On May 15, 2019, the U.S. Department of Commerce released a piece of news on its official website.

Https://www.commerce.gov/news/press-releases/2019/05/department-commerce-announces-addition-huawei-technologies-co-ltd

The Bureau of Industry and Security (BIS) of the Ministry of Commerce has added Huawei to its Entity List (entity list)

Today, the Bureau of Industry and Security (BIS) of the. Department of Commerce announced that it will be addingHuawei Technologies Co. Ltd. And its affiliates to the Bureau's Entity List.

The news also said that the move to add Huawei to the entity list was due to information obtained by the Ministry of Commerce, which provided a reasonable basis for determining that Huawei's activities violated U.S. national security or foreign policy interests.

This action stems from information available tothe Department that provides a reasonable basis to conclude that Huawei isengaged in activities that are contrary to U.S. National security or foreignpolicy interest.

So what exactly is the information?

It is the activities alleged by the Justice Department against Huawei's public indictment, including alleged violations of the International Emergency Economic Powers Act (IEEPA), the provision of prohibited financial services to Iran and deliberate violations of IEEPA regulations, and obstruction of justice and obstruction of investigation into alleged violations of US sanctions.

This information includes the activities allegedin the Department of Justice's public superseding indictment of Huawei,including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial servicesto Iran, and obstruction of justice in connection with the investigation ofthose alleged violations of. Sanctions.

Obviously, the Americans did not find any new evidence, but took the ongoing charges against Huawei by the U.S. Department of Justice as the "basis for action" of the Department of Commerce. We already knew about these charges when Canada arrested Meng Wanzhou last year.

So what does it mean to be added to the entity list?

The sale or transfer of US technology to companies or individuals on the entity list requires a license issued by BIS, if the sale or transfer would harm the national security or foreign policy interests of the United States.May refuse the license. The list will be published in the Federal Gazette.

Thesale or transfer of American technology to a company or person on the EntityList requires a license issued by BIS, and a license may be denied if the saleor transfer would harm U.S. National security or foreign policy interests. Thelisting will be effective when published in the Federal Register.

The move, taken by the U.S. Department of Commerce's Bureau of Industry and Security, with the support of the President of the United States, adds Huawei to the entity list as the world's largest telecommunications equipment manufacturer. This will prevent foreign entities from using U.S. technology in ways that could undermine U.S. national security or foreign policy interests, "Commerce Secretary Wilberrose said. President Trump has instructed the Department of Commerce to protect his national security activities. Since the establishment of the Administration, the Department has added 190 persons or organizations to the list of entities and has conducted five investigations into the impact of imports on national security in accordance with article 232 of the Trade Law of 1962.

"This action by the Commerce Department's Bureauof Industry and Security, with the support of the President of the UnitedStates, places Huawei, a Chinese owned company that is the largesttelecommunications equipment producer in the world, on the Entity List. Thiswill prevent American technology from being used by foreign owned entities inways that potentially undermine national security or foreign policyinterests, "said Secretary of Commerce Wilbur Ross. "President Trump hasdirected the Commerce Department to be vigilant in its protection of nationalsecurity activities. Since the beginning of the Administration, the Departmenthas added 190 persons or organizations to the Entity List, as well asinstituted five investigations of the effect of imports on national securityunder Section 232 of the Trade Act of 1962. "

Please note that the US Secretary of Commerce who came out to speak is a core member of the trade negotiations with China.

At the same time, the news explains the operation process of the entity list, that is, the increase in the entity list is decided by the end-user Review Committee (End-User Review Committee).Composed of officials from the Ministry of Commerce, the Ministry of Defense, the State Department and the Ministry of Energy. In accordance with section 744.11 (b) of the Export Administration regulations, there are reasonable grounds to believe that the participation of individuals or organizations that violate national security and threaten the policy interests of the United States can be added to the list of entities.

Additions to the Entity List are decided by theEnd-User Review Committee which is comprised ofOfficials from the Department of Commerce, Department of Defense, StateDepartment, and Department of Energy.Under §744.11 (b) of the ExportAdministration Regulations, persons or organizations for whom there isreasonable cause to believe that they are involved, were involved, or pose asignificant risk of becoming involved in activities that are contrary to thenational security or foreign policy interests of the United States, and thoseacting on behalf of such persons, may be added to the Entity List.

Therefore, to add Huawei to the entity list is a joint decision made by four departments in the United States, including the Department of Commerce, the Department of Defense, the State Department and the Department of Energy, which shows that this is the collective will of the US government. Please pay attention to this Export Administration Regulations (Export Administration regulations), which is the legal basis for the list of entities.

At the same time, US President Donald Trump has also declared a state of emergency with a clear title to secure the supply chain of critical information and communications technology infrastructure.

Trump signed an executive order declaring threats to ICT, services and supply chains from foreign rivals a national emergency.

The executive order prohibits business transactions involving information technology and services in the United States as long as the U.S. Department of Commerce believes it poses a threat to the national security of the United States.

Today, President Trump signed an Executive Order:Securing the Information and Communications Technology and Services SupplyChain, declaring that threats to the information and communications technologyand services supply chain by foreign adversaries are a national emergency. TheExecutive Order prohibits transactions that involve information andcommunications technology or services designed, developed, manufactured, orsupplied, by persons owned by, controlled by, or subject to the jurisdiction ordirection of a foreign adversary whenever the Secretary of Commerce determinesthat a transaction would pose a threat to national security, as articulated inthe Executive Order.

