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May 19, 2020

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Huawei says US restrictions undermine entire industry

By Zhu Shenshen | 00:05 UTC+8 May 19, 2020 | Print Edition

HUAWEI TECHNOLOGIES said yesterday that the stricter US technology export controls that specifically target the company was arbitrary and pernicious, and threatens to undermine the entire industry worldwide.

Under the latest US regulations, foreign manufacturers require a license before being able to offer Huawei semiconductors that were produced using US technology.

Huawei’s business will “inevitably be affected” and its priority is focused on “survival,” Guo Ping, its rotating chairman, said during its annual analyst conference from its headquarters in Shenzhen.

“I can’t understand it. It hurts many companies and people, and even undermines the trust international companies place in US technology and supply chains,” said Guo. 

The decision will hurt the entire industry and the over 3 billion people who are using Huawei products, the Chinese tech giant said.

The US regulations will impact expansion, maintenance and continuous operation of Huawei’s networks, worth hundreds of billions of dollars, in more than 170 countries. It will also impact communications services for billions of people who use Huawei products and services worldwide.

The latest moves indicate that the US is leveraging its own technological strengths to crush companies outside its borders, according to industry sources.

Huawei is currently the world’s No. 1 telecommunications equipment maker, especially in 5G networks. It’s also the world’s No. 2 smartphone vendor behind Samsung. 

When the US added Huawei to its Entity List in May last year citing national security concerns, a number of key industrial and technological elements became unavailable to Huawei.

Despite that, Huawei posted revenue growth of over 19 percent in 2019, thanks to booming carrier and consumer business as the world moves into the 5G era.

Revenue reached 858.8 billion yuan (US$122.6 billion), with net profit of 62.7 billion yuan, up 5.6 percent from the previous year.

Huawei’s chips are produced by Taiwan Semiconductor Manufacturing Co, or TSMC, the world’s top made-to-order chipmaker. But the new US regulation has cast doubt on that relationship.

TSMC has reportedly moved to stop new orders from Huawei following the latest US action. But the company responded by saying they were merely “market rumors.” On Friday, TSMC announced a US$12 billion investment to build a new wafer plant in the United States.

Shanghai-based Semiconductor Manufacturing International Corp, the biggest made-to-order chipmaker in the Chinese mainland, is expected to provide chip support for Huawei. The company has secured US$2.25 billion in investments from state funds for new wafer plants in south China. 

SMIC is also planning to list on Shanghai’s STAR Market with the aim of upgrading technology for an advanced 12-inch wafer plant in Shanghai. The company can only make chips that are two generations behind TSMC but the gap is expected to narrow with the company’s expansion plans.

Guo said Huawei is trying to find solutions to deal with the US restrictions by increasing research and inventory and finding more industry partners. In 2019, Huawei’s research spending grew 30 percent and its inventory value surged 73 percent.

Huawei said it will continue investing and innovating in connectivity, computing and smart devices. By 2025, the digital economy will represent an industry worth US$23 trillion. In China, construction of 5G networks and other intelligent infrastructure is expected to bring opportunities and income to Huawei, analysts said.

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