Chinese telecommunication company Huawei is feared to face a threat to its existence following the decision of American technology suppliers, including Google, to restrict dealings with the company. According to experts, for Huawei, the big impact will be abroad, since Chinese customers already have limited access to Google’s services. Google’s move will have its biggest effect in places like Europe, where it has emerged as a big smartphone seller. Other companies will inevitably follow. In effect, the move puts pressure on Huawei’s international expansion dreams.
The fallout began when Google cut off support to Huawei in recent days for many Android hardware and software services, according to the companies. The move, a response to the Trump administration’s order last week, could hamstring Huawei by restricting its access to future versions of the Android operating system. Google will also limit access to popular applications like Maps, Gmail and the Google Play store in new handsets made by Huawei, the world’s second-largest smartphone maker, behind Samsung.
German chipmaker Infineon has also announced that it is going to suspend shipments of its products to the Chinese phone maker.According to sources, Infineon sells microcontrollers and power management integrated circuits to Huawei and subsequently makes $100 million or less each year. While sales to Huawei are just a small amount of Infineon’s 2018 €7.599 billion revenue, Huawei will feel the screws tightening as it begins to lose suppliers for its goods.
Huawei does not only manufacture smartphones, but also manufactures and deploy cellular network infrastructure. As of 2017 the company invested US$13.8 billion in research & development (R&D). It has 21 R&D institutes around the world & had over 170,000 employees as of September 2017, around 76,000 of them involved in R&D.
Six experts weigh in on what this means for the semiconductor sector and other companies looking to introduce 5G technology. Huawei has faced difficulties in some markets, due to cybersecurity allegations from the United States government, that Huawei's infrastructure equipment contains backdoors that may enable surveillance by the Chinese government. Especially with the development of 5G wireless networks.
Late January saw the US Justice Department unsealed indictments that included 23 counts pertaining to the alleged theft of intellectual property, obstruction of justice and fraud related to its alleged evasion of US sanctions against Iran. The core issue with Huawei has been concerns about its coziness with the Chinese government and fears that its equipment could be used to spy on other countries and companies. It's the reason why the US banned companies from using Huawei networking equipment in 2012 and the company was added to the US Department of Commerce's Bureau of Industry and Security Entity List on May 15, following an executive order from President Donald Trump effectively banning Huawei from US communications networks.
Over the last few months, there's been an upswing in scrutiny of Huawei, with a number of countries banning the use of its networking equipment. That's why its smartphones are virtually invisible in the US despite its massive presence around the world. Huawei, for its part, has long denied any wrongdoing and continues to maintain its innocence through the recent charges.
The US government has temporarily eased trade restrictions imposed last week on China's Huawei, a move aimed at minimising disruption for its customers but dismissed by its founder who said the tech firm had prepared for US action. The US Commerce Department will allow Huawei Technologies Co Ltd to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets, report agencies.
The world's largest telecommunications equipment maker is still prohibited from buying American parts and components to manufacture new products without license approvals that likely will be denied. The US government said it imposed the restrictions because of Huawei's involvement in activities contrary to national security or foreign policy interests.
The new authorisation is intended to give telecommunications operators that rely on Huawei equipment time to make other arrangements, US Secretary of Commerce Wilbur Ross said in a statement on Monday. "In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks," Ross added.
The license, which is in effect until Aug 19, suggests changes to Huawei's supply chain may have immediate, far-reaching and unintended consequences for its customers."The goal seems to be to prevent internet, computer and cell phone systems from crashing," said Washington lawyer Kevin Wolf, a former Commerce Department official. "This is not a capitulation. This is housekeeping."
Meanwhile, the founder of Huawei has said the US “underestimates” the Chinese telecom makers’s strength and that conflict with the US is inevitable in the quest to “stand on top of the world”. Ren Zhengfei said his company was fully prepared to face US bans on key components following new trade restrictions caused by Donald Trump’s declaration of a national economic emergency last week
“The current practice of US politicians underestimates our strength,” Ren told Chinese media on Tuesday. “Huawei’s 5G will absolutely not be affected. In terms of 5G technologies, others won’t be able to catch up with Huawei in two or three years. We have sacrificed ourselves and our families for our ideal, to stand on top of the world. To reach this ideal, sooner or later there will be conflict with the US.”
Huawei, the world’s largest telecommunications equipment maker, has become a focal point in a protracted trade war with the US. The US has been working to thwart the company’s global 5G ambitions, which it sees as a national security threat to other nations. US officials added the company to a trade blacklist on Thursday, after Trump issued an executive order to ban the technology and services of “foreign adversaries”.
It has resulted in new restrictions that will make it extremely difficult for the company to do business with US companies. Google confirmed on Monday it was restricting Huawei’s access to the Android operating system on which the Chinese company’s mobile devices depend. Reuters reported on Sunday that Google had suspended all business with Huawei that required the transfer of hardware, software and technical services, except those publicly available.
Ren’s defiant tone was in contrast to his company’s restrained statement on Monday following reports that Google had pulled the company’s access to Android updates for its phones and tablets. It promised to continue providing security updates and other after-sales services for Huawei devices using Android. On Monday, the US temporarily eased some of the restrictions, a sign of how the prohibitions on Huawei may have far-reaching and unintended consequences for the telecommunications sector at large.
For the next 90 days, the US Department of Commerce will allow Huawei to purchase US-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets. “It appears the intention is to limit unintended impacts on third parties who use Huawei equipment or systems,” said the Washington lawyer Kevin Wolf, a former commerce department official. “It seems they’re trying to prevent network blackouts.” Ren dismissed the gesture from the department, saying on Tuesday: “The US 90-day temporary licence does not have much impact on us. We are ready.”