Will Honor soon be on the US embargo list?

The relationship between the Chinese technology group Huawei and the US authorities can probably best be described with the words “it’s complicated”. Now another company from China is said to have become the focus of U.S. economic policy. Honor is a former subsidiary of Huawei. Coincidence?

Is the embargo list growing?

The economic policy dispute between China and the United States has determined the tense relationship between the Far East and the West for a few years now. In particular, the embargo list created on the part of the USA makes it difficult for Chinese companies to do business in the Western market. The smartphone giant Huawei is the undisputed number one. In the meantime, the Chinese company has been able to recover from the heavy blow, which had far-reaching consequences. Not only did Huawei have to develop its own operating system, but it also had to set up chip production and find new suppliers. The reason for this was the ban on US companies (e.g. Google) from working with Huawei.

Honor is likely to face similar problems now. According to internal sources, there are intense discussions about putting this company on the now infamous embargo list as well. The blockade of important hardware components and Android might have much more severe consequences for Honor than it did for Huawei. After all, the capital of the now spun-off subsidiary cannot be compared with that of Huawei. However, it has not yet been possible to find an agreement. According to an article in the Washington Post, the responsible authorities are primarily arguing about the sense and purpose of such a serious step.

Multiple US authorities are involved

Anyone who now thinks that momentous decisions such as an embargo may only be made by the U.S. Department of Commerce is wrong. Here one sets rather on the co-operation equal of several authorities. In particular, a meeting has taken place between responsible members of the Department of Commerce, the Department of State, the Department of Energy and the Department of Defense. This is hardly surprising in view of the impact it has. After all, the relationship between the U.S. and China has been so tense for quite some time that one can almost speak of a new edition of the Cold War.

If the Washington Post report is to be believed, the pro side is led by the Department of Energy and the Department of Defense. They are said to be ready for anything and determined to add Honor to the “entity list” that already includes the former parent company. However, the Ministry of Commerce and the Ministry of Foreign Affairs are said to be opposed to the project. Accordingly, they are in a tricky stalemate situation, so to speak. In this case, U.S. law stipulates that such a decision be made a “matter for the boss. Consequently, U.S. President Joe Biden would ultimately have to decide on the Causa Honor if the authorities fail to reach a consensus.

The former subsidiary company

By cutting ties with Huawei, Honor achieved the unthinkable in November 2020. After all, one would not have thought that the smartphone company could really survive without the economically strong parent company. However, it is highly questionable whether the decision was quite so voluntary. After all, it is also obvious that Honor took the plunge and wanted to escape the trade embargo of the US by leaving Huawei. Honor was sold by Huawei and now operates under the auspices of a completely new group of companies. The official reason given by Huawei at the time was that they were simply no longer able to provide enough hardware components for their own company and the subsidiary.

In particular, the loss of chip suppliers caused a lot of problems for the Chinese tech company. In addition to the already existing chip shortage, which can still be felt now, it was simply not possible to continue meeting the high demand for smartphones and tablets. Honor’s exit was supposed to alleviate this problem by never making Huawei’s subsidiary a target of the trade embargo. Not yet, at least. The advantages for companies unaffected by the embargo are obvious, especially when you make a direct comparison with Huawei. Honor, for example, is still allowed to offer its smartphones with all Google services (Android and Google Play Store) and does not have to set up its own ecosystem.

National security is threatened

But what stone got the discussion about Honor rolling in the first place? The reason for the current discussions about Honor is a request from the Republicans from August of this year. These are of the opinion that the encapsulation of Honor is just another strategic move by Huawei. The giant company only wants to sell off the small subsidiary to avoid the threatening consequences of a trade embargo and to be able to continue selling its smartphones in the US. If Huawei is really still the string-puller at Honor, the concerns would be quite justified (following US logic).

After all, the US has emphasized several times in the past that Huawei is a threat to the national security of the United States. According to the logic, Huawei probably only wants to sell its devices in the US to spy on US citizens. To date, Huawei vehemently denies these allegations. In their letter, the total of 14 MPs state that they now have to fear similar dangers with Honor.

The nail in the coffin for Honor?

Honor’s Western business would perish if the U.S. authorities or Joe Biden decide to put the company on the embargo list. Unlike Huawei, a loss of suppliers and Google services would not only mean slight economic losses. Instead, the entire existence is at stake. Now, too, many people are wondering if and when the U.S. will reverse its decision to put Huawei on the entity list. The decision, which was made by Donald Trump in 2019, has not yet been reversed by acting President Joe Biden. The Chinese technology group therefore does not need to hope for a recovery of sales in Western countries any time soon.