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Hi there,

It's Kevin Allison with your Wednesday Signal. Today we stare into the abyss with Huawei, watch a high-stakes diplomatic mission to Iran, and ignore some North Korean killer piranhas.

Send us your love/hate mail here, or sign up a friend for Signal here. Thanks for reading!

-Kevin (@kevinallison)

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Hi there,

It's Kevin Allison with your Wednesday Signal. Today we stare into the abyss with Huawei, watch a high-stakes diplomatic mission to Iran, and ignore some North Korean killer piranhas.

Send us your love/hate mail here, or sign up a friend for Signal here. Thanks for reading!

-Kevin (@kevinallison)

 

Huawei is putting on a brave face. The Chinese networking equipment giant, banned from acquiring US technology last month over alleged violations of international sanctions against Iran, last week claimed it had assigned 10,000 engineers to work around the clock to find ways to break its reliance on American code and computer chips.

Spoiler: It's not going to work. If the US ban stays in place, today's Huawei won't survive.

Here's why:

Technology: To make its phones and networking gear work, Huawei needs semiconductors. To make those semiconductors, Huawei relies on software tools that are built by only a handful of US and European companies, which have suspended doing business with Huawei to comply with the US ban. Without access to these tools, or the software updates needed to keep them running, Huawei can't make viable products, and its business will collapse. It's as simple as that.

Politics: Huawei could try to seek a settlement. If Huawei were to admit guilt over the violation of Iran sanctions, fire some executives, and submit to US inspections to allay espionage fears, as it's already done in the UK, Washington might be willing to deal. But Huawei is China's most important and innovative tech giant. Kowtowing to the US would be humiliating both for company, the country, and in particular Chinese President Xi Jinping. There is no sign yet that Huawei or China are willing to go down that path.

But what about all those other countries that have signed deals with Huawei? Governments from Brasilia to Moscow to Kuala Lumpur have signaled they are sticking by Huawei despite US pressure. Just last week, Huawei signed a 5G deal with a Russian mobile telecom company. But unless the US ban is lifted, Huawei won't be able to deliver much beyond signatures.

What if Trump changes his mind? He's seeking leverage in his broader trade dispute with China, and as we know, President Donald Trump has turned on a dime before. All it would take is a single tweet and presto, Huawei's saved. But even if Trump decided to suspend the technology ban as part of a potential deal, the firm's reputation as a supplier may already be compromised. Telecom companies that are preparing to shell out billions of dollars to build their 5G networks would have to think hard about signing deals with a company that from now on will be squarely in the US crosshairs.

And so Huawei is probably going down. As that fact becomes clearer over the coming days and weeks, it will send shockwaves through both the $1 trillion global telecoms sector and through geopolitics. Don't say we didn't warn you.


 

 
 
 

The supply chains for today's technology giants are fantastically complex — yet it's often true that the most essential and irreplaceable components come from a small number of countries. Here's a look at some key components of the Chinese networking giant Huawei and how suppliers have responded to Washington's ban on sales of US technology to the company. The ban, which also includes components from other countries that contain significant US technology or materials, has quickly gone global, threatening Huawei's survival.


 

 
 
 

AI is helping researchers and institutions accelerate the discovery, monitoring and protection of biodiversity across the planet. See how owls, elephants, orcas and other animals are benefitting from the advance of AI.

For more on this and other issues, visit → Microsoft On The Issues.


 

 
 
 

Iran – There's a lot going on with Iran this week. The UN's atomic watchdog (great band name!) said Monday that Iran has accelerated production of low enriched uranium, which brings the country closer to violating the Iran nuclear agreement. Then, during a press conference with his German counterpart, Iranian foreign minister Mohammad Javad Zarif issued an uncharacteristically blunt threat, warning that the US "cannot expect to stay safe" after launching what he called an "economic war against Iran." Finally, Japanese Prime Minister Shinzo Abe arrives in Iran today, with Trump's blessing, to try to ease growing tensions and find some basis for talks that might lead to a new US-Iran nuclear deal.

Rebels rearming in Colombia – Just two years after a landmark peace deal between the government and the leftist FARC insurgency, thousands of rebels who laid down their weapons are taking up arms again. They are frustrated at the slow pace of economic and security improvements, particularly in rural areas, that the government pledged as part of the peace accord. Rightwing President Ivan Duque recently failed in his bid to revise the peace agreement, which he sees as too lenient. But unless the government can better deliver the benefits of peace, the deal may fall apart on its own.

European tech firms cutting the world in half – Amid deepening trade and technology rivalry between the US and China, two of Europe's leading technology firms — Nokia and Ericsson — might create separate units for the Eastern and Western hemispheres, according to a report by The Sunday Telegraph. Details are murky, but the idea seems to be to shield the "Western" parts of their businesses from any concerns arising from the "Eastern" units' activities in China, while at the same time protecting the "Eastern" businesses from getting caught in the crossfire between Beijing and the West. Here's how the decoupling of Chinese and Western firms could play out for the tech sector. And here's how it could hit you in the wallet.

What We Are Ignoring

Piranha Executions in North Korea – A British tabloid claims that Kim Jong-un has executed a suspected coup plotter by slashing him with a knife and tossing him into a tank filled with Brazilian piranhas to be devoured. We are ignoring this because the article is a little fishy, so to speak, and because although Kim's brutal streak is well known, we are old enough to remember the last incorrect reports about Pyongyang purges and executions… from last week. As a side note, we think the piranha gets an unjustly bad reputation, but judge for yourself.


 

 
 
 

67: Botswana's High Court struck down a law this week criminalizing gay sex. Some 67 countries around the world — including upwards of two dozen countries in sub-Saharan Africa — still have laws on the books that make homosexuality a punishable crime.

547: Over the span of 10 days, Iranian authorities closed 547 restaurants and cafes in Tehran for their failure to adhere to "Islamic principles." The Iranian police listed among the violations "unconventional advertising in cyberspace, playing illegal music and debauchery."

41: Forty-one of 77 districts in the former East Germany are expected to lose 30 percent or more of their working-age citizens by 2035 as birthrates have collapsed following the fall of the Berlin Wall. The lack of people, jobs and prospects has turned the region into a stronghold for the country's far-right, anti-migrant AfD party.

44.5: UK government bean-counters revealed this week that the British economy shrank 0.4 percent between March and April, driven by a 44.5 percent drop in car production as automakers shuttered factories in anticipation of Brexit. While Brexit is yet to come, its economic consequences are already here. Er, there.


 

 
 

This edition of Signal was written by Kevin Allison (@kevinallison), Alex Kliment (@saosasha), Willis Sparks, and Leon Levy (@leonmlevy).

 

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