Foxconn Halts Some of Huawei Phone Production Lines
Foreign media reports say that Huawei's smartphone shipments are expected to shrink by up to 24 percent this year due to sanctions by the U.S. administration. They report that Foxconn in Taiwan has stopped some of its production lines for Huawei smartphones.
As Washington’s anti-Huawei campaign kicks in, the Chinese government is moving to respond to it by announcing its own blacklist of companies that have suspended transactions with Chinese companies for political reasons.
According to foreign news media outlets including the South China Morning Post and Tech Crunch, Foxconn, the world's largest OEM company that produces smartphones for Apple and Huawei, has put on hold some of its production lines for Huawei phones. Recently, EE and Vodafone of the United Kingdom have suspended the launch of a Huawei 5G model, while Japanese mobile carriers, Softbank and KDDI, put off receiving pre-orders for the Huawei smartphone P30.
Huawei sold 59.1 million smartphones in the first quarter of this year, enjoying a year-on- year sales increase of 50.3 percent. Its world market share reached 19 percent. The company has declared its goal of outselling Samsung Electronics to take the number one spot in the world by the end of next year.
However, the U.S. government's crackdown on the company has put the brakes on its strategy to take first place in the smartphone market. Market researchers such as Fubon Research and Strategy Analytics expect Huawei's smartphone shipments to decline 4 percent to 24 percent this year if the United States maintains its sanctions on Huawei. Fubon Research had expected Huawei smartphone shipments to reach 258 million units this year, but now expects the number to drop to 200 million units in a worst-case scenario. Strategy Analytics also expects Huawei smartphone shipments to shrink by about 24 percent this year and by 23 percent next year. Huawei’s shipments decline this year and next year is estimated at 100 million units.
As Huawei's expected slump has become reality, the company’s partners such as Foxconn are being hit hard. According to industry sources, 36 percent of Huawei's core suppliers are American businesses and 60 percent Asian firms. Among them, Chinese, Japanese and Taiwanese companies account for 27 percent, 12 percent and 11 percent, respectively. In particular, Foxconn of Taiwan occupies about 10 percent of Huawei's total purchases.
Foxconn is the largest producer not only for Huawei but for Apple. It is sandwiched in the U.S.-China trade dispute. As Apple is suffering from the hefty U.S. tariffs on products made in China and anti-American sentiments among Chinese consumers, Foxconn will suffer from a double whammy. Foxconn is reportedly moving its iPhone production line in China to India to reduce its Apple risks.
Meanwhile, in response to the U.S. government's sanctions on Huawei, China said that it would also make a blacklist. China is targeting foreign companies that excluded Chinese companies from their trade lists for political reasons. As a result, U.S. ICT companies such as Qualcomm, Intel, Google and Microsoft are likely to suffer damage due to the suspension of trade with Chinese companies. Experts say that the Chinese government is likely to crack down on Apple for security reasons in the same fashion as the U.S. government has done against Huawei. Qualcomm, Intel and Apple depend on China for 69 percent, 40 percent and 19 percent of their sales, respectively.
The Chinese government’s move to announce its own blacklist is causing concerns among global ICT companies as most of them have ties with Chinese companies in terms of technology development, parts supply, and sales. Major Korean companies such as Samsung Electronics, SK Hynix and LG Electronics are also expected to be affected directly and indirectly.