 75 year old.

  But standing between Ren and those anonymous visits to coffee shops is probably the biggest decision of his career.

  In May, the Trump Administration announced a new direct product rule (DPR) that effectively blocks Huawei's access to advanced semiconductors – the brains inside all of its products. While Huawei was able to survive Washington’s first attempt to deny it access to US core tech in May last year, this time it has no wriggle room left.

  Huawei’s short term strategy has been to take advantage of a two month grace period to stockpile chips from its key silicon supplier TSMC. After September, TSMC and other companies that use US chipmaking equipment (including China’s SMIC) will need a waiver from Washington to supply Huawei.

• A Jefferies report earlier this week said Huawei has enough inventory of 5G base station chips to last until the end of next year, but after that the situation was “highly uncertain”.

  If Huawei is hiring lawyers and consultants to find loopholes in the new ruling it is very likely wasting money. “We reaffirm that we will implement the rule aggressively and pursue any attempt to evade its intent,” US Commerce Secretary Wilbur Ross was quoted as saying by Reuters last month.

• So what is the long term solution for Huawei? There has been speculation that it could find an alternative wafer fabrication partner to TSMC – one that can supply chips made using equipment from Europe and Japan instead.

• Even if that were feasible, it is unlikely Japan, The Netherlands and Germany – the main suppliers of non-US chip making gear – would openly defy Washington by making it possible for Huawei to continue buying 5G chips.

  Earlier this year Dutch company ASML was blocked from shipping the latest generation EUV lithography machine to Chinese foundry SMIC under pressure from Washington.

  With its 5G chip stockpile set to run out sooner or later, Huawei doesn’t have many options. It could take a decade or more to come up with a viable alternative to US chipmaking technology, and the billions of dollars Beijing has vowed to spend to upgrade China’s domestic chip industry may not help either because in many instances that needs US equipment, so is still subject to the new ban.

  But there is one way Ren might be able to save his company.

• Although Huawei’s relationship with the US has soured over a 

  host of issues dating back many years

  , 5G is at the core of the current confrontation. And Trump is winning.

  The tide has turned against Huawei in the international 5G markets, especially after Boris Johnson’s decision earlier this month to ban the company from Britain’s 5G roll out. However, this is all moot because when its stockpile of 5G base station chips runs out, Huawei won’t be able to provide the same products anyway – including to its domestic Chinese telco customers.

  By that stage, Huawei's other products would also be starved of semiconductors. That is, unless Ren cuts 5G loose and refocuses on his other businesses, such as smartphones, where it is No 2 behind Samsung Electronics.

  Huawei’s carrier business, which includes 5G, is about one third of total company revenue. Walking away from 5G would be a bitter pill to swallow – not just for the loss of revenue. Huawei is viewed by the Chinese government as a global tech champion and bulwark against US dominance in tech.

• Amid deteriorating relations with Washington last year, Ren himself offered to share Huawei’s 5G technology with a major western company for a one-time fee. His motive seemed to reflect a preference to battle a US competitor in the market than fight the US government.

  If US-China relations were not so toxic, such an offer might have helped, but not now. In the current geopolitical environment, any Chinese tech company with perceived links to Beijing is a target, with ByteDance’s TikTok short video app also in the Trump Administration’s cross hairs. There has been media speculation that ByteDance could sell TikTok to a buyer to head off its problems.

• If Huawei withdrew from the 5G business altogether it would still earn royalties from its patents. Or the company could consider selling its 5G patent portfolio outright, which might provide a face saving exit for Ren.

  This is, assuming Washington hardliners don't want to kill Huawei outright – regardless of what business it operates in.

  Since he founded Huawei more than 30 years ago, Ren has fought many battles in the marketplace. The former PLA engineer likes to invoke military slogans to motivate the company troops, especially during difficult times.

• That mindset has alarmed some in Washington, including FBI director Christopher Wray. In a widely reported speech on China to the Hudson Institute on July 7, Wray was perturbed after reading 

  the military language used by Ren

   in a speech to employees, as reported in The Wall Street Journal last month.

  “He reportedly told employees that to ensure the company’s survival, they need to – and I quote – ‘surge forward, killing as you go, to blaze us a trail of blood’,” Wray said. “He’s also reportedly told employees that Huawei has entered, to quote, ‘a state of war’.”

  It doesn't sound like Ren intends to mount a tactical retreat on 5G so he can live to fight another day. But Huawei will soon run out of “ammunition” in the form of 5G chips. And that could mean the loss of thousands of highly skilled jobs.

  After this battle is over, Ren may find it even harder to go unnoticed in coffee shops in retirement.

