Caixin
Sep 24, 2020 05:14 AM
BUSINESS & TECH

Despite U.S. Chokehold, Huawei Has Enough Chips, Chairman Says

A branded perspex comments box sits on a product display table inside a Huawei Technologies Co. store at Menlyn Park Shopping Center in Pretoria
A branded perspex comments box sits on a product display table inside a Huawei Technologies Co. store at Menlyn Park Shopping Center in Pretoria

Huawei Technologies Co. Ltd., the telecom giant at the center of U.S.-China tensions, has “sufficient” inventory for its communications equipment business while it seeks out supplies of smartphone chips that have been cut off by a Trump administration ban, the company said.

Guo Ping, Huawei’s rotating chairman, told reporters Wednesday on the sidelines of the Huawei Connect 2020 conference in Shanghai that the company has enough supplies to keep its enterprise and carrier units afloat, and it’s developing new consumer devices to offset the hit to its smartphone business. Huawei is still evaluating the impact of the U.S. blacklist, which has greatly limited business with American suppliers, Guo said, though Huawei is still willing to buy from those companies.

It’s the first time a Huawei executive has commented publicly on the latest round of U.S. sanctions on the company. The latest sanctions, announced Aug. 17 and enacted on Sept. 15, target non-American companies such as Taiwan Semiconductor Manufacturing Co. Ltd. by threatening to cut them off from their U.S. suppliers if they trade with Huawei.

The latest sanctions cut off foreign-made semiconductors, software and other materials that are key to powering Huawei’s mobile phones and 5G base stations. While suppliers including Qualcomm Inc. have applied for licenses to continue shipping to the Chinese company, it’s unclear whether the U.S. Commerce Department will issue the necessary permits.

Guo told reporters that Qualcomm was long an important Huawei partner, and would seek to use the company’s chips in its smartphones if a license is granted.

Huawei has been a key target in the U.S. campaign against China’s tech ascendancy, which President Donald Trump has been ratcheting up as the November elections approach. “The U.S. ban brings tremendous trouble in operation and production,” Guo said. Huawei will provide full support to its supply chain, including in areas like talent, technology and standards, to help navigate the restrictions, he said.

Huawei is also under siege elsewhere. Japan and Australia have joined in the U.S.-led boycott, while the U.K. will prohibit its telecom operators from buying the company’s equipment starting next year. Chief Financial Officer Meng Wanzhou remains under house arrest in Canada and is fighting a U.S. extradition request on alleged trade-sanctions violations.

PC pivot

While it has been tougher to source smartphone chips, some U.S. companies are still able to supply other technology to Huawei, which has prompted the company to shift focus to corporate servers and personal computers. On Tuesday, the company released its FusionServer Pro, a so-called “intelligent server” with applications in cloud computing and data warehouses. The servers use Intel processors and memory chips, and Intel has confirmed to Caixin that it holds a license to supply Huawei, but would not say how long the license is valid.

Last year, after the Shenzhen-based company was added to the U.S. “Entity List,” which cut it off from its American suppliers, Washington issued a batch of supply licenses to U.S. companies, mainly for technology used in PCs and servers. 5G-related smartphone chips such as those supplied by Qualcomm missed out. Analysts are divided on how long Huawei’s pile of smartphone chips will last, but it is expected to run out after the first quarter of next year — long after the U.S. election on Nov. 3.

Huawei has also been turning inward with a focus on the domestic market, and that is expected to continue with government support. At the opening ceremony of the conference in Shanghai, Shenzhen Mayor Chen Rugui made a show of turning up to support the company. A panel discussion at the event brought together senior government officials from seven cities, including Shanghai, Chongqing, Wuhan and Hefei.

 Read More 
China Has a Sanction-Proof Pile of Processors, but They Won’t Last Long

Tapering off

Mobile phone business is Huawei’s most significant source of revenue. According to the company’s 2019 annual report, its core consumer smartphone business took in 467.3 billion yuan ($67.2 billion) last year. In the second quarter of this year, as the coronavirus pandemic disrupted the market, Huawei was able to snatch the title of world’s largest smartphone-maker from Samsung for the first time, shipping 55.8 million devices.

Huawei’s first-half revenue grew 13% to 454 billion yuan despite the global backlash, the company said in July. Profit for the six months through June jumped nearly 20% to about 41.8 billion yuan, according to Bloomberg. Its enterprise business — including cloud, routers and other IT services — accounted for less than 10% of revenue during the period, while its carriers unit made up slightly more than a third.

More than half of Huawei’s sales came from its consumer business, which is now being threatened by the U.S. ban. Richard Yu, the company’s consumer group chief, acknowledged at an event earlier this month that curbs on chip supplies have affected smartphone shipments, which were 105 million units in the first half of 2020 after reaching 240 million in 2019.

Guo suggested the company may be holding out hope that the situation could improve after the U.S. elections.

“As Alexandre Dumas said, ‘All human wisdom is summed up in these two words: wait and hope,’” he said, quoting from “The Count of Monte Cristo,” the 19th century novel in which the eponymous nobleman eventually gets revenge against those who conspired against him. “Survival is the key.”

Bloomberg contributed to this report.

Contact reporter Flynn Murphy (flynnmurphy@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

Download our app to receive breaking news alerts and read the news on the go.

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code