The United States is expanding the scope of its regulations on Chinese telecommunications equipment from finished products to core components and online distribution markets. This is a measure aimed at blocking routes through which sanctioned companies, such as Huawei and ZTE, circumvent restrictions to enter the U.S. market via component supply or third-party online sales. The South Korean telecommunications equipment industry is also closely monitoring the impact of the regulations.
According to the industry on Aug. 11, the Federal Communications Commission (FCC) of the United States recently approved the Third Report and Order (FCC 26-50) containing these details.
The core of the order is to restrict new equipment authorization for third-party devices equipped with “logic hardware” components produced by Chinese companies, such as Huawei or ZTE, which are listed on the Covered List of equipment posing national security risks. It also regulates the online sales of those components.
Logic hardware refers to components that perform arithmetic, control, and communication functions, such as semiconductors, processors, and telecommunications and Internet of Things (IoT) modules. Even if a finished product manufacturer is not a regulated entity, if core components produced by Covered List companies like Huawei and ZTE are included, it cannot receive new FCC authorization. Passive components, such as cables, connectors, and simple resistors, are excluded.
This move represents an effort by the United States to expand the scope of Chinese telecommunications equipment regulations from blocking finished products to the component supply chain and the actual sales stage. While new equipment authorization for companies such as Huawei and ZTE has been blocked since 2022, products from other manufacturers equipped with components made by these companies were able to receive authorization.
The South Korean telecommunications equipment industry, which heavily utilizes Chinese components, is on high alert, noting that even if major disruptions do not occur immediately, it could be affected depending on the detailed application methods of the FCC.
“Chinese components have high price competitiveness, so it is not easy to exclude them completely, but for products bound for the U.S., we have already been managing supply chains separately by utilizing components produced in Vietnam or domestically to account for potential risks,” an official at a telecommunications equipment company said. The official added, “For now, we view that the impact is not significant enough to require a total overhaul of the supply chain due to this measure.”
However, it has been reported that since direct regulations on Chinese products were tightened, there have been numerous instances of Chinese component manufacturers producing goods in third countries, such as Mexico, and supplying them to U.S. equipment companies. If the FCC strictly scrutinizes the component production entity and supply history rather than the production location in the future, the burden of managing the overall supply chain for telecommunications equipment destined for the U.S. could increase for South Korean companies as well.
Whether the scope of regulation will expand further remains a variable. In this regulation, the FCC limited the scope to physical components that perform logic operations, leaving software and firmware as tasks for future review.
