Huawei Case Shows Failure of US Export Control Strategy, Think Tank Says
The U.S. government’s failure to cripple Huawei through export controls shows that it needs a different strategy to counter foreign threats to American technology competitiveness, the Information Technology and Innovation Foundation said in a new report last week. Although the U.S. should still use export controls in certain situations, they should always be applied with allies and used sparingly so as not to use up America’s “technology capital,” the think tank said.
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“The failure of U.S. policies against Huawei evidences an outdated rationale to address Chinese mercantilism,” it said. The U.S. “is using yesterday’s tools against a fundamentally different adversary; it needs a realistic, not hubristic, policy approach.”
ITIF argued that Huawei is a “more innovative” technology company today than it was before the first Trump administration imposed sweeping export restrictions on it, including by placing it on the Entity List in 2019. The think tank said this caused Huawei to develop its own operating system, build its own chips and buy equipment from other nations, adding that it remains the world’s largest telecom equipment manufacturer and has expanded its global market share in that field.
ITIF also noted that the Huawei controls led to retaliation from Beijing -- which may have led to the development of China’s unreliable entity list (see 1905310060) -- and hurt the sales revenue of U.S. companies that could no longer ship to Huawei without an export license. ITIF estimated that those export restrictions caused U.S. companies to lose at least $33 billion in sales between 2021 and 2024.
The report also examined what ITIF believes might have happened if the U.S. never imposed export controls on Huawei. The think tank said sales from U.S. firms to Huawei could have helped sustain American market share in key technology products and funded research and development, which could have prevented China from capturing that share.
ITIF used the example of Teradyne, an American manufacturing company specializing in automated test equipment for the semiconductor industry. Because U.S. export controls against Huawei weren’t coordinated with allies, ITIF said, Teradyne’s Japanese competitor, Advantest, was able to take Teradyne’s place as a Huawei supplier. Advantest’s global market share for semiconductor testers grew from 43% in 2020 to 58% in 2024, while Teradyne’s “declined roughly in a similar, inverse proportion.”
The U.S. needs a more "realistic" approach to address similar foreign technology threats in the future, ITIF said, arguing that the Huawei export controls were “a legacy of an earlier era, when America could impose sanctions without significantly harming its competitiveness and could hinder the production capabilities of its adversaries.”
The report suggested that the U.S. apply future controls alongside allies, which will help prevent other companies from simply substituting American inputs with products made in other countries, including U.S.-allied nations. “This experience demonstrates that unilateral export controls, besides being ineffective and harmful to U.S. companies, actually work to the advantage of American allies.”
Export controls also must take into account how they erode U.S. firms' “techno-economic power.” ITIF said U.S. officials for decades have been willing to “spend” that power to achieve foreign policy goals -- such as sanctioning Iran or another country that the U.S. wanted to punish -- but that spending power isn’t unlimited.
“Huawei’s experience demonstrates that export controls are detrimental to the United States in both absolute and relative terms: they reduced the resources available for U.S. companies to invest in R&D and innovation, and helped shape Huawei as a competitor in new products, such as OSs, which now threaten U.S. dominance in this global market,” ITIF said. “It is time for an intellectual and operational reset.”