How the Arrest of the Huawei Executive can Hit Apple and US Technology Companies

The arrest of the Huawei chief financial officer at the request of the United States is already causing repercussions for US companies. And Apple may be a significantly impaired.

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The arrest of the Huawei chief financial officer at the request of the United States is already causing repercussions for US companies. And Apple may be a significantly impaired.

China on Monday denounced the “inhuman” treatment imposed on the financial director of the telecommunications company Huawei, Meng Wanzhou, detained in Canada at the request of the United States and claiming to have health problems.

The head of Huawei, the world leader in mobile telephony and telecommunications equipment, was arrested on December 1 at the Vancouver airport.

Released on bail

Meng has been released from prison and will pay a $10 million bail money, a judge in Canada said on Tuesday. In order to be released, Meng accepted to pass the passport and live in one of the houses he holds in Vancouver. She will also pay for permanent security detail and wear a GPS brace on her ankle.

If she is extradited to the US, Meng will face multiple conspiracy charges to defraud more financial institutions, with a maximum penalty of up to 30 years for each prosecution.

China’s early strong objection

No effort is needed to realize how The Global Times – the Chinese state newspaper – is interpreting the arrest of Meng Wanzhou, the financial director of electronics giant Huawei.

“Banishing Chinese companies such as Huawei will isolate the United States from the digital economy of the future,” a headline says.

Vice Foreign Minister of China Le Yucheng summoned US ambassador Terry Branstad on Sunday to voice China’s displeasure.

“Le Yucheng pointed out that the US side has seriously violated the legitimate rights and interests of Chinese citizens, and the nature of the violation is extremely bad,” the foreign ministry said in a statement.

“The Chinese side firmly opposes this and strongly urges the United States to attach great importance to China’s solemn and just position,” it said.

It is this threat of isolation that can leave US tech companies on the alert. Meng has been incarcerated for 12 days in Canada. The CFO was detained at the request of the United States on charges of breaking economic sanctions imposed by the US government on Iran – which it denies.

Meng-Wanzhou

Difficulties for American technology giants

That detention should mean, at least, more market difficulties for the American technology giants, who have managed to establish themselves in China’s important market.

About 20 percent of Apple’s revenue last year came from China. “Some Western countries are resorting to political means to resist Huawei’s attempts to enter their markets,” said an article from The Global Times.

“Failure to ensure a reciprocal opening means that their companies will not receive any benefit from China’s digital economy,” the Chinese newspaper said.

Blocked sales

China has long been complaining that the United States is unfair to its major technology firms, in particular, Huawei, which is the closest Chinese company to Apple’s major competitor.

Although it still does not come close to the annual profitability of the American company (Apple’s profit is $266 billion against Huawei’s $100 billion), the Chinese company outperformed the global smartphone sales earlier this year. Huawei was only behind Samsung in this respect.

On Tuesday, a Chinese court banned the sale of some old iPhone models as a result of a lawsuit over patent breaches between the US Apple and Qualcomm. The company claims that Apple used in some iPhone models a chip made with technology patented by Qualcomm, without proper recognition.

The technology involves the redefinition of the size of the photos taken with the smartphone and the ability to use the touchscreen for the use of applications. The two companies are fighting for similar actions by Qualcomm in several countries.

Most experts estimated that China would reject Qualcomm’s request. Therefore, the banishment of the iPhone models surprised. Apple has appealed which guarantees that the company can keep the handsets on sale in China until the final decision of the Justice.

There is no direct link between this measure and the controversy surrounding Huawei. But the fact that it was adopted after Meng’s arrest and in the midst of the commercial war of import tariffs makes it seen as a demonstration of strength on the part of the Chinese.

5G-Huawei

Huawei’s true success story, however, does not come from the smartphones themselves, but from the devices that make it make sense to have a technology phone. Huawei is positioning itself as a provider of 5G technology, the next generation of the mobile phone network.

In short, if China thinks that the United States is unfairly harming Huawei’s opportunity to be one of the protagonists of 5G technology, it may retaliate against Apple. And the American giant may feel the effects of this aggression.

Protection of Huawei products

Wedbush consultancy estimates that 350 million iPhones are coming at a time when most users are looking for an upgrade. About 70 million of this total is in China. Even without official intervention, the publicity given to Huawei’s case and the blocking of iPhone models could affect Apple’s revenues from China.

Outside the Vancouver court where the Huawei CFO was heard on Monday (10), members of the Chinese community in Canada clearly stated how they felt. They carried placards saying “Release, Meng!” and told reporters that the United States was bullying Huawei and, by extension, China.

Memos obtained by Yahoo News revealed that several Chinese companies had taken steps to promote among their employees the use of Huawei products instead of Apple items. The document encourages employees to exchange their iPhones for Huawei cell phones in exchange for benefits offered by the company.

Apple is the job creator

But there is one aspect of Apple’s success in China that could help contain the fury of the Chinese government. Apple not only sells its equipment in China but also produces it there. In 2017, Apple estimates that, between production, retail, and distribution, it has generated 4.8 million jobs in the Asian country.

In addition, the American company has opened research centers that employ some of China’s brightest new graduates. They have a relationship with the Chinese government because they have been a big employer. By burning Apple, China would be, to a certain extent, burning the house itself.

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