The Trump administration has announced on Thursday that it will finalize regulations that ban the United States government from working with contractors who use technology from five Chinese companies: Huawei, ZTE, Hikvision, Dahua and Hytera Communications.
The ban was first introduced as a provision in the 2019 National Defense Authorization Act (NDAA). The regulation will prevent government agencies from signing contracts with companies that use equipment, services and systems from the companies, its subsidiaries and affiliates due to national security concerns.
The government contracting (GovCon) workforce has cited challenges regarding the ban, noting that the banned companies are global market leaders in their respective categories, making it harder to find alternatives.
Huawei and ZTE are two of the largest telecom equipment providers in the world; Dahua and Hikvision are two of the biggest providers of surveillance equipment and cameras; and Hytera is a market leader for two-way radios.
The Trump administration will require agencies to conduct a national security analysis before they grant any waivers. The new regulation will also aim to limit the companies’ influence on the U.S. economy companies a choice: do business with the U.S. government or with the Chinese firms.
In a previous announcement in May 2020, the Pentagon noted that under the new regulations, chip makers using U.S. equipment are now required to have a license before the suppliers ship components to Huawei or any of its subsidiaries.
Xiaomeng Lu, China practice lead at technology consultancy Access Partnership who previously worked at Information Technology Industry Council (ITI), noted that the U.S. restrictions could "shoot American companies in the foot."
Lu stated on Friday that the restricted regulatory change will cause U.S. chip companies to lose significant sales to the Korean, Taiwanese, Chinese and Japanese competitors. As the revenue stream continues to rise, foreign chipset companies will secure new investments, research and development in the next generation semiconductor technologies without the U.S. as a major competitor.