North Korea declares emergency over suspected Covid-19 case Kim Jong-un imposes lockdown on Kaesong, calling it a ‘critical situation’

North Korea has declared an emergency and a lockdown in a border town after a person suspected of having coronavirus returned from South Korea after illegally crossing the border, state media has said.

If confirmed, it would be the first case officially acknowledged by North Korean authorities.

Kim Jong-un convened an emergency politburo meeting in response to what he called a “critical situation in which the vicious virus could be said to have entered the country”, the North’s KCNA state news reported.

A person who defected to South Korea three years ago returned across the fortified border that divides the two Koreas to the town of Kaesong this month with symptoms of Covid-19, according to KCNA.

“An emergency event happened in Kaesong city where a runaway who went to the south three years ago, a person who is suspected to have been infected with the vicious virus, returned on 19 July after illegally crossing the demarcation line,” KCNA said.

The agency did not say if the person had been tested, but said an “uncertain result was made from several medical checkups of the secretion of that person’s upper respiratory organ and blood”, prompting officials to quarantine the person and investigate anyone he may have been in contact with.

One analyst said the announcement was important, not only because North Korea was for the first time reporting a suspected coronavirus case but also because it suggested it was appealing for help.

“It’s an ice-breaking moment for North Korea to admit a case,” said Choo Jae-woo, a professor at Kyung Hee University in Seoul. “It could be reaching out to the world for help. Perhaps for humanitarian assistance.”

North Korea is under economic pressure because of international sanctions over its nuclear programme. Cho Han-bum, a senior fellow at the Korea Institute for National Unification in Seoul, said it was significant that North Korea was reporting that its first suspected coronavirus case was imported.

“North Korea is in such a dire situation, where they can’t even finish building the Pyongyang general hospital on time. Pointing the blame at an ‘imported case’ from South Korea, the North can use this as a way to openly accept aid from the South,” Cho said.

KCNA did not elaborate on how the unidentified “runaway” had crossed one of the world’s most heavily guarded borders but said the incident was being investigated and the military unit responsible would face “severe punishment”.

The South’s joint chiefs of staff (JCS) said there was a “high chance” that someone had indeed crossed and the military was checking surveillance footage. It suggested it might be able to identify the person.

“Our military has specified some people and is verifying facts in close collaboration with related agencies,” the JCS said.

North Korea has received thousands of coronavirus testing kits from Russia and other countries and imposed strict border closures. Thousands of people were quarantined as it took precautions to prevent a coronavirus outbreak, but restrictions had recently been eased.

US-China relations: Washington confirms suspension of Fulbright programme for Hong Kong, mainland

• Would-be participants told after US President Donald Trump signed an executive order this month in retaliation for Beijing’s imposition of a national security law in Hong Kong
• Programme, set up in 1946, allows American and foreign academics to teach, research and study in each other’s countries.
• The United States has confirmed the suspension of its Fulbright programme in mainland China and Hong Kong, after 

  President Donald Trump

   pulled the plug on the fellowship earlier this month in response to Beijing’s introduction of a national security law in the former British colony.

  In an email sent to US scholars preparing to take part in the programme, the US state department said the 2020-21 exchange “will not operate”, though participants would be allowed to apply to take part in different countries.

  The Fulbright programme was established by the US in 1946 and allows American and foreign academics to teach, research and study in each other’s countries. The first agreement was signed with China, but it now covers more than 160 countries.

  Trump announced the termination of the exchanges in an executive order on July 14. It was part of a series of actions to remove the preferential treatment afforded Hong Kong.

  The confirmation comes as ties between China and the United States continue to sour over a broad range of issues, including trade, technology, Hong Kong, Xinjiang and the South China Sea. The rising tensions also saw the Peace Corps end its China programme, which sent American volunteers to teach English in Chinese universities, in January.

• Hundreds of Fulbright participants, past and present, criticised the suspension, saying it was counterproductive at a time of heightened US-China tensions and would hurt mutual understanding between the countries. More than 1,500 people signed a petition, organised by Fulbright members and alumni, arguing it was “because of the state of US-China relations today that Fulbright’s work is more needed, not less”.

  Rachel Wong, a board member of Fulbright Lotus, an affinity group supporting Asian and Asian-American members of the programme, said the move was a “huge blow” to US, mainland Chinese and Hong Kong students and scholars alike.

• “Fulbright’s entire mission revolves around cultural diplomacy and intercultural exchange, and this executive order goes against that,” said Wong, who received a Fulbright to teach English in Taiwan this year.

  “This will have consequences in our societies as well: we don’t get to reap the benefits of breakthrough collaborative research.”

• Canaan Morse, a doctoral student at Harvard University and 2020 Fulbright awardee who planned to research Chinese traditional storytelling in Beijing, said the suspension of the programme left him “frustrated, infuriated and deeply, deeply saddened”.

