Michael Liedtke

US sanctions on Huawei bite, but who gets hurt?

The Trump administration sanctions against Huawei have begun to bite even though their dimensions remain unclear. U.S. companies that supply the Chinese tech powerhouse with computer chips face a drop in sales, and Huawei’s smartphone sales could get decimated with the anticipated loss of Google’spopular software and services. The U.S. move escalates trade-war tensions with Beijing, but also risks making China more self-sufficient over time. Here’s a look at what’s behind the dispute and what it means. What’s this about? Last week, the U.S. Commerce Department placed Huawei on its so-called Entity List, effectively barring U.S. firms from selling it technology without government approval. Google said it would continue to support existing Huawei smartphones but future devices won’t have its flagship apps and services, including maps, Gmail and search. Only basic services would be available, making Huawei phones less desirable. Separately, Huawei is the world’s leading provider of networking equipment, but it relies on U.S. components including computer chips. About a third of Huawei’s suppliers are American. Why punish Huawei? The U.S. defense and intelligence communities have long accused Huawei of being an untrustworthy agent of Beijing’s repressive rulers — though without providing evidence. The U.S. government’s sanctions are widely seen as a means of pressuring reluctant allies in Europe to exclude Huawei equipment from their next-generation wireless networks. Washington says it’s a question of national security and punishment of Huawei for skirting sanctions against Iran, but the backdrop is a struggle for economic and technological dominance. The politics of President Donald Trump’s escalating tit-for-tat trade war have co-opted a longstanding policy goal of stemming state-backed Chinese cyber theft of trade and military secrets. Commerce Secretary Wilbur Ross said last week that the sanctions on Huawei have nothing to do with the trade war and could be revoked if Huawei’s behavior were to change. The sanctions’ bite Analysts predict consumers will abandon Huawei for other smartphone makers if Huawei can only use a stripped-down version of Android. Huawei, now the No. 2 smartphone supplier, could fall behind Apple to third place. Google could seek exemptions, but would not comment on whether it planned to do so. Who uses Huawei anyway? While most consumers in the U.S. don’t even know how to pronounce Huawei (it’s “HWA-way”), its brand is well known in most of the rest of the world, where people have been buying its smartphones in droves. Huawei stealthily became an industry star by plowing into new markets, developing a lineup of phones that offer affordable options for low-income households and luxury models that are siphoning upper-crust sales from Apple and Samsung in China and Europe. About 13% of its phones are now sold in Europe, Gartner analyst Annette Zimmermann estimates. That formula helped Huawei establish itself as the world’s second-largest seller of smartphones during the first three months of this year, according to the research firm IDC. Huawei shipped 59 million smartphones in the January-March period, nearly 23 million more than Apple. Ripple effects The U.S. sanctions could have unwelcome ripple effects in the U.S., given how much technology Huawei buys from U.S. companies, especially from makers of the microprocessors that go into smartphones, computers, internet networking gear and other gadgetry. The list of chip companies expected to be hit hardest includes Micron Technologies, Qualcomm, Qorvo and Skyworks Solutions, which all have listed Huawei as a major customer. Others likely to suffer are Xilinx, Broadcom and Texas Instruments, according to industry analysts. Being cut off from Huawei will also compound the pain the chip sector is already experiencing from the Trump administration’s rising China tariffs. As expected, the Commerce Department on Monday announced a grace period of 90 days that applies to existing Huawei smartphones and networking equipment. The grace period allows U.S. providers to alert Huawei to security vulnerabilities and engage the Chinese company in research on standards for next-generation 5G wireless networks. It also gives operators of U.S. rural broadband networks that use Huawei routers time to switch them out. The Commerce Department could extend the temporary license to continue to ease the blow on smartphone owners and network operators with installed Huawei gear. Whether that happens could depend on whether countries including France, Germany, the U.K. and the Netherlands continue to refuse to completely exclude Huawei equipment from their wireless networks. Still in place are requirements that government licenses be obtained for any U.S. sales to Huawei unrelated to existing equipment. Could this backfire? Huawei is already the biggest global supplier of networking equipment and is now likely to move toward making all components domestically. China already has a policy seeking technological independence by 2025. U.S. tech companies, facing a drop in sales, could respond with layoffs. More than 52,000 technology jobs in the U.S. are directly tied to China exports, according to the Computing Technology Industry Association, a trade group also known as CompTIA. What about harm to Google? Google may lose some licensing fees and opportunities to show ads on Huawei phones, but it still will probably be a financial hiccup for Google and its corporate parent, Alphabet Inc., which is expected to generate $160 billion in revenue this year. The Apple Effect In theory, Huawei’s losses could translate into gains for both Samsung and Apple at a time both of those companies are trying to reverse a sharp decline in smartphone sales. But Apple also stands to be hurt if China decides to target it in retaliation. Apple is particularly vulnerable because most iPhones are assembled in China. The Chinese government, for example could block crucial shipments to the factories assembling iPhones or take other measures that disrupt the supply chain. Any retaliatory move from China could come on top of a looming increase on tariffs by the U.S. that would hit the iPhone, forcing Apple to raise prices or reduce profits. What’s more, the escalating trade war may trigger a backlash among Chinese consumers against U.S. products, including the iPhone. “Beijing could stoke nationalist sentiment over the treatment of Huawei, which could result in protests against major U.S. technology brands,” CompTIA warned.