At the same time, it is mentioned that this decision is based onAttorney General, Treasury Secretary, Secretary of State, Secretary of Defense, Secretary of Homeland Security, United States Trade Representative, Director of Intelligence, Director of General Services, Chairman of Federal CommunicationsNegotiations. The head of the committee and other appropriate bodies, the Ministry of Commerce, will issue rules within 150 days to establish procedures for reviewing such transactions

Basedon consultations with the Attorney General, the Secretaries of Treasury, State,Defense, and Homeland Security, the United States Trade Representative, theDirector of National Intelligence, the Administrator of General Services, theChairman of the Federal Communications Commission, and the heads of otherappropriate agencies. In carrying out this mission, the Department of Commercewill issue regulations within 150 days to establish procedures for reviewingsuch transactions.

Within one year of the executive order, the Secretary of Commerce will consult with the Secretary of Finance, the Department of Homeland Security, the Secretary of State, the Department of Defense, the Secretary of Justice, the United States Trade Representative, the Director of National Intelligence and the Chairman, as appropriate. The Federal Communications Commission must report to the President on the adequacy of the action taken and continue to take action if necessary.

Withinone year of the Executive Order, the Secretary of Commerce, in consultation asappropriate with the Secretaries of Treasury, Homeland Security, State,Defense, the Attorney General, the United States Trade Representative, theDirector of National Intelligence, and the Chairman of the FederalCommunications Commission must report to the President whether the actionstaken are sufficient and continue as necessary to mitigate the risks identifiedin the Order.

Both the executive order and the entity list published by the US Department of Commerce can in fact prohibit US companies from selling products to Huawei at any time. We have reason to believe that Huawei has become a bargaining chip in US trade negotiations.

The real purpose of trade negotiations is not only to reverse the deficit by exporting more things to China, but also because they want to accept trade agreements to hinder the development of China's advanced industries, and because of this, trade agreements contain contents that China cannot accept. If you are interested in this, you can take a look at my article in the same period last year, which completely listed the English version of the negotiation terms published by the US media at that time.

The U.S. Department of Commerce BIS added Huawei to the entity list in accordance with the United States Export Administration regulations, which is characterized by restrictions on foreign transactions, that is, "out-of-region application", according to market prices.If the components and software of American companies include in principle25More than%Then it will also be regulated, that is to say, even products from South Korea, Japan, Europe and other countries will be regulated. If it violates, it will be subject to administrative and criminal penalties such as prohibition of trading with US companies by the US government.

So is Huawei safe and sound?It will certainly be affected, and it will not be a small one.

According to the list of 92 core suppliers announced by Huawei at the end of 2018, there are 33 in the United States, 25 in Chinese mainland, 11 in Japan, 10 in Taiwan and 13 in other regions. Suppliers in the United States are mainly semiconductor and software companies.

According to information from the supply chain, on May 17, major US semiconductor companies were notified by the US government to stop supplying Huawei, which means that the American ban has no buffer period for Huawei at all.

Huawei has made an internal assessment of the possible impact on the limit state.

Xu Zhijun, Huawei's rotating CEO, said in an internal speech at Huawei's annual working meeting in February 2019.

"We now have a team of more than 8000 people who are fighting for business continuity day and night, with no holidays."

At the same time, there is a key sentence:

"the consumer business is a little different from the ICT infrastructure business, and we basically don't rely on the U.S. For business continuity.Although we use American devices on a large scale, we can be independent ofThis is a more practical point. "

At the same time, Hu Houyi, Huawei's rotating CEO, said in an internal "letter to employees" on May 16, 2019:

The Commerce Department's BIS decision to add Huawei to the so-called "entity list" is the latest step in the US government's continued crackdown on Huawei for political purposes. In this regard, the company expected many years ago, and in research and development, business continuity and other aspects of a large amount of investment and full preparation, to ensure that in extreme casesThe operation of the company is not greatly affected.。”

Of course, the speeches of Huawei executives will certainly have a sense of military stability, so how much will Huawei be affected?

1Huawei's mobile phone business is more affected than communication base stations and enterprisesITThe product should be small.

This can also be confirmed by Xu Zhijun's speech at Huawei's annual work conference.

Huawei mobile phones in addition to short-term supply capacity trouble, affecting sales, medium-and long-term recovery will be faster, this is why?

One is that the objective requirements are different, intelligent terminals pay more attention to user experience, enterprise IT products and communication base station products pay more attention to technical indicators.

Smartphones are small components, only for personal use, and the amount of data exchanged with external communication is relatively small, and the average monthly traffic of an ordinary person is only a few gigabytes.

However, a communication base station connects a large number of users, which produces a huge amount of data exchange every day. The same is true of the IT products bought by enterprises, which have a great demand for data exchange capacity.

For enterprises and telecom operators, the demand for data is not at the same level as that of individuals, and the requirements for reliability are not the same as those of individuals. If an enterprise or an operator has a business interruption, the loss will be huge. Let's assume that a city is suddenly cut off for a few hours, and the impact will be huge.

Therefore, in the part of ICT infrastructure, the requirement for high-performance devices such as signal processing is higher than that of mobile phones.

At the same time, the mobile phone business is more about the user experience level of consumers, there are a small number of enthusiasts who have a few technical parameters of mobile phones, and most people will not understand the specific technical specifications of mobile phones at all.

We have been talking about 5G, in fact, one of the core differences between 5G and 4G is the data transmission speed. If the speed is less than 5G, it will not be 5G, so it will not be used by operators.

For ordinary users, in fact, the Internet speed of the mobile phone is faster, but you can't feel it at all. In contrast, you will pay more attention to non-performance things. For example, your leader generally buys a mobile phone from Huawei, although the style he buys may not necessarily have the same performance as OV or XIAOMI.

One is the objective cost of income, why Huawei Hayes's main product is the Kirin processor used in mobile phones?

