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What happens to companies that defy the Huawei ban?

What happens to companies that defy the Huawei ban?


So far, Microsoft hasn’t said how it will respond

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Illustration by Alex Castro / The Verge

Over the past two weeks, Huawei has lost nearly every partner it has thanks to a US trade ban, including high-profile splits with Google, Corning, and ARM that have plunged the Chinese phone maker into an unprecedented crisis. But some of its major partners are staying quiet — most notably Microsoft, which still hasn’t put out an official statement on the ban. Microsoft did quietly pull Huawei laptops from its site, suggesting some kind of withdrawal of services, but we’re still in the dark about the company’s broader plans for dealing with the ban.

Microsoft is one of Huawei’s biggest software partners, licensing and maintaining Windows on a number of Huawei laptops that have to be directly licensed and updated by the company. It’s most likely that Microsoft is simply staying quiet because of the sensitivity of the issue, but the silence raises an interesting question: if Microsoft (or any other company) defies the Commerce order and keeps doing business with Huawei, what kind of penalties would it face?

The assumption from nearly everyone in the industry is that Microsoft will take the same tack as Google and the others, for the simple reason that they can’t afford not to. There’s a raft of penalties for companies that defy export bans, ranging from civil fines to denial orders that would place explicit limits on what the violating company can export, all administered by dedicated Export Enforcement investigators. If the violations are flagrant enough, there can even be criminal penalties, like a case in May that saw a New Jersey man convicted on conspiracy charges for exporting weapons to Ukraine. But given how much Microsoft relies on government and international contracts for its business, there would be plenty for the company to lose before the threat of jail time was even raised.

It’s not just US companies that need to be careful of this kind of penalty. As law firms are rushing to clarify, anyone who licenses technology from the US has to abide the same restrictions, which effectively means cutting off partnership with Huawei. “For example,” one firm explains, “nonpublic U.S.-origin technology necessary to produce a toothbrush may not be provided to Huawei by a company outside the United States without a BIS license,” even if the toothbrush itself is made outside the US. That risk goes a long way to explain why companies like ARM, which is based outside the US and provides chip architectures rather than manufacturing itself, are still steering clear of the ban.

What’s more likely is that Microsoft is simply playing for time. Trump himself has hinted that the restrictions could be removed as part of a trade deal, which would likely be struck before the new tariffs go into effect on June 25th. If that deal actually happens, staying quiet and riding out the storm might seem smart in retrospect — but given Trump’s track record as a federal deal-maker, it seems like a risky bet.