Lockdown: Apple could make it even tougher to hack Phones

SAN FRANCISCO (AP) — Suppose the FBI wins its court battle and forces Apple to help unlock an iPhone used by one of the San Bernardino killers. That could open all iPhones up to potential government scrutiny — but it’s not the end of the story. Turns out there’s a fair bit both individuals and Apple could do to FBI-proof their phones and shield private information from investigators and cybercriminals alike. Those measures include multiple passcodes and longer, more complex ones. Of course, increased security typically comes at the expense of convenience. Most efforts to improve phone security would make the devices harder to use, perhaps by requiring you to remember more passwords. Making it more difficult for law enforcement to crack open iPhones could also spur legal restrictions on phone security, something that neither Apple nor other technology companies want to see. “They are walking a tightrope,” says Mark Bartholomew, a law professor at the State University of New York at Buffalo who specializes in privacy and encryption issues. Requiring longer passcodes might annoy most Apple users, he says, while boosting phone security “sort of amplifies the whole argument that Apple is making things too difficult and frustrating law enforcement officials.” Apple had no comment on any future security measures. In a recent letter to customers, it noted that it has routinely built “progressively stronger protections” into its products because “cyberattacks have only become more frequent and more sophisticated.” In the current fight, the FBI aims to make Apple help it guess the passcode on the work phone used by Syed Farook before he and his wife killed 14 people at an office party in December. The FBI wants Apple to create special software to disable security features that, among other things, render the iPhone unreadable after 10 incorrect guesses. Apple has resisted, maintaining that software that opens a single iPhone could be exploited to hack into millions of other devices. The government insists that its precautions would prevent that, though security experts are doubtful. Should the FBI prevail, it would take computers less than a day to guess a six-digit passcode consisting solely of numbers, the default type of passcode in the latest version of the iPhone operating system. Even with security features disabled, each passcode guess takes 80 milliseconds to process, limiting the FBI to 12.5 guesses per second. For security-conscious individuals, the simplest protective move would be to use a passcode consisting of letters and numbers. Doing so would vastly increase the amount of time required to guess even short passcodes. Apple estimates it would take more than five years to try all combinations of a six-character passcode with numbers and lowercase letters. Adding capital letters to the mix would extend that further. Changing to an alphanumeric code is as simple as going into the phone settings and choosing “Touch ID & Passcode,” then “Passcode options.” Another option is simply to pick a much longer numeric code. An 11-character code consisting of randomly selected numbers — that means no references to birthdays or anniversaries that could be easily guessed — could take as long as 253 years to unlock. But longer, more complex codes are harder to remember, and that’s probably why Apple hasn’t yet required their use. It could, however, easily do so. In fact, iPhones moved to six-digit passcodes from four last September. Apple may have other tricks up its sleeve. For instance, the company could add additional layers of authentication that would thwart the security-bypassing software the FBI wants it to make, says computer security expert Jonathan Zdziarski. Apple phones rely on a feature known as the “secure enclave” to manage all passcode operations. The software demanded by the FBI would alter the secure enclave, Zdziarski says. But the software couldn’t do so if the secure enclave required the user passcode to approve any such changes. “This is probably the best way to lock down a device,” Zdziarski says. Apple could also require a second passcode whenever the phone boots up; without it, the phone wouldn’t run any software, including the tool the FBI is requesting. “It would be like putting a steel door on the phone,” Zdziarski says. Currently, iPhones automatically load the operating system before asking for a passcode. For now, Apple CEO Tim Cook is focusing on winning the current battle with the FBI in a Southern California federal court while also trying to sway public opinion in the company’s favor. The skirmish could go all the way to the U.S. Supreme Court. In the meantime, Apple is probably already working on security improvements for the next version of the iPhone operating system that it will probably announce in June and release in September.
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