In fact, the reason is not complicated, even in a large country like China, the number of communication base stations is one million stations, and the various products used by enterprise IT are the same, and their demand is far from being able to compare with the sales of millions or even tens of millions of mobile phones.

Therefore, Huawei gives priority to vigorously developing Kirin processors on mobile phones, which is also in line with commercial interests, which objectively leads to a high degree of autonomy of some of Huawei's mobile phone chips, even without relying on American devices.

At the same time, Huawei is also more confident, the use of alternative devices will undoubtedly lead to a decline in the performance of mobile phones, but for consumers, this experience will not be too sensitive. For example, you and your friends both bought the same phone and tested the download speed of the phone in the same network environment. You are 3M/s and he is 4M/s. Does it look like his phone has 1/3 better performance? In fact, your user experience won't be that different.

2The US Export Control regulations cannot be traced back to products that have been sold before.ARMThe architecture has been permanently licensed and Huawei's own operating system is available.

It is easy to understand that the list of entities issued by the US Department of Commerce BIS is based on the Export Control regulations, which can punish companies that violate the export ban, but it is impossible to say that a company has sold things to Huawei before, so it should also be punished.

Huawei can continue to use all kinds of service products purchased by Huawei before May 2019, but will not continue to receive services from manufacturers.

Some people say that Huawei's processors use ARM architecture, Huawei's mobile phone uses Android operating system, Huawei uses Cadence,Synopsys to develop chips, and even Huawei employees use windows for internal office work, which is banned in the United States.

This statement is wrong, the purchase of service products, the transaction has been completed, its ownership in Huawei, Huawei continues to use without any legal problems, Huawei has time to gradually replace the above purchased service products.

Take ARM as an example, although it is owned by Softbank Corp., because it uses the intellectual property rights of the United States, it will also be subject to jurisdiction.

But even if Huawei no longer authorizes the new version, Huawei can continue to develop on its own based on the previously purchased version. The picture below shows Huawei explaining public questions about the autonomy of the ARM architecture at a market event in January 2019. Huawei has a permanent license for the ARM V8 architecture, the latest commercial architecture, which allows Huawei to design processors completely independently of the external environment.

In addition, if the Americans ask Alphabet Inc-CL C Android to stop selling products and services to Huawei, Alphabet Inc-CL C will certainly abide by it, but this will not prevent Huawei from launching its own system compatible with Android. In fact, Huawei already has a very deep understanding of Android. The Ark compiler launched not long ago is an example. Huawei, through the research on the underlying layer of Android, can ensure that its own system independence is proved on patents. It is guaranteed to sell legally in all countries except the United States.

The same is true of other EDA chip design tools. Huawei can continue to use it even if it cannot continue to get updated versions, which gives Huawei time. In fact, Huawei has other ways to avoid it, such as outsourcing and so on.

In fact, the development of Moore's Law has also given Huawei time, EDA tools are highly related to the process, chip foundry processes to higher nano-precision, but also need EDA tool manufacturers to update the database. But at present, after the chip production process has reached the 7/5nm, it has basically reached the limit, and the speed has slowed down, so the EDA tool license that Huawei has purchased can be used longer than before, which also brings a buffer to Huawei.

Software and architecture licenses are service-oriented products. One of them is that they do not have the problem of large-scale supply. I can continue to use them if they do not continue to supply. I still have time to continue to improve.

One is that there is no legal problem, which is also critical, which means that Huawei's products such as mobile phones can continue to be sold smoothly in countries around the world and cannot be prohibited by local laws, with the exception of the United States, which has long banned the sale of Huawei products.

In other words, even if the United States plays hooligans, even if there is no legal basis at all, it will force the ARM architecture license and Android license previously sold to Huawei to not count, nor will it affect Huawei's continued use at all. As long as it abides by the laws and regulations of countries other than the United States, Huawei will not lose the global market.

This can be seen from the fact that the United States has repeatedly asked its allies to abandon Huawei 5G, but few people have responded.

3Huawei's core components supply problem—The influence of Taiwan Semiconductor Manufacturing Co Ltd problem

It should be noted that Huawei has made a complete layout for the extreme situation of supply cuts for many years. Some American suppliers of chips have occupied a dominant position and share of products, such as FPGA,DAC,ADC, DSP, and so on. Many people suspect that Huawei has no response plan.

This is completely wrong, the above chips can be designed by domestic manufacturers, Huawei also has its own related layout, but the performance is not as good as similar products of the United States. In fact, Huawei executives have made "business continuity" as the strategic goal of the company's life and death in many speeches.

Huawei's strategic layout for so many years has always been unexpected, laying out several years in advance in places you do not expect. Huawei has been laying out a large category of chips for many years, especially more than a year after the ZTE incident broke out last year. But the possibility of no action is zero.

One is from the system design, through different paths to avoid and reduce the use of American chips, the most obvious is the AI chip. At present, there are different implementation schemes on the market, such as FPGA, GPU and ASIC, and different programs have different dependence on the United States.

One is to provide buffer time for switching suppliers through stock, switching from the first supplier to backup suppliers and own chips, which will certainly lead to performance degradation and capacity gap, so stock buffering is needed.

Huawei has given different inventory times for different types of important components. According to a report in the Nippon Keizai Shimbun on May 17, according to sources from several Huawei suppliers in Europe and Asia, Huawei has ensured a 6-to 12-month inventory of semiconductors from irreplaceable American companies.

In fact, I reasonably infer that in addition to preparing its own goods, Huawei also allows all kinds ofThe partner keeps inventory.It is easy to understand that many chips are not purchased directly from chip factories by mobile phone or communication manufacturers, but from various distributor partners, and various distributors also keep inventory in order to share the risk. therefore, Huawei's actual stock cycle is more than 6-12 months.

