miércoles, 5 de junio de 2019

Disrupting supply chains

On May 16th, US Government introduced Huawei in the Entity List, a black list of companies that no American companies could supply specific items under EAR (Export Administration Regulation). This means, basically, the ban to supply the Chinese company any software or hardware product developed in the USA. However, this ban is not only for US-Persons but also for non US-persons. In the case of foreing products that contains US-products, the supply to Huawei is also forbidden in case they contain more than a de minimis amount of controlled US content are subject to the EAR (25% of the value). The best explanation I have found of these restrictions is in this post.

Look around yourself and pick up any device that gives you access to digital services. Or think about any of the applications that you use on a daily base. Few of these products have been developed completely in just one country, usually all of them are made of different hardware or software components, each of them build up in geographical areas on different sides of the international borders.  So now imagine how difficult is to be safe  of not being breaking the restrictions if you are supplying a technological product. You would have to begin to made complex calculations in case you are using any US component. Therefore, the safe route is cutting relationships with Huawei if possible.

And this is what is happening. Important companies around the world are stopping to supply products to company for the fear of breaking the rule. Software and hardware products that are needed for Huawei products should be substituted by others. A complete redesigne and rebuild of the company flagship products will be needed. The lesson from this affair is how easy is to disrupt the supply chains even of the most powerful companies.

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