Huawei is much more dependent on its U.S. suppliers than you might think

Huawei is much more dependent on its U.S. suppliers than you might think
Sure, Huawei founder and CEO Ren Zhengfei can sound like the company has no problems without access to parts and components from U.S. companies like Qualcomm, Intel, and Micron. And that's because Huawei's own HiSilicon unit designs its own chips including the Kirin SoCs and Balong modem chips used on its high-end models. HiSilicon president Teresa He Tingbo recently said, "We actually have foreseen this day for many years, and we do have a backup plan." In a letter written to HiSilicon employees, the executive wrote that HiSilicon will be "self-reliant." But Reuters reports that chip experts aren't buying this talk.

Last week, the U.S. added Huawei to the Commerce Department's Bureau of Industry and Security (BIS) Entity List. That means that U.S. companies cannot sell components or parts to Huawei without securing a license from the U.S. government. Huawei is considered a national security threat to the U.S. because of fears that the communist Chinese government can order it to spy on consumers and corporations at any time. For years there have been rumors that Huawei devices and products contain backdoors, ready to act as a conduit sending information to Beijing. Huawei executives have denied this, and last week company chairman Liang Hua said that the manufacturer would sign a "no-spy" document with any country.

Last year, the company spent $11 billion buying supplies from U.S. chip makers like Qualcomm, Intel, and Micron. A Reuters source in China, who works for a U.S. tech firm, states that none of Huawei's suppliers in the U.S. can be replaced by suppliers in China for at least a few years. Strategy Analytics analyst Linda Sui says, "I would be surprised if HiSilicon can make it without any U.S. suppliers." And while HiSilicon does design its own chips, one expert says that odds are that the Huawei unit uses chip design software from U.S. firms Cadence Design Systems Inc and Synopsys Inc. Mike Demler, a senior analyst with The Linley Group, points out that software from those two companies allow HiSilicon to test chip designs before testing on silicon. Testing a new blueprint on software instead of actually producing it first can save a company months of development time.

Huawei is not as self-reliant as it claims to be

Add all of this together, including today's blockbuster report stating that Google is reportedly cutting most of its business ties with Huawei, and all of a sudden the global smartphone market has been transformed. Huawei was set to take over the top spot in smartphone deliveries next year from Samsung, but that is now in doubt. All of a sudden, it is unclear just exactly what the Huawei Mate 30 line, due out later this year, will have under the hood and what operating system it will use. Sure, Huawei could decide to use a forked version of Android, but that is not going to play well outside of China. Last August, a rumor that Huawei was developing its own Android alternative was denied a month later. But earlier this year, the company said that it had its own operating system ready just in case.

Being put on the Entity List affects more than smartphones as far as Huawei is concerned. The manufacturer is the global leader in networking equipment like the kind used to build out 5G networks. The lasers Huawei uses to send light signals through the fiber-optic cables in Huawei's gear are sourced from U.S. companies like NeoPhotonics, Lumentum, and Finisar.

One question that is sure to come is whether the U.S. put Huawei on the Entity List for national security reasons, or as leverage in future trade negotiations. We would imagine that China's trade negotiators are going to demand the removal of Huawei from the list as part of any trade agreement with the U.S. But the latter would seem to hold all of the cards here, especially since it appears that Huawei is not as self-reliant as it claims to be.



3. Bondurant

Posts: 784; Member since: Jun 04, 2014

And what spying did ZTE do to get banned?

11. Subie

Posts: 2388; Member since: Aug 01, 2015

ZTE violated agreed upon terms regarding their trade deals with sanctioned countries - North Korea and Iran. That's is why they were banned the other year.

4. Bondurant

Posts: 784; Member since: Jun 04, 2014

China going too soft on US. China should shut down apple and android in China. Entire US phone industry will collapse. And Chinese mobile companies should get together for joint venture with Asian countries for alternate OS platform. The hegemony of US companies should end for good.