In the chip layout of Huawei's current products, priority is given to ensuring the supply of core and strategic products, while products that account for a very small proportion in Huawei's system will be greatly affected. In fact, Huawei's notebooks are developing very well now, with sales soaring 400% in 2018. At this rate, Huawei will soon become the world's mainstream supplier of notebook computers, and Lenovo will be dangerous in a few years.

But the current laptop Intel Corp CPU, Huawei can not find a replacement, there is also windows, but Huawei can sell computers without windows, installed by consumers.

However, due to the irreplaceability of Intel Corp CPU, Huawei's laptop business will inevitably be greatly affected.

By contrast, Huawei has no problem with its ARM architecture and operating system autonomy in smartphones and tablets.

By contrast, the biggest risk comes from Taiwan Semiconductor Manufacturing Co Ltd, and even Samsung's memory is less worrying.

Taiwan Semiconductor Manufacturing Co Ltd's 7nm process chips are supplied in large quantities for Huawei's flagship P30 series. If shipments are stopped, it will have a devastating impact on Huawei's flagship aircraft sales. Huawei flagship machines will not be able to continue production after running out of inventory.

Semiconductor Manufacturing International Corporation of Chinese mainland has adopted the practice of focusing on the company's profitability in the past few years, making full use of and developing mature processes to ensure sustained profitability, resulting in slow progress of advanced processes. this approach is good for the company's operation and employee remuneration, but it is indeed disadvantageous to national security.

Fortunately, this situation has changed since Liang Mengsong joined Q3 in 2017. The 14nm process has been in mass production this year, 12nm has been introduced by customers in the first quarter of this year, and the 7nm process is already under study. SMIC has completely changed its strategic direction and made every effort to sprint for the advanced process.

In early May 2019, Semiconductor Manufacturing International Corporation released his first-quarter financial results, and joint CEO Zhao Haijun and Liang Mengsong also expressed their views on operation and technology. "Over the past two years, the company has been in a period of adjustment. Enhance internal strength through optimization and reformThe speed of research and development has increased significantly.. The energy and competitiveness we have saved will accelerate our next pace to catch up with the new trend of industrial development, cater to the arrival of macro market opportunities, and is expected to come out of the adjustment period and accelerate our growth. "

It is very clear that Semiconductor Manufacturing International Corporation has completely taken advanced technology as the main direction of the adjustment in the past two years.

Therefore, SMIC's future earnings may not be very good-looking.

In the "letter to shareholders" issued by Semiconductor Manufacturing International Corporation in 2019

It is clearly mentioned that "global revenue in 2018 is about US $3.36 billion, an increase of 8.3% over the same period last year; revenue from China (excluding technology licensing income) grew by 24.3% year on year."

"2018 is the year of accelerated research and development. We spend more than $600 million on research and development, accounting for a much higher proportion of revenue than the industry average. Special thanks to our colleagues in the R & D department for their round-the-clock efforts, we have made gratifying breakthroughs in advanced process research and development, indicating that our R & D efficiency has been greatly improved. We have completed the research and development of 28nm HKC+ and 14nm FinFET technology, and started the related customer introduction work. Production is expected to be achieved within 2019. "

According to the first-quarter financial results released in May 2019, Semiconductor Manufacturing International Corporation went a step further to the 12nm stage.

Dr. Liang Mengsong, Co-CEO of Semiconductor Manufacturing International Corporation, said: "FinFET R & D is progressing smoothly, 12nm process development has entered the customer introduction stage, and the next generation FinFET R & D has made gratifying progress on the basis of past accumulation.

With regard to the difference between 14nm and 12nm, Liang Mengsong pointed out that 12nm is a miniature version of 14nm. Comparing 12nm process with 14nm process, 12nm has 20% reduction in power consumption, 10% increase in efficiency and 20% reduction in area. Some customers overlap between the two processes.Consumer, mid-range mobile phonesAPAnd other applications will have a demand.

Please pay attention to this mid-range mobile phone processor, the industry is basically sure that the first user of Semiconductor Manufacturing International Corporation 14/12nm is Huawei Hayes.

So what level is 14/12nm at? The Kirin 960 released by Huawei in October 2016 uses 16nm technology, which carries the flagship Mate9 released in October 2016 and the P10 released in February 2017. I am now using the mate9, which has been more than two years old and is still smooth. Of course, in the same period of time, my wife has changed two mobile phones, so it is not possible to rely on middle-aged men to stimulate consumption.

There are still Huawei phones on the market with Kirin 960s, such as Nova2S, and the 6G+64G is currently priced at 1600 yuan.

In other words, Semiconductor Manufacturing International Corporation's current level of technology, even if smooth mass production this year, can only support the sales of middle and low-end mobile phones.

Although Semiconductor Manufacturing International Corporation has made "gratifying progress in the research and development of the next generation FinFET" and did not disclose whether this next generation is 10nm or 7nm, it will be several years before it reaches mass production and catches up with the current level of Taiwan Semiconductor Manufacturing Co Ltd.

The Americans will inevitably put pressure on Taiwan and Taiwan Semiconductor Manufacturing Co Ltd, which will very much test the judgment of Taiwan Semiconductor Manufacturing Co Ltd's management. At the crossroads of history, can Taiwan and Taiwan Semiconductor Manufacturing Co Ltd make the right choice?

Judging from the current situation, Taiwan Semiconductor Manufacturing Co Ltd was the first to say on the evening of 17 May that "a complete internal system has been established, and after preliminary assessment, it should be able to comply with the export control regulations, and has decided not to change the export plan, but will continue to carry out inspection and evaluation."

At least it shows that its attitude is positive. Since Taiwan Semiconductor Manufacturing Co Ltd also issued ADR (depositary receipts) on the New York Stock Exchange of the United States, it is a risk point whether Americans include companies listed in the United States in the definition of American enterprises.

