Lack of components, Huawei’s supply chain on the verge of folding

Chinese telecommunications giant Huawei Technologies said U.S. sanctions were putting its supply chain in trouble and called on Washington to reconsider its trade restrictions that are hurting suppliers around the world. The world’s largest maker of mobile telecommunications equipment and smartphones is under pressure from U.S. trade sanctions aimed at preventing Huawei from buying off-the-shelf chips. “This is the third time the United States has changed its sanctions, putting our production and business in the face of big challenges,” Huawei Chairman Guo Ping told reporters gathered in Shanghai.

Washington claims that Huawei is a Trojan Horse used by the Chinese state to carry out espionage, and since September 15 Donald Trump has imposed new restrictions prohibiting American companies from supplying products or services to the company. Huawei has repeatedly denied posing a national security risk. Guo said that while Huawei had enough chips for its BtoB operations, including its 5G network business, its smartphone chip stocks were badly impacted by U.S. restrictions. “The Chinese company understood that suppliers like Qualcomm were asking for US licenses to continue doing business with them,” he added. Intel has already received licenses to supply certain products to Huawei, and Chinese company Semiconductor Manufacturing International, which uses US-sourced machinery to produce chips for Huawei, has also applied for the license.

More Kirin chips in production

“Huawei is ready to use Qualcomm chips in its smartphones if Qualcomm obtains a license to circumvent restrictions,” Guo added. Qualcomm did not immediately respond to a request for comment. “We hope that the US government can reconsider its policy and if the US government allows it, we are always ready to buy products from American companies,” Guo said on the sidelines of the annual Huawei Connect conference held online from 12:00 p.m. September 23 to 26. Huawei said that as of September 15, it stopped manufacturing its most advanced Kirin series chips that power its high-end mobiles. Analysts say Huawei will run out of stock of Kirin chips next year.

Fearing the demise of Huawei’s mobile division, consumers rushed to buy the brand’s smartphones. Sellers say the price of some devices has increased by 500 yuan (US$74). Washington does not seem ready to waive sanctions against Huawei, especially since relations between the United States and China have not been so tense for decades. Last month, the United States said it would expand a program called “Clean Network” to block various Chinese apps and telecommunications companies from accessing sensitive information about American citizens and businesses. David Wang, an executive director of Huawei, said the company hopes countries will introduce “rational standards” for 5G. “So far, Huawei has not yet seen any negative impact of the US program on its global 5G business,” he added.