The decisions of the U.S. mainly result in a ban on any direct sell of products to Fiberhome, but they have no effect on the cooperation between the Joint Venture and Supermicro.
Supermicro Computer B.V.
Supermicro is a tech company founded and headquartered in the USA. It mainly deals with server technology and innovation, develops and provides end-to-end green computing solutions to the data center, cloud computing, enterprise IT, big data, and HPC. In 2018, it was ranked as the 3rd largest server systems supplier in the world by IDC. The company has many branches in Asia and Europe; one of them, Supermicro B.V., is located in ’s-Hertogenbosch (The Netherlands) and mainly deals with servers sales.
Fiberhome Telecommunication Technologies Co., Ltd.
Fiberhome Telecommunication technology is a Chinese company, based in Wuhan and founded in 1999. It is a provider of information and communication network products and solutions. At present, Fiberhome Communications has ranked among the top ten most competitive companies in global optical communications. The company appears to be highly influenced by the Chinese government as, through different ownership layers, it is ultimately owned by the State-owned Assets Supervision and Administration Commission of the State Council.
In May 2020, the U.S. Commerce Department’s Bureau of Industry and Security officially declared they would add Fiberhome to its Entity List of organisations subject to Export Administration Regulations governing exports and other transactions. As a result, from that time on, U.S. companies are only allowed to do business with Fiberhome if they obtain a specific license, which is especially hard to get.
The Fiberhome Supermicro Joint Venture
In 2016, Supermicro B.V. and Fiberhome started a joint venture, Fiberhome Supermicro. The company is active as IT product and solution provider forpublic entitites, telecommunications, security, transportation, finance, Internet, education, medical and other industries. The joint venture offers advantages to both of the mother companies. On the one hand, in fact, it gives Supermicro the opportunity to easily access the Chinese market; on the other hand it grants Fiberhome an entryway to the technology and the know-how of the US company.
It must be noted, though, that despite the joint venture seem to preserve the interests of both Supermicro and Fiberhome, the ownership of the company is not equally divided: while Supermicro owns 30% of its shares, the Chinese counterpart owns the remaining 70%, resulting in a significantly higher decision making power over the owned company. This is specifically relevant, most of all after the recent amendment to the Chinese company law, that imposes a shift in decision-making within joint ventures from the board to the shareholders.
Moreover, due to the fact that Fiberhome has been blacklisted by the U.S. Bureau of Industry and Security, Supermicro is supposed to stop selling products directly to the joint venture. However, the Dutch company is still an investor in the joint venture, that continues to produce servers for Fiberhome. The decisions of the U.S. Commerce Department, then, mainly result in a ban on any direct sell of products to Fiberhome, but they have no effect on the cooperation between the two companies, that never ceased to exist.
High-Tech Sector in China
Since the companies involved are active in the strategic sector of the high-tech industry, it is worth mentioning the political framework regarding the development of this field in China. High-tech is, in fact, one of the main industries that China wants to expand with the use of plans like Made in China 2025 (MiC 2025). This is a strategic government plan through which the country aims at becoming a global high-tech powerhouse. More specifically, the plan aims at advancing China’s technological and industrial capabilities, therefore reducing the country’s dependence on foreign technology. The main spur for the creation of this plan has been China’s weaknesses in certain technological fields, that left the nation highly dependent on foreign nations when it comes to delivering high-tech solutions.
Cases like the one analysed here constitute relevant examples of how the peculiar legal framework referring to joint ventures may present loopholes. As a result, joint ventures may constitute exceptions to the laws and may a means to avoid international sanctions or bypass export lists, while still allowing the sanctioned company to do business and acquire strategic knowledge.