Whether Taiwan Semiconductor Manufacturing Co Ltd will eventually be pressured by the United States depends on his political wisdom.

Semiconductor Manufacturing International Corporation began to lay out 7nm research and development in 2017, less than 2 years now, and its 7nm has been successfully developed and mass produced. It will take at least two or three years for Liang Mengsong to join. But during the gap of these years, Huawei's flagship machine needs to be highly dependent on Taiwan Semiconductor Manufacturing Co Ltd. At present, the grandstand SMC is the biggest variable and risk for Huawei.

Of course, in extreme cases, Huawei's mobile phone department will suffer a major setback if Taiwan Semiconductor Manufacturing Co Ltd, under pressure from the United States and Taiwan governments, makes the choice to follow the history of the United States, but at least middle and low-end phones can rely on Semiconductor Manufacturing International Corporation's 14nm/12nm to continue production.

5Huawei's capital security

Huilu security is also an issue that Huawei needs to consider because the global dollar trading system is in the hands of the United States, and Huawei's headquarters and global subsidiaries, as well as suppliers around the world, have cross-border capital flows.

Since the global transactions of US dollars are in the hands of the United States, US dollar transactions outside the United States are mainly conducted through the US Empire's cross-border dollar trading system CHIPS, and all participating banks of CHIPS are in the United States, specifically in New York. For example, Bank of China Ltd. New York Branch is a participating bank of CHIPS, and other branches of the Bank of China are not qualified.

Because cross-border clearing and payment of US dollars are carried out through these CHIPS member banks in the United States, Americans are well aware of the flow of every dollar fund, and every dollar clearing transaction in the world is carried out through participating banks in New York.

In theory, Americans could demand a freeze on Huawei's dollar transactions.

If the United States does so, Huawei can only trade in euros or RMB, and if it goes a step further, the United States requires major commercial banks around the world to refuse to provide financial services to Huawei, or impose civil and criminal punishments. then the challenge is big.

Even big Chinese banks, such as the big four, may find it hard to violate the US ban, which may be one of Huawei's biggest risk points and needs state assistance.

Let's refer to the case of Kunlun Bank, which, under Petrochina Company Limited, is a bank specially set up by China to import Iranian oil to buy Iranian oil when Iran is subject to a US financial blockade.

Let Iranian banks open accounts with Kunlun Bank, and Chinese companies remit RMB and euros to the bank account after importing oil, and vice versa. Of course, Kunlun Bank has been sanctioned by the United States since 2012, and the US dollar settlement channel has been closed. For a long time, Kunlun Bank can only trade in euros and renminbi, and is the only settlement bank for Chinese merchants to export goods to Iran.

In other words, none of China's other big banks are involved in providing settlement services for trade with Iran in order to avoid the risk of being sanctioned by the United States.

If there is really an extreme situation, you can refer to Kunlun Bank, which specializes in Iran business.

A small bank has been set up to provide global financial services to Huawei.

In addition, in addition to using euros, the second phase of China's cross-border RMB payment system CIPS has also been launched in May 2018, which can provide strong support. In the first three quarters of 2018, Bank of China Ltd., for example, handled RMB cross-border settlement business of 4.26 trillion yuan, an increase of 60% over the same period last year.

At present, China has signed bilateral currency swap agreements with more than 30 countries and regions, which can trade without the US dollar and the euro.

6Huawei's ultimate fate and limit deduction

As analyzed in the previous article, Huawei has the following revenue items that can not be affected:

One is that there are many products that do not rely on American components, which can be sold smoothly, the most typical of which is photovoltaic inverters. Huawei is the world's largest photovoltaic inverter manufacturer.

Similarly, there are Hayes chips, the world's largest security system manufacturer Haikangwei, its largest chip supplier is Hayes, similarly, there are smart TV chips, Hayes also accounts for a large share. And this kind of chip does not need the high-end manufacturing process of 7nm, from design, manufacture to packaging can be done in Chinese mainland.

If Hayes's demand from Huawei's own system decreases, it can vigorously promote foreign sales and increase the chip autonomy rate of domestic electronic products.

In addition, there are terminal products, such as routers, Huawei bracelets, Huawei watches, Huawei TV, etc., low-and middle-end mobile phones, whose performance lags behind that of flagship machines. Huawei can make mid-and low-end solutions with non-American solutions.

After the outbreak of the ZTE incident in April last year, Huawei was also greatly alarmed by giving Huawei a total of 13 months in May this year, plus 6-12 months in inventory, Huawei had plenty of time to complete the non-American layout of low-and middle-end products.

One is Huawei's patent income. Even if Huawei cannot sell any products, it can still charge royalties like Qualcomm Inc. After all, whether it is 4G or 5G, Huawei has a large number of unavoidable basic patents, which are no less than Qualcomm Inc. Qualcomm Inc's annual patent income can reach 10 billion US dollars.

In fact, we assume that in extreme cases, all Huawei's mobile phones cannot be sold at all, and some of its withdrawal from the market must be occupied by OV and XIAOMI. For China, the overall market share loss is not so great. Huawei has not started to collect royalties from domestic mobile phone manufacturers, but it is very exciting to talk about patent licensing fees with Samsung and Apple Inc. We can make up for the losses by starting patent fees for domestic manufacturers.

In addition, Qualcomm Inc is also using Huawei's patent and needs to pay Huawei, but Qualcomm Inc does not produce mobile phones. After cross-licensing, Huawei still needs to pay Qualcomm Inc.

