US Free Market Principles

    This post is a double of entries from my Telegram channel. He considered it necessary to share the facts discovered with the habrabschestvo.

    Once I told you about the case when the CFIUS service under the US Department of Homeland Security forced the Chinese to sell LGBT social networks, because it is worthless that Beijing has so much data about citizens “the most free”. Then it surprised me, but this is quite a common practice. For example, the Chinese were also forced to sell their share in the medical startup PatientsLikeMe of the Chinese for the same reasons. For a moment, investors from the Middle Kingdom have acquired a majority stake in the round of $ 100 mults.

    There is also a story about Pamplona Capital Management, in which Michael Friedman's LetterOne is actively investing. They were forcedsell Cofense, which they bought with BlackRock for $ 400 million. Cofense is engaged in cybersecurity and develops solutions against phishing attacks. And the motive of CFIUS is only that the share of foreigners is too great. How do you like that? Of course, I heard about similar methods in one country, but there at least everything is clearly regulated and affects only the media.

    And now about the main thing - Huawei, with thoughts about which there was a desire to write all this. Many do not know, but the debate between the telecommunications giant and the states arose in the early 2000s. Moreover, Cisco's claims were partially true, but then everything began to look like some kind of theater of the absurd.

    In 2008, Huway was banned from buying 3Com, which was subsequently absorbed by HP. Do you know why? Because Huawei was closely connected with the Chinese army and this decision was made for reasons of national security. That is, when Amazon, Microsoft, Google or someone else responds to contracts with the Pentagon and then participates in M&A transactions, then everything is fine. To others - it is impossible.

    But the agile Chinese have found a way to strengthen their presence in the US market. So there was a joint venture between Huawei and Symantec. Everyone lived peacefully until in March 2012 Symantec sold his share of the company from the Middle Kingdom for half a yard of dollars. After that, all sorts of clauses reappeared and already in October 2012, the Congress banned any mergers and acquisitions for Huawei and ZTE. Yes, yes, the second they, too, have been babbling quite a while.

    See what happens next. With telecom, everything seems to have calmed down, but here's the bad luck, ZTE smartphones were to the taste of the American consumer. ZTE's share of the U.S. smartphone market in Q1 2018 was 10%. And suddenly it turns out that the Chinese violated the sanctions regime against Iran and the DPRK by selling devices made with parts from the United States to these countries. After that, sanctions are introduced against the company.

    Time passes, sanctions are lifted. True, it is worth mentioning that the United States has deposited $ 400 mults and introduced a kind of condition - if ZTE will behave well for 10 years, then the money will be returned back. However, forcing information about the threat to national security due to some Chinese company in all media does not pass without a trace. Already in Q4 2018, the share of ZTE fell to 4%, and Huawei unexpectedlyoccupied 11% of the US market. Moreover, in Q1 2019, Huawei was ahead of Apple in global shipments.

    And what started is still happening. But do not think too much, the reason is in Chinese hackers and surveillance of the Americans. Therefore, the states thoroughly rebelled against Huawei. I am more surprised by their methods. To one degree or another, Huawei refused to cooperate with Google, Broadcom, Intel, Qualcomm, Xilinx and Western Digital. It is important to mention that these are targeted sanctions against one particular company.

    It turns out that in addition to the “force to sell” mechanism, their toolkit also has a “ban on selling”. Yes, ours also once bought a golden share, but what does it mean too? It was a very elegant solution, which, at a minimum, looks market-like. Although they were convinced that Volozh was pressed, but they were pressed from Galitsky not to understand this. Are there any more precedents? - You still won’t find such ones, because not only American companies got up against Huawei.

    The English ARM, which is owned by the Japanese SoftBank, forbade Huawei to use its architecture. A ban on the use of microSD cards became the eventful ending of the current week. This decision was made by the SD Association, a non-profit organization led by the brave guy from SanDisk, the Western Digital brand. The world is small.

    Let's drop my sarcasm. It is assumed that the Chinese are really engaged in espionage. But in fact, we have two situations: in the first, after unilateral accusations from the United States, an instant reaction of the entire industry followed; in the second, after accusations by the NSA of total wiretapping by the top officials of a number of states, nothing happened at all.

    Apparently the free market is when you are free to do what you like on it.

    Update: for the charges of stealing commercial secrets in Huawei address the US stands fact finding backdoors. However, the hale user yleo draws attention to the fact that dozens of backdoors were found in the products of Broadcom , Intel , Cisco, HP and others . And some companies were caught deliberately faking the elimination of "unintended vulnerabilities." xfaetas mentioned Vodafone's claims to the Chinese telecommunications giant. And I remembered one very interesting story

    about wiretapping people from the Greek government in 2004-2005, in which Vodafone and Ericsson were involved. In 2011, there was direct evidence that the U.S. Embassy in Athens was behind all this.

    In an article from vladimirfedorov528, a very good description of the principle of the sanctions mechanism against Huawei was found.
    Under normal circumstances, the US government can tightly control only public procurement. Contacts of ordinary companies such as Google are not controlled.
    But there is a special law Act of 1977 (International Emergency Economic Powers Act), which gives the president the authority to regulate the commercial activity of ordinary firms during the "emergency". So since 1977, the act has been applied about 30 times, introducing various sanctions, mandatory for all American companies. These sanctions are monitored by the U.S. Department of Commerce.
    On May 15, 2019, Trump introduced a “state of emergency” that allows Huawei to be banned for all US companies. The official reason is the "risk of espionage." That is, while we think that in sunny California everything is also sunny, in the whole country of emergency due to the discovery of backdoors in Huawei products.

    Update [2]: Andrey Sebrant at @techsparks spoke about a new episode in Huawei’s misadventures. After the companies banned the use of Google services, microSD cards and much more in their future smartphones, it came to participation in international alliances involved in the development of common technologies used around the world. The WiFi Alliance has suspended Huawei’s participation with the words:
    Wi-Fi Alliance is fully complying with the recent US Department of Commerce order without revoking Huawei Technologies membership. Wi-Fi Alliance has temporarily restricted Huawei Technologies participation in Wi-Fi Alliance activities covered by the order.
    A member without the right to participate in the work is an interesting status. It seems that the term “technology balkanization”, which is increasingly found in notes in recent days, will become a sign of the future: if one country can command the work of international groups, there will inevitably be other countries that will begin to form their groups and alliances. Another confirmation of Nordstrom’s forecasts: globalization is curtailed, competing blocs are replacing it.

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