  He said he had already lined up interviews with artists in Beijing, but would now have to submit a new proposal to conduct his research on the ethnography of “pingshu” performance in Taiwan instead.

  “I have no truly satisfactory alternatives because those of us who study folk performance must go to the locus of performance – we can’t just simply substitute one thing for another,” he said.

  “I can think of nothing more counterproductive to the improvement of the US-China relationship than the cancellation of this programme.

  “We live in a world in which everyone is yelling, and no one is being persuaded … But what does help is when a cultural outsider can say, I see what you have and I love it too. That’s what brings people together, and that’s how minds are changed.”

• About 140 China scholars signed a separate open letter against the move, after the board for the Michigan-based non-profit organisation Association for Asian Studies released a statement on July 16 that called the termination “extremely short-sighted” with “long-lasting implications for US foreign affairs.”

  James Millward, a professor of Chinese history at Georgetown University in Washington who signed the letter, said he was awarded a Fulbright grant in 1989, which later partially funded foundational research for his career he conducted in Beijing and through trips to Xinjiang.

  Millward, whose research helped expose the mass internment camps Beijing uses to imprison Uygurs and other ethnic minorities in Xinjiang, said the cancellation of the exchanges would hurt the US more than China, and cut off an important channel between American and Hong Kong scholars.

  “I don’t know if this was simply an ignorant, money-saving measure on the part of the administration, or whether this was deliberately meant as part of a decoupling strategy, but it really is a case of the administration shooting itself in the foot,” he said.

  “It’s literally blinding us to China at a time when we need to know and understand China more.

  “Sending somebody to teach in Hong Kong, or welcoming a scholar from Hong Kong – it has nothing at all to do with what the Chinese Communist Party’s trying to do, in fact it’s enabling it because it is cutting Hong Kong off in significant ways from the academic world in the United States.”

• Yang Wang, an assistant professor of art history at the University of Colorado Denver, said the programme had shaped the careers of many scholars, diplomats, journalists and business professionals, including her own after Fulbright funded her art history research in 2011 in Xian.

  Wang, who sits on the campus committee for her university’s Fulbright student programmes, said the China and Hong Kong programmes currently supported 50 to 60 researchers.

  “It would be a major loss to our national base of expertise on Greater China. It not only sends Americans abroad but also brings to the US many international students and professionals, who through Fulbright gain a deeper understanding of American culture that they, in turn, share with their networks back in their home countries,” she said.

  “The programme has been a successful component of American diplomacy, a relatively economical one at that, and should be prioritised rather than dismantled.”

• 
  

US has 10 more ways to defeat China: Taiwanese economist Closing consulates only the beginning of heated conflict between two nations

Taiwanese economist Wu Chia-lung (吳嘉隆) stated on Friday (July 24) that the U.S. has at least 10 additional ways to counteract China's aggressive global expansion as tensions between the two countries ratchet up to the highest point in decades following consulate closures in Houston and Chengdu.

1. Jointly demand compensation

The U.S. can team up with other countries to hold China accountable for its responsibility for the global COVID-19 pandemic.

2. Cancel China's sovereign immunity

Once the U.S. takes away China's sovereign immunity, the Americans can then sue the Chinese government for the economic losses inflicted by the pandemic. However, some have pointed out that this approach could lead to the U.S. facing future lawsuits itself after establishing a precedent.

3. Tear down China's Great Firewall

China blocks domestic access to information from the outside world through its Great Firewall on the internet. The U.S. can leverage Starlink — the 42,000-satellite web that the U.S. aerospace company SpaceX plans to establish in the coming years — to allow more Chinese netizens to learn the truth about their country.

4. Destroy the linked exchange rate system in Hong Kong

Once the U.S. cuts the supply of U.S. dollars to Hong Kong, the latter's foreign exchange reserves will dry up to the point that its linked exchange rate system can no longer function, causing the Hong Kong dollar to depreciate as well as the Renminbi. When this happens, foreign companies will withdraw from the Special Administrative Region along with their capital.

5. Exclude Hong Kong and China from the U.S dollar-based financial system

As the U.S. dollar is still the most traded currency in the world, America can ban Chinese and Hong Kong banks from transferring U.S. dollars for their clients, which will put China's trade with other countries in jeopardy.

6. Increase military operations in the South China Sea

China's largest nuclear submarine base is in Hainan's Yalong Bay. The depths of the South China Sea offers natural protection for China's submarines and encourages the communist country to build artificial islands in order to claim sovereignty over surrounding areas. The U.S. reaction is crucial to halting China's attempted expansion and continuing intimidation of other coastal states.

7. Place an oil embargo

The U.S. can implement an oil embargo in the South China Sea or across the Malacca Strait.