One is that Huawei has a large number of stock networks and mobile phone products around the world, which can continue to achieve revenue. The revenue that a mobile phone brings to Huawei is not only the price of the phone itself, but also the income of the above system. The most typical is the Huawei mall, where you download any software and applications and bring revenue to developers. Huawei will get a share, generally more than 30%, especially games. This is a huge source of income, you download from Huawei game applications, and then recharge, Huawei will have a share of the revenue. There are also various Huawei applications such as Huawei pay, which can also bring revenue to Huawei.

Huawei has at least hundreds of millions of mobile phones in stock around the world, which is one of Huawei's sources of profit.

In addition, Huawei has millions of communication base station products all over the world. 2G, 3G, 4G are many old products from many years ago, and they can also earn income by selling all kinds of spare parts.

I think what we really need to worry about is some of Huawei's suppliers. Huawei will suffer a big loss, but it won't fail, but if its suppliers lose Huawei's supply, some of them will fail. Because Huawei is the largest customer of many suppliers, this has a great impact on the industrial chain.

Another is the financial security issue of Huawei, which needs the assistance of the state. After all, advanced chips can be developed by themselves, but Huawei cannot set up its own bank to serve itself. Of course, under extreme circumstances, Huawei can at least do business in China and a small number of countries.

Although it lags behind the United States, China already has a strong semiconductor research and development capability, and all the chips have a layout and a spark.

The United States is the pioneer of the ICT industry and the strongest leader in the world. Not relying on American components is a daunting challenge and there will be short-term pain. But we should also be confident that although China lags behind the United States in the IT industry, it has accumulated for decades. In fact, as far as semiconductors are concerned, if the first in the world is the United States, then who is the second in the world?

The following picture shows the top 10 chip designs in the world in 2018:

They are Broadcom Ltd, Qualcomm Inc, NVIDIA Corp, MediaTek, Hayes, AMD,Marvell, Sailings, Lianyong, Ruiyu. We can see that there are six American companies, three Taiwanese companies and one Chinese mainland company.

In fact, the above list is only pure chip designers, if we look at all semiconductor manufacturers.

The following picture shows the global top 15 of Q1 in 2019, including Intel Corp, Samsung, Taiwan Semiconductor Manufacturing Co Ltd, Hynix, Micron, Broadcom Ltd, Qualcomm Inc, TI, Toshiba Semiconductor, Infineon, NVIDIA Corp, NXP, STMicroelectronics, Hayes, Sony Group Corp.

They are 6 in the United States, 3 in Europe, 2 in Japan, 2 in South Korea, one in Taiwan and one in Chinese mainland.

What can we see from the above two lists?

There is no doubt that the United States is far ahead, but it is actually difficult to tell who is second in other countries.

In terms of semiconductor sales, South Koreans are undoubtedly the second largest in the world. Their Samsung and Hynix memory sales are staggering, causing both to rank among the top four in the global semiconductor industry, surpassing Europe, Japan, Taiwan and Chinese mainland in total sales.

In terms of pure chip design companies, China is the second largest in the world. The picture below shows the top 50 global chips released by IC insight, with a share of 53% in the United States, 16% in Taiwan, 11% in Chinese mainland, only 2% in Europe, and only about 2% in Japan and South Korea combined.

In fact, 11% of China does not include internal sales of Hayes, ZTE and Datang, which, according to IC insight estimates, is 17%.

In 2018, there is no doubt that the output value of Chinese mainland design industry was further enlarged and continued to surpass Taiwan to become the second place.

In terms of chip manufacturing, it is the strongest in Taiwan.

Several major chip factories in the world, Taiwan Semiconductor Manufacturing Co Ltd, United Microelectronics Corp, Samsung, Intel Corp, Semiconductor Manufacturing International Corporation, global'foundry, Europe lags behind in this respect.

Generally speaking, we can also see that apart from the global United States, only China's semiconductor industry has the strongest momentum of development and poses the greatest threat to the United States. The ICT industry is supposed to be a dominant industry for Chinese. NVIDIA Corp, one of the top 10 global chip designers, and Huang Renxun are one of the co-founders. Similarly, there are Yang Zhiyuan, founder of Yahoo, Chen Shijun, co-founder of youtube, an Huagao and Broadcom Ltd's CEO Chen Fuyang, and so on.

Taiwan's semiconductor industry with Taiwan Semiconductor Manufacturing Co Ltd and MediaTek as the core is also doing very well.

Chinese mainland started late, but the momentum is the best.

Iconic events are needed to change human cognition

To change human perception of a thing, landmark events are needed as a watershed.

For example, the War to resist US aggression and Aid Korea marks that "the era when Western colonists could occupy a country by setting up a few cannons on an eastern coastline for hundreds of years is gone forever."

The ICT industry is the industry with the greatest advantage for Americans. Once in this contest, the world found that Huawei still continues to develop after a few years. In other words, everyone knows that even in its strongest ICT field, it is useless for Americans to block and cut off the supply of technology, and cannot hinder the development of Chinese science and technology companies.This will psychologically reconstruct people, refresh the world's understanding of China's scientific and technological capabilities, and enhance the self-confidence of the Chinese people.

For a long time, Americans have a sense of contempt for China and the Chinese, or the yellow race.

Yang Zhenning once wrote in Deng Jiaxian:

In 1971, I visited the people's Republic of China for the first time. In Beijing, I saw Jiaxian, who had been away for 22 years. Before that, after China's atomic bomb exploded in 1964, American newspapers had repeatedly mentioned that Jiaxian was an important leader of this cause. At the same time, there are rumors that Han Chun, who went to China in March 1948, was involved in China's atomic bomb project.

In August 1971, when I saw Jiaxian in Beijing, I avoided asking him where he worked. He only said "working out of town". But I asked him if Han Chun had participated in China's atomic bomb work, as rumors in the United States said. He said he didn't think so, but he would confirm the exact situation again and then tell me.

