China Will 'Nuke Bomb' Apple With Endless Investigations in Retaliation for Huawei Penalties, State Media Says

The Chinese government may enforce several "countermeasures" against U.S. companies—including Apple—in retaliation for the Trump administration's plans to crack down on shipments of semiconductors to Chinese telecommunications giant Huawei from chipmakers worldwide.

According to analysts cited in the state-run Global Times, such retaliatory measures from China towards large American companies such as Apple, Cisco and Qualcomm could be akin to a "nuke bomb."

"China will launch rounds of endless investigations on those firms, just like swords hanging over their head. It will dampen investors' confidence and squeeze their income in the Chinese market," an anonymous insider told the outlet. Global Times also reported Friday that government sources informed them of plans to add U.S. companies to a list of unreliable entities, if Huawei gets pinched by the U.S. government.

That same day, the U.S. Department of Commerce announced new regulations strengthening the prohibition on exports of critical electronics such as semiconductors to Huawei.

The action is aimed at preventing the company, which reported $100 billion in revenue in 2018, from dominating the global semiconductor market, ostensibly for national security reasons, and is only the latest move by the Trump administration to curb China's trading ability.

Huawei has historically relied on U.S. technology firms to support its operations. One analyst told Reuters last year after restrictions were first announced that it would come as a surprise if the company's in-house chipmaker "can make it without any U.S. suppliers."

According to an editorial in The Washington Post last October, Apple has made many compromises to do business in China that included hiding an emoji of the Taiwanese flag from its keyboard amid the Hong Kong protests; deleting Quartz from the Chinese version of its app store due to the news outlet's coverage of the protests; and removing the app. "Apple justifies acceding to despotic demands by arguing that it is the cost of operating in China, and that the Chinese people are better off with a big U.S. firm around than without," said the editorial.

Requests for comment to Apple, the Commerce Department and the Chinese Foreign Ministry on Saturday were not returned.

"China should implement these countermeasures to the extent that the U.S. dare not ask for a mile after being given an inch," He Weiwen, a former senior trade official and an executive council member of the China Society for World Trade Organization Studies, told the Global Times, before suggesting the punitive measures China may be planning against the U.S. companies. He advised the Chinese government to conduct a "thorough investigation into the U.S. move and to 'let them feel the pain.'"

On Wednesday, the Trump administration added another year to the government's export ban targeting Huawei and fellow Chinese telecommunications giant ZTE.

The Global Times report Friday relied on a "source close to the Chinese government" saying China will impose restrictions against Qualcomm, Cisco and Apple. The Chinese government is also looking to suspend purchases of Boeing planes. The source repeatedly referred to the Trump administration plan to limit Huawei's global purchasing power as a "suppression" of free market trade.

"We must be clear that coping with U.S. suppression will be the key focus of China's national strategy. We should enhance cooperation with most countries. The U.S. is expected to contain China's international front lines, and we must knock out this U.S. plot and make China-U.S. rivalry a process of U.S. self-isolation," read the report.

The Commerce Department first added Huawei and overseas affiliates to its Entity List in May 2019, requiring that a license first be obtained before exporting or transferring any electronics to the company that could have national security implications, such as computers and telecommunications equipment.

There would be a "presumption of denial" for any such license, according to the department. The move substantially curtailed the ability of U.S. corporations to do business with Huawei.

China responded with immediate objection, warning at the time that it would seek to create an "unreliable entity list," widely interpreted as a pretext for targeting U.S. companies.

The Commerce Department said that Huawei has since worked to evade its Entity List designation, relying increasingly on in-house production or non-U.S. production enabled through U.S.-made software and technology.

The new regulations announced on Friday would seek to close this loophole by requiring that any product derived from U.S.-enabled technology—which is itself already subject to export restrictions—also be licensed by the Commerce Department before shipment to Huawei.

"There has been a very highly technical loophole through which Huawei has been able in effect to use U.S. technology with foreign fab producers," U.S. Commerce Secretary Wilbur Ross told the Fox Business Network on Friday. "We believe that will have a very powerful impact because we never intended that loophole to be there."

These new restrictions will not go into effect until September.

Customers gather as they take part in a class to learn how to use their iPhones at an Apple Store on January 7, 2019, in Beijing, China. Chinese state media reported that the country is considering retaliatory measures against U.S. companies, such as Apple, after the Trump administration moved to clamp down on suppliers of the Chinese telecoms giant Huawei. Kevin Frayer/Getty

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