Huawei, the giant Chinese telecoms company, and the largest seller of smartphones in the world by volume, is warning that it’s running low on smartphone chips due to biting US sanctions.
According to Richard Yu, CEO of Huawei’s consumer business unit, the sanctions are making it harder for the company to manufacture its Kirin chipsets. If nothing changes, the Chinese smartphone giant will be out of chips by a month.
The US has accused Huawei of building backdoors into network infrastructure for the Chinese government to spy. The company has denied this but it doesn’t seem like the Trump administration will hear any of it.
In May 2019, the White House moved to place Huawei and 114 of its other subsidiaries into the Entity List. This simply means that US manufacturers cannot sell technology to the Chinese company unless they get approval from the US government.
The Entity List also means that Huawei is no longer able to obtain an Android license from Google, something that has forced the company to keep most Google apps away from its phones. There was hope that the US would reverse course after the White House reached a trade deal with China in recent months, but the ban on Huawei was extended by another year until May 2021.
Additional amendments were also added to the initial ban that would prevent foreign semiconductor companies using US technology from doing business with the Chinese company unless they get authorization from the US. As a result, the US Taiwan Semiconductor Manufacturing Co., the largest semiconductor maker in the world, was forced to halt orders for the HiSilicon unit from Huawei.
But despite this, the ban by the Trump administration still has a huge potential of significantly hurting US companies. Earlier this year, Huawei overtook Samsung to become the largest seller of smartphone devices in the world, and is expected to dominate the smartphone market for years. For many US chip makers, it’s clear that there’s a huge potential for massive generation of revenue by doing business with Huawei.
As a matter of fact, The Wall Street Journal reported that Qualcomm, one of the major US chipmakers, has been pushing the Trump administration to ease this restriction but so far nothing has been achieved. Huawei is currently developing its 5G phones and it’s hard to see how they will hit the market without US semiconductors. But for now, there’s really nothing the company can do.
The Trump administration is locked in a trade dispute with China and this has been going on for months now. The White House, citing national security concerns, has banned several Chinese companies from operating in the country, including popular video-sharing app TikTok.
Many analysts, however, feel that the move by Trump is more political than strategic. The president wants to appear tough on China and this blanket bans on Chinese companies would appeal to his base. But there will be an economic trade-off to be paid no doubt.