On August 16, 1971, on the eve of leaving Shanghai and returning to the United States via Paris, Shanghai leaders invited me to dinner at the Shanghai Mansion. Someone at the table sent me a letter written by Jia Xian, saying that he had confirmed that there were no foreigners participating in China's atomic weapons project, except for very little "assistance" from the Soviet Union as early as the end of 1959.

This short letter gave me a great emotional shock. Tears filled my eyes for a moment, so I had to get up and go to the bathroom for plastic surgery. Afterwards, I wondered why there was such a big emotional shock, that it was for the sake of national pride. Or are you proud to be the first to be a farmer? I still can't figure it out. "

Americans have always been unwilling to believe that the Chinese can come up with nuclear weapons on their own, which must have been helped by foreigners, which frustrated Yang Zhenning, and when Deng Jiaxian confirmed to him that China's nuclear weapons were really made by the Chinese themselves, this contrast made Yang feel emotional shock and burst into tears.

The Cox report in 1999 was also typical, which caused an uproar in the United States and became the focus of Sino-US relations and a hot event reported by the media. without any evidence, China accused China of stealing the US W88 nuclear bomb technology to complete the miniaturization of the nuclear bomb.

As a result, Wen Ho Lee, a Chinese scientist, was arrested, which eventually proved that Wen Ho Lee was innocent and had to be released. Wen Ho Lee was released in 2000 and received compensation from the US government and the media.

In this incident, from the media in the United States, to the US government, to US congressmen, they all seem to believe that it is impossible for the Chinese to master such advanced technology, so stealing American technology has become the only explanation. This is a sense of superiority that regards the Chinese as an inferior nation.

In fact, today in 2019, this mentality of Americans has not changed. Today, they spend a lot of energy accusing China of stealing intellectual property rights from the United States. The logic behind this seems to be that China's technological progress and development are made possible by stealing American technology.

China's major science and technology groups, including Aerospace Science and Technology, Aerospace Science and Technology Industry, China Shipbuilding heavy Industry, China Electric Technology, CNR Corporation, Huawei, ZTE, SAIC, State Grid, BOE, and so on, cannot develop except by stealing American technology. The Chinese themselves do not have the ability to develop science and technology.

In 2018, the United States imposed an embargo on CGN and CNNC on the grounds that it had stolen US nuclear technology. As a matter of fact, the United States has imposed an embargo, and today, the development of CGN and CNNC has not been affected, and various projects are progressing steadily. Well, now we all know that it is useless for the United States to impose a blockade on China in terms of nuclear technology.

The blockade and anti-blockade against Huawei can also become a landmark event, a watershed in the scientific and technological self-reliance of China's ICT industry, and not only change Americans' sense of superiority that "you can't develop if you don't steal my technology."

It can also change the fear of the Chinese that "our ICT technology companies will not be able to develop with US sanctions."

Both China and the United States have weaknesses, and the United States is not sure of winning.

What is America's weakness in the ICT industry?

For the ICT industry, the US blockade of Huawei is actually a gamble because Americans are not sure they will win.

Most of the global ICT manufacturing industry chains and brands are concentrated in East Asia.

Of the top ten chip buyers in the world, five are in East Asia (Samsung, Huawei, Lenovo, BBK, XIAOMI).

Of Apple Inc's 200 largest suppliers in the world, 139, or almost 70 per cent, are from East Asia.

At the same time, in terms of factories, only 62 of Apple Inc's top 200 suppliers are in the US, accounting for 7.7 per cent.

605 are in East Asia (China, Japan, South Korea and Taiwan), accounting for 75%, of which China accounts for 47.76%. Americans are actually marginalized in the manufacturing field.

Outside the East Asian industrial chain, the United States can be said to be an isolated island, so it must remain open, participate in and integrate into the East Asian industrial chain.

Most of the parts and machine manufacturing involved in the ICT industry have long been far away from the United States.

It is difficult for this industry chain to return to the United States, where unemployment is not high, manufacturing can only provide higher wages to grab jobs from the service sector, and demographic changes in the United States are difficult to support large-scale manufacturing jobs.

I have watched many documentaries made by CCTV about Chinese companies opening factories in the United States, and one feeling is: why are American workers generally so old and seem to be mostly white?

The greatest advantage of Americans lies in the field of semiconductor design and the manufacture of some semiconductor products. The United States is far away from East Asia, which is the manufacturing center of ICT, at a distance of more than 10,000 kilometers, which is a natural disadvantage.

Because the parts companies and brand companies gathered in the middle and lower reaches of East Asia hold the purchasing power of semiconductor products, in other words, I am a customer, as long as I have a choice, then I can buy either yours or his.

At present, American companies rely on their advantages in semiconductor technology, so that enterprises in the middle and lower reaches have no choice but to buy their products and have no other family, so as to participate in the industrial division of labor and make profits.

While the United States is promoting the blockade of Huawei, it is actually promoting China to increase investment in the core areas of the United States, and once China catches up in this respect and finds that it can completely realize the internal circulation of the ICT industry, without the need to buy from American companies thousands of miles away, then the US semiconductor industry, which is far from the core area of the East Asian industrial chain manufacturing, will only be gradually replaced.

Such stories have happened a lot. For example, Huiding Technology in Shenzhen, in fact, the largest fingerprint identification company in the world is FPC in Europe and Sweden, and when Chinese companies found that Huiding's domestic fingerprint identification chips can also be used, OPPO,VIVO and Huawei all purchased Huiding Technology one after another, and similar companies in Europe and the United States, which were soon far away from the East Asian industrial chain, did not have the opportunity to gradually withdraw from the industrial chain.

