Two weeks after Huawei was put on a blacklist that prevents US suppliers from selling components to the telecoms company, companies across the world are still working out the ramifications.
Last week, Huawei told the Financial Times that the Trump administration’s decision to put the company on its “entity list” would affect about 1,200 US suppliers. Huawei bought roughly $11 billion (€9.8 billion) in components and services from US companies last year.
The ban has had significant consequences for Huawei’s suppliers. As well as preventing US companies from selling directly to Huawei, it also stops third-party companies from selling products with more than one-quarter US-originated technology to Huawei. Analysts say companies are likely to dispute what products fall under the re-sale ban.
Uncertainty
The uncertainty over the effects of the ban has led some phone operators to delay the launch of new Huawei smartphones while they make further assessments. In the UK, BT subsidiary EE and Vodafone have “paused” the launch of Huawei’s 5G smartphones, while two of Japan’s largest mobile phone carriers, SoftBank and KDDI, have also suspended presales of the new Huawei P30 phones.
Huawei is highly dependent on the US for the design of the chips it uses in its smartphones and telecoms equipment. Even though Huawei uses its own in-house chip design unit – HiSilicon – to design “system on a chip” chips for its high-end smartphones, HiSilicon requires US-made software to make the designs.
Moreover, HiSilicon and other chip designers use core chip architecture patented by ARM, a UK-based company owned by SoftBank that has said it can no longer license its designs to Huawei.
Google has already said it will stop supplying Huawei with software for the Android operating system that runs three-quarters of the world's mobile phones.
Fortunately for Huawei, its main producer of smartphone chips, Taiwan's TSMC, has said it will continue to supply the company because it does not think it is in violation of the US ban by using US-made chip fabrication equipment to make Huawei's chips. But in addition to relying on TSMC for HiSilicon's chips, Huawei also uses memory chips made by Micron and Seagate, both US companies.
Ban
When it comes to telecoms equipment such as mobile masts, Huawei relies on logic chips called field-programmable gate arrays (FGPAs) made by US company Xilinx. The other major FGPA suppliers, Intel's Alterra and Lattice Semiconductor, are also US companies.
Huawei has built up semiconductor stockpiles in anticipation of the ban. Market research firm CLSA estimates the company has six months of smartphone inventory and nine to 12 months of 5G base station inventory.
Although China’s government has been pushing hard for self-sufficiency in semiconductor design and manufacturing in light of a previous US ban that crippled Huawei’s competitor ZTE, there are barely any domestic options for Huawei to turn to after its inventories run out.
Analysts reckon China is more than 10 years behind in designing high-end logic chips of the kind used in Huawei's switches and routers.
– Copyright The Financial Times Limited 2019
