The United States Department of Commerce, which is credited by many experts with powering the $25.5 trillion U.S. economy with discoveries such as the internal combustion engine, the integrated circuit and fire, continues its bold defense of American business.
In a dramatic move, Commerce officials have imposed the largest fine in the agency’s history, some $300 million, on a U.S. company that secretly sold over 7 million buggy whips to a Chinese company on the “Entity List.” Under strict rules to protect Americans from the Yellow Peril, U.S. companies may sell only to non-entities.
Though the buggy whips in question actually were made in China, U.S. officials warned that they were made using “elite U.S. whip technology that must not fall into the hands of the nations identified by the U.S. government as inscrutable.” Commented one official familiar with the matter, “Have you ever read a fortune cookie? There is just no way for us to understand what those people are thinking—or planning.”
Other officials questioned why the Chinese suddenly need 7 million buggy whips.
“They don’t even have buggies,” commented one person in the know. “That raises the question of just what they intend to do with those whips.”
Okay, some of that’s not true. The Department of Commerce did not discover fire.
Oh, and it wasn’t 7 million buggy whips. It was 7 million hard disk drives (HDDs), which are kind of like buggy whips but shorter and less flexible. The two do have this in common: like buggy whips, HDDs are technology from a prior century, and rapidly disappearing on their way to obsolescence.
Once ubiquitous (iPods used them!), hard disks are increasingly relegated to the role of a rarely visited basement, to store stuff you might never need but can’t bring yourself to toss. They are scandalously mechanical, with the disk spinning as many as 15,000 times a minute (that would be 250 times a second) underneath a moving read-write head, suspended 10 microns—one fifth the width of a human hair—above.
Replacing HDDs are solid state memories, which have no moving parts or mechanical risk, read and write many times faster, require less maintenance, last longer, fail less often, and have come down in price so rapidly that soon they will be no more expensive. One reason we added Pure Storage (PSTG) to our investment portfolio was that they were the first major enterprise storage supplier to eschew HDDs altogether and commit to 100% solid state.
So why is the United States banning sales of 20th-century technology to Chinese companies on the Entity List, in this case Huawei?
We weren’t in the room, but we can guess what happened.
Regulations are made to be gamed, and there are few better games than portraying your toughest competitor as a threat to national security.
When the persecution of Huawei by U.S. China hawks commenced (on the absurd and soon abandoned premise that Huawei gear was full of tiny bits of spyware that would share your shopping list with Beijing), Huawei’s competitors must have been thrilled that their mightiest rival might be sidelined.
And then, no doubt, the scholarly appearing “white papers” and market surveys were written by the usual consulting firms whose impeccable credentials are rivaled only by their pliability. Long and improbable lists of critical components in Huawei’s supply chain were assembled, and gravely presented to the Commerce Department.
With equal gravity, the Commerce guys, who never met a protectionist measure they didn’t love, ordered that, in the name of national security, these deadly devices must never reach the Orient. It hardly needs to be said that these great patriots never ever, ever, even considered how many competing U.S. firms—Cisco, Apple, HPOE, Juniper, Ciena, Infinera to name just a few–might benefit from Huawei’s downfall.
How the lobbyists must have bragged to their clients that Huawei was doomed by their efforts.
Alas, the story had an ending the lobbyists probably don’t find as delicious as we do. Though Huawei’s consumer cell phone business was upended by the ban on it using the Android operating system, Huawei remains the world’s most proficient supplier of telecom network gear, a technology leader, and a great spur to China’s effort to make state-of-the-art semiconductors at home, making U.S. suppliers unnecessary.
As Huawei still serves the fastest-growing markets in the world, it will likely outlive and out- prosper most of its Western rivals.
U.S. protectionists, once again, have protected only China.
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