In this sense, Americans are also playing with fire. If Americans insist on blocking Huawei for one or two years, then for the United States, those American technology companies with relatively weak technological advantages will be the first to be affected, because a year later, they find that they have been replaced by local suppliers in China because of the crackdown on ZTE and Huawei by the US government. So that those who do not have the opportunity to participate in the market competition of China's local chip companies have the opportunity to develop and grow.

And once they are replaced, it is very difficult to enter the East Asian industrial chain. This is why it is so important for Americans to bring manufacturing back to the United States and the industrial chain back to the United States.

This is a competition, the Chinese are racing against the clock in the field of semiconductors, while the Americans are trying to maintain the advantage of semiconductor technology while bringing the industry chain back to the United States.

At present, China already has a large number of global brands, at the same time, the companies in the upper reaches of the Chinese industrial chain have also mastered a large number of parts manufacturing, camera modules, CMOS sensors, mobile phone processors, OLED display panels, mobile phone lenses, glass covers, metal processing, FPC, circuit boards and other parts technology have made breakthroughs and large-scale shipments.

If the industrial chain is always firmly in the hands of China, then in the end, only semiconductors will be left. Once there is a technological breakthrough, there is no need to lead American companies at all. As long as the technology reaches the same level, American products will be replaced quickly, and once replaced, they will almost never come back.

For Huawei, ZTE, OPPO, VIVO and XIAOMI, since they can be bought in Dongguan and Shenzhen, why should I buy them from the United States?

The ZTE incident in 2018 lasted almost three months from April to July. This incident has dealt a blow to the confidence of many people in China, but on the contrary, we are not aware of a problem, that is, the share of chips in the United States has been permanently reduced in ZTE's procurement system.

ZTE has stepped up its procurement of home-made, domestic and other non-American chips, which is a continuing loss for American semiconductor companies.

Huawei is seven times the size of ZTE and is one of only three hundred billion dollar companies in the world.

In 2018, the global procurement of semiconductors reached US $21.131 billion, an increase of 45.2%.

That's why shares of American semiconductor companies tumbled after Huawei's ban, which was much more affected than last year.

This also puts the United States in a situation:

If we insist on the ban, not only the semiconductor suppliers in the United States will be affected, after all, it is very painful to lose a big customer.

At the same time, Huawei's customers around the world will also be affected, including Huawei customers in the United States, Huawei network of the global stock is huge, the impact is global.

Even if this ban is lifted in the future, American semiconductor companies' share in Huawei will be permanently lost and reduced, which will actually weaken the advantages of American semiconductor companies.

In other words, once this decision is made, whether or not the ban is lifted, the United States will certainly suffer a lot of losses.

If this is not a good feeling, let's take an example. If the Chinese government suddenly announces a ban on Samsung or Apple Inc,

China's domestic supply chain can not be shipped to Apple Inc, China's parts supply chain enterprises are bound to suffer serious losses.

And once Apple Inc or Samsung is kicked out of the supply chain, it is difficult to enter again.

The willingness of the Trump administration to bear this loss shows that they are determined to weaken China's scientific and technological progress.

China's national strength is the strong support of Huawei, do a good job in a protracted war.

Although Huawei faces all kinds of difficulties, it is not only a technology company with 180000 people, but also a technology company with 1.4 billion people.

The biggest advantage of Huawei is its strong organizational ability.

To put it bluntly, even if Huawei's technical capabilities are exchanged with other domestic counterparts, Huawei can quickly catch up with its own organizational skills.

That is, as long as Huawei can survive this time, as long as the organization still exists, it can finally achieve complete de-Americanization survival and recover again after setbacks, just like the major military industrial enterprises in our country.

At that time, as American semiconductor companies were gradually removed from the supply chain by Huawei, the higher Huawei's share, the harder it would be to survive.

Therefore, it is not just Huawei itself that can keep Huawei. The Chinese government is also acting.

China's major military industrial enterprises have been cut off by the United States for many years. At that time, China was able to ensure the development of state-owned military industrial enterprises and, of course, the survival and development of Huawei.

This is not the first time China has experienced such an incident since the founding of the people's Republic of China.

ZTE in 2018, Zhongguang Nuclear, China Nuclear, China Electric Power, Jinhua.

In 2019, Huawei was banned and cut off by the United States.

But in fact, the most serious "economic cut-off" incident in Chinese history is far more serious than it is today, that is, the breakup between China and the Soviet Union that began in 1958, followed by the withdrawal of all experts from the Soviet Union to China in 1960, which did not affect a top Chinese technology company.

Of the 304 projects assisted since the first five-year Plan at that time, 103 had been completed in the first half of 1960. The remaining 201 projects are under construction. The Soviet Union withdrew all 1390 experts from China from July 28 to September 1, 1960, took away all drawings, plans and materials, stopped supplying important equipment, and greatly reduced the supply of complete sets of equipment and key components of all kinds of equipment. as a result, the construction of more than 250 enterprises and institutions in China has come to a standstill.

The biggest cause of the incident was the Soviet Union's proposal to build long-wave radio stations for military use on Chinese territory and to set up a joint fleet with China in China's territorial waters in exchange. This is a violation of China's sovereignty. Mao Zedong later recalled the incident and said: "in fact, it was 1958 when they fell out with the Soviet Union. They controlled China militarily, but we will not do it."

I would rather be cut off and break with the superpower than betray the national interests, as was the case in China 60 years ago, and it is still the same in China 60 years later.

In fact, the conditions facing China today are much better than they were then.

Whether it is Huawei and its upstream supply chain, or the scientific and technological progress of the ICT industry in the whole country.

We should not only be psychologically and mentally prepared for the short-term difficulties we face, but also have firm confidence in medium-and long-term victory.