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Intel survived bid to prevent millions in sales to China's Huawei, sources say

Intel logo is visible near computer motherboard in this image shot January 8, 2024

WASHINGTON, March 12 (mod1s) - Intel has survived an attempt to prevent hundreds of millions of dollars' worth of chip sales to Huawei, two individuals familiar with the case said, giving one of the world's major chipmakers additional time to sell to the severely sanctioned Chinese telecommunications carrier. 

U.S. President Joe Biden has long been under pressure to withdraw a license, awarded by the Trump administration, that permits Intel (INTC.O), opens new tab to export powerful central processors to Huawei for use in laptops. 

The effort came from Intel competitor Advanced Micro Devices (AMD.O), opens new tab, which felt it was unjust that it did not have a license to sell identical chips to Huawei and from China hawks, who are pushing to halt all sales to the Chinese giant. 

Intel's ability to hang on to a license to sell chips while a rival could not obtain similar permission demonstrates the uneven and uncertain terrain companies face as the U.S. seeks to limit Beijing's access to sophisticated American technology, especially to a heavily sanctioned company like Huawei.

It has also enabled Huawei to preserve a modest but rising portion of the worldwide laptop market, while AMD was deprived of hundreds of millions of dollars' worth of sales to the Chinese sanctioned corporation, data indicated. 

"The majority of the CPUs used in Huawei's laptops is still from Intel, so any further limitation on it would make Huawei's laptop offering quite challenging," said Emma Xu, an analyst at technology industry research company Canalys.

Intel, Huawei, the Commerce Department and the White House refused to comment. AMD did not reply to a request for comment. Describing the limits on Huawei as economic bullying," the Chinese Embassy in Washington asked the United States to "stop overstretching the idea of national security" to "crush Chinese firms." 

Huawei, a symbol of the years-long technological struggle between Washington and Beijing, was put to the trade restriction list by the Trump administration in 2019 for suspected sanctions breaches. Huawei has previously denied guilt.

Being included to that list typically bans U.S. vendors from selling anything to the targeted firm. 

But in late 2020, shortly before former President Donald Trump left office, the Commerce Department gave several U.S. Huawei suppliers -- including Intel -- special clearance to sell specific components to the telecommunications equipment giant. 

AMD asked for a license to sell identical processors in early 2021 after President Joe Biden assumed office but never got a response to its application, a person said. 

Reuters could not identify why Intel was awarded its license and AMD was not. But the effect on CPU chip sales to Huawei was immediate, with the percentage of sales of Huawei laptops containing AMD processors plummeting from 47.1% in 2020 to 9.3% in the first half of 2023, an internal AMD presentation using data supplied to NPD and GfK indicated. 

Intel's proportion of sales of Huawei laptops featuring its processors climbed throughout the time from 52.9% to 90.7%, according to the presentation. 

That left the two firms with upwards of a $512 million dollar "estimated revenue discrepancy" by early 2023, according to the presentation. 

Circana, the business founded last year from the merging of NPD and IRI, and GfK, which is now controlled by NIQ, refused to comment. 

The drive to withdraw licenses looked likely to reap fruit last year when a government official announced publicly that Huawei's licensing policy was under review and privately promised firms the Commerce Department will resolve the licensing gap, sources said. 

But by late last year, the government had abandoned preparations to withdraw licenses, without citing a reason, said a person familiar with the situation and a U.S. official, who cautioned the proposal may be resumed at a later point. 

Reuters could not uncover why the Commerce Department delayed its efforts to terminate Intel's license. 

But the move occurred as Washington made steps to mend ties with Beijing, including reestablishing military-to-military discussions, after a Chinese spy balloon's discovery in U.S. airspace last winter strained relations between the two countries. 

Intel's license is anticipated to expire later this year, and is unlikely to be extended, sources added. Meanwhile, Huawei continues to depend largely on Intel CPUs for its laptops, its website indicates, opens new tab. 

In China, Huawei's proportion of sales has climbed from 2.2% in 2018 to 9.7% for 2023 when it displaced Dell as China's third biggest laptop maker, according to Canalys.


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