Top US tech giants begin to cut off vital Huawei supplies | Fin24
 
Loading...

Top US tech giants begin to cut off vital Huawei supplies

May 20 2019 07:36
Ian King, Mark Bergen and Ben Brody, Bloomberg
Richard Yu, chief executive officer of Huawei, pre

Richard Yu, chief executive officer of Huawei, presents the Mate X foldable 5G mobile device during a Huawei launch event ahead of the MWC Barcelona in Barcelona, Spain, on Sunday, Feb. 24, 2019. (Stefan Wermuth/Bloomberg)

Related Articles

On Huawei and cars, Trump aligns trade with US security

US places Huawei and scores of affiliates on export blacklist

Trump's Huawei threat is the nuclear option to halt China's rise

China confirms arrests of Canadians detained amid Huawei spat

 

Top US corporations from chipmakers to Google have frozen the supply of critical software and components to Huawei, complying with a Trump administration crackdown that threatens to choke off China’s largest technology company.

Chipmakers including Intel, Qualcomm, Xilinx and Broadcom have told their employees they will not supply Huawei till further notice, according to people familiar with their actions. And Alphabet’s Google cut off the supply of hardware and some software services to the Chinese giant, another person familiar said, asking not to be identified discussing private matters.

The moves, which had been anticipated, hamstring the world’s largest provider of networking gear and No. 2 smartphone vendor. The Trump administration on Friday blacklisted Huawei - which it accuses of aiding Beijing in espionage - and threatened to cut it off from the US software and semiconductors it needs to make its products.

Blocking the sale to Huawei of critical components could also disrupt the businesses of American chip giants like Micron Technology and retard the rollout of critical 5G wireless networks worldwide - including in China. That in turn could hurt U.S. companies that are increasingly reliant on the world’s second largest economy for growth.

If fully implemented, the Trump administration action could have ripple effects across the global semiconductor industry. Intel is the main supplier of server chips to the Chinese company, Qualcomm provides it with processors and modems for many of its smartphones, Xilinx sells programmable chips used in networking and Broadcom is a supplier of switching chips, another key component in some types of networking machinery. Representatives for the chipmakers declined to comment.

Huawei “is heavily dependent on US.semiconductor products and would be seriously crippled without supply of key US components,” said Ryan Koontz, an analyst with Rosenblatt Securities. The US ban “may cause China to delay its 5G network build until the ban is lifted, having an impact on many global component suppliers.”

Shares Down 

The ban’s commencement walloped shares of Asian tech supply chain companies Monday. Sunny Optical Technology Group was again the worst performer on Hong Kong’s Hang Seng Index, while Luxshare Precision Industry dived as much as 9.8% in Shenzhen.

To be sure, Huawei is said to have stockpiled enough chips and other vital components to keep its business running for at least three months. It’s been preparing for such an eventuality since at least the middle of 2018, hoarding components while designing its own chips, people familiar with the matter said. But its executives believe their company has become a bargaining chip in ongoing US-Chinese trade negotiations, and that they will be able to resume buying from American suppliers if a trade deal is reached, they said.

The American companies’ moves are likely to escalate tensions between Washington and Beijing, elevating fears that President Donald Trump’s goal is to contain China, triggering a protracted cold war between the world’s biggest economies. In addition to a trade fight that has rattled global markets for months, the US has pressured both allies and foes to avoid using Huawei for 5G networks that will form the backbone of the modern economy.

“The extreme scenario of Huawei’s telecom network unit failing would set China back many years and might even be viewed as an act of war by China,” Koontz wrote. “Such a failure would have massive global telecom market implications.”

The American clampdown also deals a direct blow to Huawei’s fast-growing mobile devices division. Huawei will only be able to access the public version of Google’s Android mobile operating system, the world’s most popular smartphone software. It won’t be able to offer proprietary apps and services from Maps and search to Gmail, said the person, who requested anonymity speaking about a private matter.

That will severely curtail the sale of Huawei smartphones abroad, though it’s unclear when those apps - which are popular mainly outside of China - will become unavailable.

Huawei, the world’s largest smartphone brand after Samsung, was one of a select few global hardware partners to receive early access to the latest Android software and features from Google. Outside of China, those ties are critical for the search giant to spread its consumer apps and bolster its mobile ads business.

The Chinese company will still have access to app and security updates that come with the open-source version of Android. Reuters reported the move earlier. “We are complying with the order and reviewing the implications,” a Google representative said, without elaborating.

google  |  huawei  |  donald trump  |  trump tariffs  |  trade war
NEXT ON FIN24X

 
 
 
 

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

SARS has lifted the tax return threshold from R350 000 to R500 000 per year. What are your thoughts on this??

Previous results · Suggest a vote

Loading...