Sources: Commerce Department signals it will not renew export license for Futurewei Technologies, Huawei's Silicon Valley-based R&D unit (Wall Street Journal)

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About 700 engineers and scientists work at Futurewei’s flagship R&D center in Santa Clara, Calif., which opened in 2011.


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Yichuan Cao/Sipa USA/Associated Press

Huawei Technologies Co. is contending with a new obstacle: getting technology it developed at a U.S. subsidiary back to China.

The Chinese telecommunications giant has been unable to send home certain technologies from its Silicon Valley research-and-development unit, Futurewei Technologies Inc., after the Commerce Department signaled it wouldn’t renew a Futurewei export license, according to people familiar with the matter and documents reviewed by The Wall Street Journal.

The department said in a June letter to Futurewei that it intends to deny its application to renew the license, citing national security concerns, according to the documents. Futurewei has contested the Commerce Department’s move, but in the meantime the export of the technologies in question has been prohibited, the people said.

The license covered the export of telecommunications technology and software, including high-speed data-transfer technology, according to the documents. The technology had an operating budget of more than $16 million and involved more than 40 full-time-equivalent personnel.

The Commerce Department’s move isn’t a death blow to Futurewei because the majority of technologies the unit exports from the U.S. don’t require an export license, according to people familiar with the matter. The company continues to operate in the U.S.

Chinese telecom giant Huawei has long caused tension between Washington and Beijing. WSJ’s Shelby Holliday explains what the company does and why it’s significant. (Photo: Aly Song/Reuters)

Still, the move is a setback for Huawei’s U.S. operations. About 700 engineers and scientists work at Futurewei’s flagship R&D center in Santa Clara, Calif., which opened in 2011. Huawei, the world’s largest maker of telecommunications equipment, is embroiled in a separate battle following the arrest of its chief financial officer, Meng Wanzhou, in Canada last month at the request of U.S. officials.

Futurewei told the Commerce Department in a July letter protesting the decision that it might have to move its R&D hub to a location outside the U.S. if its application isn’t approved, according to the documents reviewed by the Journal.

“The process for granting export licenses is independent from our ongoing trade discussions with China,” Commerce Secretary Wilbur Ross said in a statement to the Journal.

In its June letter to Futurewei, the Commerce Department’s Bureau of Security and Industry said it intended to deny an application to renew an export license that the Chinese company had held since 2014 that was set to expire in April 2018, according to the documents reviewed by the Journal.

In its July response, Huawei called the department’s national security rationale unfounded. It also said the technologies in question are already widely available outside the U.S.

Huawei still has avenues to appeal the decision, according to people familiar with the matter. Its timeline for doing so isn’t clear.

Huawei has been effectively blocked from selling its telecommunications equipment in the U.S. since a 2012 Congressional report labeled it a national security threat. Huawei has long denied that it is a threat, saying it is owned by its employees and operates independently of Beijing.

The company maintains a modest presence in the U.S., where it employs about 1,500 people. Many are involved in sales of telecom equipment to small carriers servicing rural areas. But the company has scaled back its public-relations outreach and curtailed efforts to communicate with Congress and federal agencies, people familiar with the matter have said. It has redirected its fight to the courts, hiring additional law firms to deal with potential challenges.

Recently, the U.S. has been pressuring allies to keep Huawei equipment out of their networks. Huawei faces a ban on its 5G equipment in several allied countries where it has long enjoyed access, including Australia and New Zealand.

The U.S. campaign against Huawei escalated in December with the arrest of Ms. Meng. Prosecutors want her to stand trial in the U.S. on charges of bank fraud related to Huawei’s business in Iran. Ms. Meng denies the charges, and Huawei says it follows the law in all countries where it operates.

Huawei has continued to post strong growth despite the challenges. Guo Ping, Huawei’s deputy chairman, said in a year-end letter that the company’s expected revenue grew 21% to $108.5 billion in 2018.

Write to Dan Strumpf at daniel.strumpf@wsj.com and Kate O’Keeffe at kathryn.okeeffe@wsj.com


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