12. mahalo15

Posts: 84; Member since: Nov 30, 2018

You are right China should shut down apple and android in China. So that Jobs and investment can go to other countries with cheaper labor in South East Asia. Foxtron and Pegatron should move all their assembly lines to these countries who will welcome them with open arms. They have already moved lot of assembly lines to Vietnam and India recently.

15. Bondurant

Posts: 784; Member since: Jun 04, 2014

Good riddance. Chinese people are better off working for their own products and done being a slave to Uncle Sam. Rest of Asian countries will realize the same and let Uncle Sam labor at his own factory at a farm in US.

18. shawman

Posts: 71; Member since: Sep 18, 2012

I am not sure the logistics can work with china providing some of the raw materials. If I am not sure most phones need some rare metals that China dominates. If China ceases to export those then US industry could be screwed. I am sure this sabre tooth rattling is to get concessions in trade agreement. I am sure within next few weeks we will have it and then Huawei will be let off with a "fine".

5. d1g1te

Posts: 64; Member since: Oct 04, 2016

If this continues, I cross my fingers for Huawei to survive this act of aggression from Trump administration. Break free of US dependencies and then Trump is screwed. Trump will get what he wants more expensive slower 5G. US will as result fall heavily behind in technology as crucial as 5G and China will become world leader in technology.

6. Alcyone

Posts: 487; Member since: May 10, 2018

Speaking of "threats". That puts this software and hardware bs into real perspective. As if, the US wasn't and hadn't been spying themselves. I'd rather have China pick up info on me, and take a pass on advanced (virtually unstoppable) military hardware. The lesser of the two evils is what needs to be settled upon.

7. Hollowmost

Posts: 424; Member since: Oct 10, 2017

US gov accuses huawei for spying lol, this is like the spider-man pointing to spider-man meme.

8. Seanetta unregistered

It's all down to MONEY. Trump came to a deal with ZTE with them paying a good few billion to US government. And also Trump and America doesn't like the fact that Huawei and Chinese companies are doing the better than some American companies. That's the real threat cos so far nobody had come up with any evidence or proof that Huawei is guilty of anything

10. Hollowmost

Posts: 424; Member since: Oct 10, 2017

i dont thing 1.4 billion will save the US, like is trump doing all this to get 2 or 3 billions ?

20. TBomb

Posts: 1571; Member since: Dec 28, 2012

It's more complicated than just money. do I fully understand it? no. Can I articulate a proper message to explain it? no. but I guarantee it comes down to more than just money.

9. Hollowmost

Posts: 424; Member since: Oct 10, 2017

if you look closely the US companies will also be hurt badly > china will also bounce back ( remember the trade war where china implied tariffs for US 'soybeans' good, china immediately started importing soybeans from Canada and Brazil, leading all south Dakota farmers 'aka trump voters' to go bankrupt > iphones are made in china so ... > android will have a huge drop in OS market share > people will start fearing to get android devices because google can stop updating devices with no prediction > china will start developing Kirin OS which will directly hurt android.

13. JohnR

Posts: 158; Member since: Sep 08, 2017

LOL... China is soooo hacking our next election.

14. Bondurant

Posts: 784; Member since: Jun 04, 2014

Ban Apple and all its subsidaries in China and it will take Apple another 3 years to catch up to the losses by the which time it is too late. And ban Android and create alternate new OS platform in cooperation with Asia and West European countries that cannot be held to ransom like Android does. That would reduce Android users to Samsung and Samsung would soon ditch Android for developing Tizen OS.

16. Demo-jay

Posts: 78; Member since: Feb 13, 2018

If Huawei creates it’s own O.S and apple gets will remain the only Android based device...and am telling it won’t be for long till the take advantage or that and move completely to Tizen...

17. Demo-jay

Posts: 78; Member since: Feb 13, 2018

Then sony moves to their o.s,nokia will join sony....then google looses and makes android closed for pixel phones only...they’ve been long looking to be the next Apple after all

19. worldpeace

Posts: 3135; Member since: Apr 15, 2016

Still not much compared to how apple dependent on China's parts.. China won't just sit back and let this thing happen, good luck for Apple.

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