Huawei under no ‘illusion’ about US lifting sanctions but will keep chip-making unit as it fights for survival
- Huawei deputy Chairman Eric Xu said Huawei is planning its future based on the assumption that it will not be removed from the US Entity List
- The telecoms equipment maker has been moving into new businesses in search of revenue growth, but without access to US chip technology, its future looks bleak
Huawei currently has enough chip inventory to support its enterprises, Xu said, but added that the situation cannot last indefinitely, suggesting the company is depleting its stockpiles.
However, Huawei will keep its fabless HiSilicon chip unit for as long as it can, Xu noted, despite the fact that it cannot find any manufacturer willing to make its chips. HiSilicon designs the Kirin processors that Huawei uses in its smartphones, but the company has no chip manufacturing capacity of its own.
“All our strategies and detailed plans are made with the assumption that we have to survive and grow [while being on the] Entity List, and we can’t make strategies and plans under illusion or fantasy – we will be dead by doing that,” Xu said.
The US government tightened sanctions on Huawei last summer when it barred chip makers from supplying the Shenzhen-based company with chips made using US technology without prior approval, cutting Huawei off from the most advanced chip technology in the world.
Huawei’s chip purchase volume from Japan dropped to US$8 billion in 2020, down from US$10 billion the year before, as a result of this restriction, according to Xu.
“Our target for 2021 is to survive, but of course we hope that we can live a bit better,” Xu said.
Dan Wang, an analyst with Gavekal, wrote in a research note that the sanctions are not likely to kill Huawei, but it might lead to a transformation of the company.
“If there is no change to current US restrictions, then Huawei will quickly run out of inventory to maintain production of smartphones; the carrier business will last longer, but not indefinitely,” he wrote. “There’s no way that Huawei would dissolve as a corporate concern: the company is pivoting to new business lines like automotives, but a Huawei that does not make smartphones and base stations would be a fundamentally different company.”