Ouch. US blacklisting has apparently resulted in Chinese firm shutting down some of its smartphone production lines
The scale of problems facing Huawei Technologies is becoming extremely visible after it was reported that the Chinese tech giant is reducing orders for new phones.
This is according to a report in The South China Morning Post, which cited unnamed sources as saying that Foxconn has halted production lines for several Huawei phones, following the reduced orders for new devices from Huawei.
If true, this is stark evidence of the affect of the executive order issued by President Donald Trump in mid May, that declared a national security emergency against Chinese firms.
And almost immediately after the President’s executive order, the US Commerce Department added Huawei and 70 affiliates to its so-called Entity List, which bans them from buying parts and components from US companies without US government approval.
That decision made it difficult, if not impossible, for Huawei, to sell some products because of its reliance on US suppliers for essential silicon and other components.
Just days later however the US Commerce Department announced a 90-day delay to the imposition of trade restrictions on Huawei, but the Chinese firm said that the extension didn’t ‘mean much’.
This was because soon after the US decision, firms such as British chip designer ARM, as well as Intel, Qualcomm, Xilinx and Broadcom said they were halting co-operation with Huawei.
Google has also restricted Huawei’s access to future Android operating system updates, which impacts its ability to offer popular Google apps on its phones in the future.
Huawei however has made some contingency plans.
For example it is reported that the firm had built up a three month component inventory ahead of President Trumps executive order.
Huawei is also understood to have built its its own Android -based operating system.
For the time being though Huawei can still use the stripped down, open source version of Android that ships without Google Mobile Services.
And Huawei smartphone customers can still access Google’s app store, but this is not certain going forward and the Chinese vendor could be forced to offer third party apps via its own Huawei app store.
Huawei is also hitting back legally after it adjusted its lawsuit against the US government over the law that bans any federal agencies from using Huawei equipment on national security grounds. It is arguing that ban is ‘unconstitutional’.
Huawei has also reportedly sent home American staff that undertake R&D functions at its Shenzhen headquarters.
It has also reportedly asked its Chinese staff to limit conversations with overseas visitors, and cease any technical meetings with their US contacts.
Huawei has also told Silicon UK that it is not cutting back on orders.
“Huawei refutes these claims,” a spokesperson told Silicon UK. “Our global production levels are normal, with no notable adjustments in either direction.”
President Trump knows how damaging it will be to Huawei after it was placed on the US ‘entity list’ last month.
Fellow Chinese company ZTE for example was last year brought to its knees by a similar move by the US.
The US had imposed a component ban on ZTE in April 2018 in response to ZTE’s alleged failure to discipline executives who had colluded to evade US sanctions on Iran and North Korea.
The ban effectively put ZTE, one of the world’s largest telecommunications equipment makers, out of business, since it was heavily dependent upon parts obtained from the US.
But in July last year the ban was lifted when President Trump personally intervened, saying he wanted to protect Chinese jobs.
But such was the impact of the component ban, that ZTE’s business operations only fully recovered in August 2018.
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