US Free Market Principles

US Free Market Principles

This post is a duplicate records from my Telegram channel. Considered it necessary to share the discovered facts with the community.

Once I told you about a case when the CFIUS service at the US Department of Homeland Security forced the Chinese to sell LGBT social networks, because it’s not good for Beijing a lot of data about the citizens of the "most free". Then it surprised me, but it is quite a common practice. For example, the share in the Chinese medical technology startup PatientsLikeMe is also forced to sell for the same reasons. For a minute, investors from the Middle Kingdom acquired a majority share in the round of $ 100 cartoons.

There is another story about Pamplona Capital Management, in which Michael Friedman's LetterOne is actively investing. They were forced to sell Cofense , which they bought with BlackRock for $ 400 million. Cofense is engaged in cybersecurity and is developing solutions against phishing attacks. But the CFIUS motive is only that the share of foreigners is painfully large. How do you do that? Of course, I heard about similar methods in one country, but at least everything is strictly regulated there and affects only the media.

And now about the main thing - Huawei, with thoughts about which there was a desire to write all this. Many do not know, but the debate between the telecommunications giant and the states arose at the beginning of zero. And the claims of Cisco were partially fair, but then everything began to look like some kind of theater of the absurd.

In 2008, Huewei was banned from buying 3Com, which was subsequently absorbed by HP. Do you know why? Because Huawei was closely associated with the Chinese army and this decision was made for reasons of national security. That is, when Amazon, Microsoft, Google or someone else responds to contracts with the Pentagon and then participates in M ​​& amp; A transactions, everything is fine. Others can not.

But the agile Chinese found a way to increase their presence in the US market. This is how a joint venture between Huawei and Symantec appeared. Everyone lived peacefully until, in March 2012, Symantec sold its share of the company from the Middle Kingdom for half a yard of dollars. After that, all sorts of reluctance appeared again and in October 2012, Congress banned any mergers and acquisitions for Huawei and ZTE. Yes, yes, secondly, they, too, have been playing for a long time.

See what happens next. With the telecom, everything seems to have subsided, but what a bad luck, ZTE smartphones came to taste to the American consumer. ZTE's share in the US smartphone market in Q1 2018 was 10%. And suddenly it turns out that the Chinese have violated the sanctions regime against Iran and the DPRK, selling to these countries devices manufactured using parts from the United States. After that, sanctions are imposed against the company.

Time passes, the sanctions are lifted. The truth is worth mentioning that the United States deposited $ 400 cartoons and introduced a kind of conditional - if ZTE behaves well for 10 years, then the money will be returned. However, forcing information about the threat of national security due to some Chinese company in all media does not go without a trace. Already in Q4 2018, ZTE's share dropped to 4%, and Huawei unexpectedly occupied 11% of the US market. Moreover, in Q1 2019 Huawei ahead of Apple in deliveries on the world stage.

And began what is happening so far. But you do not think too much, the reason is in Chinese hackers and surveillance of Americans. Therefore, the states thoroughly fought against Huawei.I am more surprised by their methods. To one degree or another, Huawei was denied cooperation from Google, Broadcom, Intel, Qualcomm, Xilinx and Western Digital. It is important to mention that these are punitive sanctions against one particular company.

It turns out that in addition to the “force sell” mechanism, there is also a “prohibit to sell” option in their toolkit. Yes, ours also bought a golden share once, but what does it mean too? It was a very elegant solution that, at a minimum, looks market-oriented. Although believing in the fact that Volozh was pressed, but in Galitsky they did not understand this. Are there any precedents? “You still won't find such people, because not only American companies have become exhilarated against Huawei.”

The English ARM, which belongs to the Japanese SoftBank, has prohibited Huawei from using its architecture. A ban on the use of microSD cards became the event final of the week. This decision was made in the SD Association - a non-profit organization, headed by a brave guy from SanDisk, brand Western Digital. Small world.

Let's discard my sarcasm. It is assumed that the Chinese are really engaged in espionage. But in fact, we have two situations: in the first - after unilateral accusations from the US, an instant reaction of the entire industry followed; in the second, after the NSA charges of total surveillance by the top officials of a number of states, nothing happened.

Apparently the free market is when you are free to do what you like on it.

Update: for accusations in the theft of trade secrets to Huawei from the United States costs fact backdoor discovery. However, the user yleo draws attention to the fact that in products Broadcom , Intel , Cisco, HP and others were discovered dozens backdoors . And some companies were caught on a conscious fake fix of "unintended vulnerabilities."

xfaetas mentioned claims Vodafone to the Chinese telecommunications giant. And I remembered a very interesting article from vladimirfedorov528 there was a very good description of the working principle of the sanction mechanism for Huawei.

Under normal conditions, the US government can tightly control only government purchases. Contacts of conventional companies such as Google are not monitored.
But there is Special Act Act of 1977 (International Emergency Economic Powers Act), which gives the president the authority to regulate the commercial activities of ordinary companies during the" emergency situations ". So since 1977, the act has been applied about 30 times, introducing various sanctions, mandatory for all US companies. The execution of these sanctions is controlled by the US Department of Commerce.

May 15, 2019, Trump imposed a “state of emergency” that allows Huawei to be banned for all US companies. The official reason is “the risk of espionage.” That is, while we think that in sunny California everything is also sunny, the state of emergency in the whole country is due to the backing of Huawei products.

Source text: US Free Market Principles