A Growing Number of Companies Stopping Transactions with Huawei

As the U.S. government has put Huawei on a blacklist to restrict the Chinese IT company’s access to U.S. suppliers, a growing number of global companies are suspending transactions with it.

While Google has decided to stop allowing Huawei to access updated versions of its popular Android applications, developers of chipsets for smartphones such as Intel, Qualcomm and Broadcom also stopped trading with Huawei.

Google, which provides the Android operating system (OS) for Huawei smartphones, said in a statement that it was "complying" with the U.S. order, which requires American companies to obtain a license if they ship products to the Chinese company. This means the Chinese company's smartphones could lose access to updated versions of popular Google applications.

In China's domestic market, Huawei is using a separate OS that is based on an open source version of the Android OS due to the Chinese government's policy not to use Google services. Although Huawei’s own OS is built on Android, it cannot use Google's various services such as search engine, YouTube and application market Play Store. On the other hand, products that are released in Europe and other foreign countries are equipped with Android services.

Following the U.S. Commerce Department’ action, Google is going to stop providing Huawei with technical support or cooperation regarding the Android OS. For smartphones that are released overseas, Huawei will no longer be allowed to use Play Store as well as Google's various services that it has used so far. Services like Netflix will also be unavailable. In addition, Huawei will not be able to respond when Google upgrades its OS to enhance Android security.

However Google said "Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices.”

Huawei has overtaken Apple to be the world's second largest smartphone producer after Samsung Electronics in the January-March period. The U.S. action against Huawei is predicted to affect Huawei's smartphone business as well as its 5G telecommunication equipment business.

Intel and Qualcomm are supplying modem chipsets that support application processors (APs) and mobile telecommunication services. Zylinx Technology Corp. and Broadcom are supplying WiFi and other wireless chipsets. These chipsets are being used in smartphones, PCs, tablets, wired and wireless sharing devices and IoT devices. These companies have stopped doing business with Huawei, affecting the Chinese company’s entire businesses.

Huawei is using its own chipset "Kirin" for its products for domestic use in China, but in overseas markets it is using Qualcomm's Snapdragon chipsets to meet demands from mobile carriers.

The impact on Huawei’s server business will also be serious. Because X86 server market CPU is monopolized by Intel, there is virtually no way Huawei can bypass this. Huawei ranks fourth in the global server market with an 8 percent market share, according to market research firms Gartner and IDC. There is still a significant gap in market share with leading companies such as HP, Dell, and IBM, but Huawei alone has been booming alone in the server market in recent years.

American memory chipmakers Micron Technology and Western Digital also stopped shipment to Huawei. Micron said in a statement, "As a U.S. based company with a global footprint, Micron respects and complies with all laws and regulations in the U.S. and other countries where we operate."

In preparation for the U.S. crackdown, Huawei has stockpiled roughly six months to one year of key components. "We have already been preparing for this," said Huawei's founder Ren Zhengfei at the company headquarters in Shenzhen on May 18.

The company says it has been preparing for such a situation for many years. It has been seeking to reduce its dependence on Google and diversify its trading lines for smartphone components. But industry watchers predict that the Chinese company will not be able to withstand the blow for more than three months.

It is not just U.S. companies that are stopping shipments to Huawei. Companies in Europe and Japan are also following suit. Under the related U.S. law, foreign companies using a certain amount of American technology for products sold to Huawei are subject to the same restriction as that applied to U.S. companies. They risk legal repercussions in the U.S. if they fail to comply.

For this reason, German chipmaker Infineon Technologies has suspended shipments to Huawei, a sign that Washington's sanction on the Chinese tech giant is beginning to choke off its vital chip supplies beyond the U.S. The German chipmaker supplies products to Huawei, including microcontrollers and power management integrated circuits.

Infineon’s move could influence other key European and Asian suppliers to take a similarly cautious approach.

ST Microelectronics, another key European chipmaker, is set to have meetings this week to discuss whether it will continue shipping to Huawei, according to the Nikkei Asian Review. For now, ST Microelectronics is maintaining deliveries.

Huawei's key Asian chip supplier Taiwan Semiconductor Manufacturing Co., the world's largest foundry company, continues to deliver to Huawei but is conducting due diligence to assess the potential impact, according to the Nikkei Asian Review.

Other Asian suppliers such as Japan's Toshiba Memory, the world's second biggest NAND flash memory provider, and Japan Display Inc, the screens supplier, are investigating the implications for their businesses of the U.S. blacklist of Huawei, the Japanese media outlet reported.