The Huawei Case and Weaponized Interdependence

Key Insight

Huawei, China's leading telecommunications equipment supplier, became a central focus of U.S. government concern, viewed less as a direct espionage threat—though Chinese spycraft support was assumed—and more as a symbol of 'everything we had done wrong with our tech competition with China.' U.S. officials believed Chinese firms were 'effectively inside the system' due to their reliance on U.S. software and machinery, making it difficult for America to 'out-innovate' them and then restrict access to these innovations. Huawei’s rapid ascent, marked by R&D spending comparable to American tech giants like Microsoft, Google, and Intel, and its position as TSMC's second-largest customer, was perceived as a strategic rather than purely commercial challenge.

International responses to Huawei varied considerably. Australia outright banned Huawei from its 5G networks, with security services concluding the risks were unmitigable, a decision soon adopted by Japan and New Zealand. In Europe, while close U.S. allies like Poland imposed bans and France implemented quiet restrictions, Germany, a significant exporter to China, faced Chinese threats of 'consequences' if it banned Huawei. The UK initially assessed that Huawei system risks could be managed without a ban, reflecting a broader European perspective that China's technological rise was inevitable and that attempts to stop it might be futile, contrasting with the U.S.'s more confrontational stance.

The U.S. administration, particularly the National Security Council, adopted a zero-sum perspective, interpreting Huawei's expansion as a direct threat from a national champion of America's primary geopolitical rival. To impede Huawei, the U.S. initially prohibited the sale of U.S.-made chips to the company, a significant blow given the ubiquity of Intel chips and other irreplaceable analog components. Recognizing that advanced chip fabrication had largely moved offshore, the U.S. leveraged 'weaponized interdependence' in May 2020 by expanding restrictions. New Commerce Department rules barred the sale of *any* goods made with U.S.-produced technology or software to Huawei, effectively disconnecting it from the entire global chipmaking infrastructure, as even non-U.S. fabs and designers rely on American tools and software. This action compelled Huawei to divest parts of its smartphone and server businesses and delayed China's 5G network rollout, prompting other nations, including Britain, to subsequently ban Huawei due to the company's inability to service products without U.S. chips.