Exclusive | Huawei prepares for US ban by checking on suppliers and activating contingency plans
- In 2018 Huawei’s total expenditure on components and other supplies reached US$70 billion
- Huawei’s wholly owned chip unit has said it is activating its backup plan to ensure continuous supply of most products
Huawei Technologies, the Chinese telecoms equipment giant that has been restricted from using US technologies, is preparing for the break by checking on its suppliers and readying contingency plans.
Huawei has been checking with its non-US suppliers to verify whether they are still able to work with the company under the ban, according to people familiar with the matter, who declined to be named as the information is private.
Three companies from Huawei’s supply chain confirmed with the South China Morning Post that representatives from the Chinese company have reached out in recent days to confirm whether their products or services contain key US technologies – a circumstance that could prohibit Huawei from further working with them after being restricted from purchasing US components and technologies.
“A Huawei representative called recently and asked whether our equipment uses key technology from US vendors. We have reported the case to our headquarters in Japan and are waiting for the reply,” said a Japanese supplier of Huawei in China, who indicated other industry players have received similar calls in recent days.
Another Chinese tech company, identified as a core supplier by Huawei, also confirmed the eligibility checks from the telecoms equipment giant, adding that its businesses with Huawei would proceed smoothly since its products are not affected by the US export blacklist.
The US government last week placed Huawei and its affiliates on a trade blacklist that restricts the Shenzhen-based company from buying services and parts from US companies without approval. US President Donald Trump also signed an executive order barring US companies from using telecommunications equipment made by firms posing a national security risk. The move was widely perceived in China as the US trying to contain the rise of its technological capabilities.
Inclusion on the Entity List means that a US company, person or government agency selling US technology to Huawei requires a license from the Bureau of Industry and Security (BIS). That also puts at risk non-US companies that use US components in products they sell to Huawei.
Google suspended access to some services for new Huawei Android devices. Top US tech companies including chip-makers Intel, Qualcomm, Xilinx and Broadcom have told their employees not to supply Huawei until further notice, according to a Bloomberg report on Monday.
In November 2018, Huawei released a list of key suppliers that showed it was dependent on technology and components from overseas suppliers, particularly in the US and Japan, despite having stepped up its investment in research and development and diversifying key component suppliers.
Of the company’s hundreds of global suppliers, Huawei considers 92 as core, including 33 US companies, 25 from mainland China, 11 from Japan and 10 from Taiwan. The remaining are from countries and regions including Germany, South Korea and Hong Kong.
Huawei has a business presence in more than 170 countries and regions around the world, and works with more than 13,000 domestic and global suppliers, including those in Japan, Europe and the US, Ken Hu Houkun, Huawei’s rotating chairman, said during an interview earlier this year. Hu said Huawei’s total purchases expenditure in 2018 reached US$70 billion.
The company’s wholly owned semiconductor unit, HiSilicon, drew up contingency plans years ago with the doomsday scenario of US cutting off access to advanced chips and technology. HiSilicon devoted significant resources to building a backup to ensure its survival, according to Teresa He Tingbo, the company president.
With the US putting Huawei and its affiliates on a trade blacklist, that backup plan is being followed and will “ensure the strategic safety of most of the company’s products and the continuous supply of most products”, He said, in one of the most detailed public descriptions of the plan.
A 90-day reprieve from the US government on Monday to allow Huawei to maintain existing networks and provide software updates to existing Huawei phones also meant little as the company was “ready” for the restrictions, Huawei founder and CEO Ren Zhengfei told Chinese media on Tuesday, according to transcripts of the interview published on state-run China Central Television’s social media account.
Ren said he had foreseen the clash with the US government, as it was only a matter of time before Huawei threatened US interests and attracted retaliation.