8. Sanction Chinese officials

Based on the existing regulations, such as the Hong Kong Autonomy Act and the Magnitsky Act, the U.S. should continue imposing sanctions on senior Chinese officials who violate human rights and threaten Hong Kong's autonomy. Banning the members of the Chinese Communist Party (CCP) from entering the U.S. will also be an option.

9. Abandon the "one China policy"

The U.S. can restore diplomatic relations with Taiwan and recognize it as a country, which would be a tremendous blow to the CCP.

10. Establish a new liberal world order

The U.S. should continue rallying its allies to build a "new liberal world order" that prevents war and achieves greater prosperity for all. The country can leave current international institutions, such as the World Health Organization, and reconstruct new ones that exclude China.

Australia declares 'there is no legal basis' to Beijing’s claims in South China Sea Australia says China’s claims to disputed islands are ‘invalid’ and are not consistent with UN convention on law of the sea

Australia has declared “there is no legal basis” to China’s territorial and maritime claims in the South China Sea, marking an escalation of recent tensions with Beijing and bringing Canberra further in line with Washington.

The declaration, made in a submission to the United Nations on Thursday, comes after the United States hardened its position earlier this month, accusing Beijing of a “completely unlawful … campaign of bullying” to control the sea.

Australia’s shift in position comes as Australia’s foreign affairs minister, Marise Payne, and the defence minister, Linda Reynolds, prepare to travel to Washington next week to meet with the US secretary of state, Mike Pompeo, and the secretary of defence, Mark Esper, for the 2020 Australia-United States Ministerial Consultations (Ausmin).

The declaration to the UN said: “Australia rejects China’s claim to ‘historic rights’ or ‘maritime rights and interests’ as established in the ‘long course of historical practice’ in the South China Sea.”

Australia’s declaration mentioned the objections and complaints held by the Philippines, Vietnam and Malaysia in regards to Beijing’s actions in the South China Sea, and “rejects” the validity of “land building activities” used to create artificial islands.

The declaration said Australia does not accept China’s claim of sovereignty over the Paracel Islands and Spratly Islands, after Australian warships encountered China’s navy near the Spratly Islands earlier this month when taking part in drills with Japan and the United States in the Philippine Sea.

It notes “the Tribunal in the 2016 South China Sea Arbitral Award found these claims to be inconsistent with UNCLOS (United Nations Convention on the Law of the Sea) and, to the extent of that inconsistency, invalid”.

“There is no legal basis for China to draw straight baselines connecting the outermost points of maritime features or ‘island groups’ in the South China Sea, including around the ‘Four Sha’ or ‘continental’ or ‘outlying’ archipelagos,” it said.

“Australia rejects any claims to internal waters, territorial sea, exclusive economic zone and continental shelf based on such straight baselines.

“Australia also rejects China’s claims to maritime zones generated by submerged features, or low-tide elevations in a manner inconsistent with UNCLOS. Land building activities or other forms of artificial transformation cannot change the classification of a feature under UNCLOS … the Australian government does not accept that artificially transformed features can ever acquire the status of an island.”

Earlier on Saturday, Payne and Reynolds said “discussions at Ausmin 2020 will centre on our shared efforts towards a stable, resilient, open, secure and prosperous Indo-Pacific, particularly in the context of the impact of Covid-19”.

“Our relationship is built on our shared values, and a shared understanding of the importance of maintaining presence and leadership in our region.

“In the face of an increasingly complex and contested regional environment, it is vital we continue working together across the breadth of our relationship.”

The joint statement also reiterated that “the United States remains by far Australia’s largest source of foreign investment”.

The ministers also wrote an opinion piece in Saturday’s the Australian newspaper noting “coercive actions in the South China Sea, such as the escalation of disputes and militarisation of disputed features, continue to create tensions that destabilises the region”.

The opposition leader, Anthony Albanese, said Australia needed to defend the “national interest” when asked about the change in position on Saturday morning.

“We also need to stand up for international law,” he said. “And the international law of the sea provides for freedom of navigation which is absolutely critical to international trade.”

Tensions between Australia and China escalated earlier this year as Canberra pushed for an inquiry into Beijing’s initial handling of the Covid-19 outbreak, with Australia’s trade minister, Simon Birmingham, complaining his Chinese counterpart would not answer his calls in May.

Since then, China has issued a warning to its citizens, and lucrative international student market, not to travel to Australia out of fears of racism. In June, Chinese foreign ministry spokesman Zhao Lijian accused Australia of mass espionage and of “stoking confrontation”.

Rising tensions have prompted Australian business leaders, who are worried further hostilities could damage exports to China, to call for a “separation of powers” between Australia’s foreign relations and trade ties.