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Free market principles as understood by the United States

by admin

This post is a take entries From my Telegram channel. I felt it necessary to share my findings with the hubracommunity.
One day I’ll give you told you about the case when the CFIUS under the U.S. Department of Homeland Security forced the Chinese to sell the LGBT social network, because it was unacceptable that Beijing had so much data on the citizens of the "freest. It surprised me at the time, but it’s quite common practice. For example, the Chinese share in the medtech startup PatientsLikeMe, too made to sell and for the same reasons. For the record, investors from the Celestial Empire bought a majority stake in the round for $100 mul.
There is also a story about Pamplona Capital Management, in which Mikhail Fridman’s LetterOne is actively investing. Their forced by to sell Cofense, which they bought along with BlackRock for $400 million. Cofense is in the cybersecurity business and develops solutions against phishing attacks. And CFIUS is only motivated by the fact that it’s too big a share of foreigners. What do you make of this? Of course, I heard about similar methods in one country, but at least there everything is clearly regulated and involves only media.
And now for the main thing – Huawei, the thought of which made me want to write all this. Many people do not know, but the debate between the telecom giant and the states began back in the early noughties. Moreover, Cisco’s claims were partially true, but then everything started to look like a theater of the absurd.
In 2008, Huawei was banned from buying 3Com Corporation, which was later absorbed by HP. Do you know why? Because Huawei was closely connected to the Chinese army and the decision was made for national security reasons. So, when Amazon, Microsoft, Google, or anyone else responds to contracts with the Pentagon and then participates in MA deals, it’s okay. Others can’t.
But the nimble Chinese found a way to strengthen their presence in the U.S. market. Thus, a joint venture between Huawei and Symantec appeared. Everyone lived peacefully until Symantec sold its stake in the company from China for half a yard in March 2012. After that all sorts of whispers resurfaced and in October 2012, Congress banned all mergers and acquisitions for Huawei and ZTE. Yes, they’ve been harassing the latter for a long time, too.
Look what happens next. Everything seems to have calmed down with telecom, but here’s the trouble, smartphones from ZTE have come to the taste of the American consumer. ZTE’s share of the U.S. smartphone market in Q1 2018 was 10%. Suddenly it turns out that the Chinese have 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 imposed on the company.
Time passes, sanctions are lifted. It is worth mentioning that the U.S. deposited $400 mul and imposed a kind of conditionality – if ZTE behaves well for 10 years, the money will be returned. However, forcing information about the threat to national security because of some Chinese company in all media does not go away. Already in Q4 2018 the share of ZTE fell to 4%, and Huawei unexpectedly took 11% of the U.S. market. Moreover, in Q1 2019, Huawei Has surpassed Apple in terms of shipments on the global stage.
And what is still happening today began. But don’t get any ideas, the reason is Chinese hackers and spying on Americans. That is why the states have taken a big turn against Huawei. I am more surprised by their methods. Google, Broadcom, Intel, Qualcomm, Xilinx, and Western Digital have all denied Huawei cooperation to one degree or another. It is important to mention that these are targeted sanctions against one particular company.
It turns out that in addition to the "make sell" mechanism, they also have "prohibit sell" in their toolkit. Yes, ours once bought a gold stock, too, but what do you mean, too? It was a very elegant solution, which, to say the least, looks market-like. Although those who believe that Volozh was pinned down and Galitsky was robbed of it can’t understand it. Are there any other precedents? – You won’t find any anyway, because it’s not just American companies that have gone ballistic against Huawei.
English ARM, which belongs to Japanese SoftBank banned Huawei from using its architecture. And the eventful finale of this week was the ban on the use of microSD cards. This decision was made by the SD Association – a nonprofit organization, whose board of directors is headed by a brave guy from SanDisk, a brand of Western Digital. Small world.
Let’s drop my sarcasm. It is admitted that the Chinese do engage in espionage. But in fact we have two situations: in the first, the unilateral accusations by the U.S. were followed by an immediate industry reaction; in the second, after accusations of total wiretapping by the NSA, nothing happened at all.
Apparently a free market is when you are free to do whatever you want in it.

Update : for charges of stealing trade secrets against Huawei by the U.S. stands fact of backdoor detection. However, the hubra user yleo Draws attention to the fact that in products Broadcom , Intel , Cisco, HP and others have been found dozens backdoors And some companies have been caught knowingly fake elimination. "unintentional vulnerabilities."
xfaetas mentioned claims Vodafone to the Chinese telecommunications giant. And I remembered one very interesting story about the wiretapping of people from the Greek government in 2004-2005, in which Vodafone and Ericsson were involved. In 2011 there was direct evidence that U.S. Embassy officials in Athens were behind it all.

In article from vladimirfedorov528 I came across a very good description of how the sanctions mechanism works in relation to Huawei.

Under normal circumstances, the U.S. government can only tightly control government procurement. Contacts of ordinary firms, such as Google, are not controlled.
But there are special law act of 1977 (the International Emergency Economic Powers Act), which gives the president the power to regulate the commercial activities of ordinary firms during "emergency situations". Thus, since 1977, the act has been applied about 30 times, imposing various sanctions that are binding on all U.S. companies. The implementation of these sanctions is monitored by the U.S. Department of Commerce.

On May 15, 2019, Trump imposed a "state of emergency" that allows Huawei to be banned from all U.S. companies. The official reason is "risk of espionage." So while we think it’s still sunny in sunny California, there’s a nationwide state of emergency over the discovery of backdoors in Huawei products.

Update [2]: Andrew Sebrant at @techsparks talked about new episode in Huawei’s misadventures. After the companies banned the use of Google services, microSD cards and more in their future smartphones, it came to participation in international alliances engaged in the development of common technologies used around the world. The WiFi Alliance suspended Huawei’s participation with the words :

Wi-Fi Alliance is fully complying with the recent U.S. 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 is an interesting status. It seems that the term "balkanization of technology", which has been appearing more and more often in the notes of recent days, will become a sign of the future: if one country can command the work of international groups, it is inevitable that other countries will start to form their own groups and alliances. A further confirmation of Nordström’s predictions: globalization is winding down, to be replaced by competing blocs.

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