Published: Mon, May 20, 2019
Markets | By Otis Pena

Huawei will use its own chips against U.S. ban

Huawei will use its own chips against U.S. ban

Huawei's predicament underscores the extent to which China as a whole is reliant on foreign chip technology: the country imports more semiconductors today than oil.

The world's biggest telecommunications equipment supplier and No. 2 smartphone seller relies on dozens of American tech companies for key components.

A Reuters source in China, who works for a US tech firm, states that none of Huawei's suppliers in the usa can be replaced by suppliers in China for at least a few years. Of that, about $11 billion was spent on products from dozens of U.S. businesses, including computer chips from Qualcomm and Broadcom, as well as Microsoft software and Google's Android.

On Wednesday, the U.S. Department of Commerce put Huawei and its affiliates on a list that requires them to apply for government authorization when they want to buy domestic technology. "As one of Android's key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefitted both users and the industry".

HiSilicon has been secretly developing back-up products for years in anticipation of the unlikely scenario that Huawei may one day be unable to obtain advanced chips and technology from the United States, He said in the letter.

Mr Ren said the firm was prepared for such a step and Huawei would be fine even if U.S. smartphone chipmaker Qualcomm and other United States suppliers do not sell chips to the firm.

Ken Hu, Huawei's deputy chairman, responded to the US decision in a memo to employees. Joseph Franell, the company's chief executive officer, said in an interview on Thursday. "We have invested heavily and made full preparations in a variety of areas".

The head of Huawei's HiSilicon chip division on Friday shrugged off concerns about disruptions to supply, saying it has always been preparing for this kind of "extreme scenario".

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Foreign ministry spokesman Lu Kang, asked if China had invited US officials for more talks, said China always advocated resolving disputes through dialogue.

The Commerce Department would let Huawei to buy US products so that it helps present clients maintain the visibility of equipment and networks, but the Chinese company still wouldn't be permitted to purchase American components and components to produce new goods.

U.S. Commerce Secretary Wilbur Ross said in a statement that Trump backed the decision to "prevent American technology from being used by foreign-owned entities in ways that potentially undermine U.S. national security or foreign policy interests".

Now is the time for "all the spare tires in the safe" to become useful, He said in the letter. Strategy Analytics analyst Linda Sui says, "I would be surprised if HiSilicon can make it without any US suppliers".

Huawei is a rapidly expanding leader in 5G technology but remains dependent on foreign suppliers.

How important Huawei is in the 5G race?

This week's escalation of the U.S. campaign against Huawei has rattled investors. She has maintained her innocence, and Huawei has entered a plea of not guilty in NY. Its stock plummeted almost 12%.

Huawei, Taiwan Semiconductor Manufacturing Co, Innolux, Qualcomm and Qorvo did not immediately respond to a Reuters' request for comment.

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