In a striking turn of events, a series of aggressive U.S. export controls intended to cripple Chinese technology giant Huawei have largely backfired. Instead of halting the company’s progress, the sanctions have inadvertently catalyzed its innovation, accelerated its independence from American technology, and inflicted significant financial damage on U.S. firms. A comprehensive study by the Information Technology and Innovation Foundation (ITIF) titled “Backfire: Export Controls Helped Huawei and Hurt U.S. Firms” details this unintended outcome, revealing a critical lesson in modern techno-economic strategy: the United States’ ability to unilaterally dictate terms in the global tech landscape has fundamentally changed [1].
This article delves into the findings of the ITIF report and supplementary research to explore how a policy designed to protect U.S. interests ultimately strengthened a key competitor, weakened American companies, and reshaped the global technology ecosystem.
The Sanctions Paradox: Fueling the Competitor
The U.S. government’s campaign against Huawei began around 2018 with import bans over cybersecurity concerns and escalated in 2019 when the company was placed on the Department of Commerce’s Entity List. This move was designed to sever Huawei’s access to critical U.S. technology and disrupt its supply chain. However, the outcome was not what policymakers had envisioned.
The ITIF report makes a stark conclusion:
Huawei is a more innovative company today than it was before the U.S. government sought to choke its supply chain. This case should serve as a lesson: U.S. techno-economic power is weaker than most think, and sanctions often hurt U.S. competitiveness more than China’s. [1]
Huawei, having anticipated such actions as early as 2012, had been preparing for this scenario for years. The company dramatically increased its research and development (R&D) spending, outpacing even tech giants like Apple and Microsoft proportionally, and focused on developing in-house alternatives to U.S. components—a strategy it referred to as building “spare tires.” By 2023, Huawei claimed to have replaced over 13,000 components and redesigned more than 4,000 circuit boards, effectively engineering American technology out of its products [1].
Huawei's Resurgence and Technological Independence
The results of Huawei’s strategic pivot are evident across multiple domains. Far from being crippled, the company has solidified its market position and expanded into new technological frontiers.
Dominance in Telecom and the Rise of HarmonyOS
Despite the intense pressure, Huawei’s global market share in telecom equipment actually increased from 29% in 2018 to 31% by 2024, cementing its status as the world’s largest manufacturer in the sector. Perhaps the most significant development has been the success of its proprietary operating system, HarmonyOS. Launched in 2019 as a direct response to losing access to Google’s Android for new devices, HarmonyOS has seen meteoric growth.
By the first quarter of 2025, HarmonyOS had captured 5% of the global OS market and, more significantly, surpassed Apple’s iOS in China with a 17-19% market share [2, 3]. With over one billion active users and support from major Chinese apps like WeChat and Alipay, HarmonyOS is now a viable third mobile ecosystem, directly challenging the long-standing duopoly of Android and iOS.
Operating System | Global Market Share (Q1 2025) | China Market Share (Q2 2025) |
Android | ~79% | ~64% |
iOS | ~17% | ~15-16% |
HarmonyOS | 5% | 17-19% |
Source: Various market analyses [2, 3, 4]
Breakthroughs in Semiconductor Technology
The export controls also targeted Huawei’s access to advanced semiconductors. Yet, here too, the company has made significant strides. With substantial support from the Chinese government, Huawei has ramped up its chipmaking capabilities. It now reportedly produces chips, such as a substitute for Nvidia’s H20 AI chip, that are competitive enough to reduce reliance on U.S. suppliers, further eroding the market share of American chipmakers in China [1].
The High Cost for American Companies
The policy’s blowback has been felt most acutely by the very U.S. technology firms the government sought to protect. The ITIF report conservatively estimates that American companies lost over $33 billion in sales to Huawei between 2021 and 2024. This loss of revenue directly impacts their ability to reinvest in R&D, weakening their long-term competitiveness.
U.S. Company | Impact of Export Controls |
Intel & Qualcomm | Licenses to sell chips to Huawei revoked in 2024, resulting in significant revenue loss. |
Teradyne | Lost market share for semiconductor testing equipment directly to its Japanese competitor, Advantest. |
Broadcom & Micron | Lost hundreds of millions in revenue, with Huawei once representing over 10% of their sales. |
Cisco | De facto barred from bidding on contracts with Chinese state-owned enterprises. |
Source: ITIF Report [1]
The case of Teradyne is particularly illustrative. As the U.S. unilaterally restricted its sales to Huawei, its Japanese competitor, Advantest, faced no such constraints. Consequently, Advantest’s global market share surged from 43% in 2020 to 58% in 2024, while Teradyne’s declined in a similar proportion. This is a clear example of how unilateral controls can simply transfer market share from American firms to their foreign competitors.
A New Geopolitical Reality and Policy Recommendations
The Huawei case demonstrates that the global landscape has shifted. The United States can no longer assume that unilateral sanctions will achieve their desired effect without significant self-inflicted harm. China’s technological capabilities, its government’s commitment to self-sufficiency, and the complexity of global supply chains have created a new reality.
The ITIF report proposes a more strategic and realistic framework for the future:
1.Form Coalitions: Export controls should be applied multilaterally with allies, or not at all. Unilateral actions are ineffective and primarily harm U.S. firms.
2.Focus on Specific Threats: Continue pressing allies to ban Huawei from critical 5G infrastructure on specific cybersecurity grounds, rather than attempting to cripple the company entirely.
3.Assess the Economic Impact: Policymakers must carefully weigh the potential costs to U.S. firms and overall techno-economic power before implementing broad sanctions.
Conclusion
The attempt to isolate Huawei has proven to be a costly miscalculation. It underestimated Huawei’s resilience and the depth of China’s commitment to technological independence, while overestimating the United States’ ability to act alone without consequence. The result is a more formidable Huawei, a weakened position for several U.S. tech leaders, and a global technology market that is increasingly fragmented.
This experience serves as a critical lesson for U.S. policymakers. In the ongoing techno-economic competition with China, strategy must evolve beyond the blunt instrument of unilateral sanctions. A successful approach will require nuanced, collaborative, and clear-eyed policies that recognize the limits of American power and prioritize the long-term competitiveness of its own industries.
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