Hardware and software vendors ‘stop supplying Huawei’ after US embargo

20 May 2019 | Alan Burkitt-Gray

Cover

A number of software and hardware vendors have stopped supplying Huawei following the US government’s embargo imposed on the company last week.

The US Department of Commerce added Huawei to its entity list, saying US companies – or others in the US – could trade with it only with specific permission.

Last night the Reuters news agency said that Google has also joined the embargo, suspending sales of hardware, software and technical services except for open-source products.

This puts into question the long-term ability of Huawei to continue to use the Android operating system on its phones.

The Chinese vendor protested, saying: “Huawei has made substantial contributions to the development and growth of Android around the world. As one of Android’s key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefitted both users and the industry.”

It added: “Huawei will continue to provide security updates and after-sales services to all existing Huawei and Honor smartphone and tablet products, covering those that have been sold and that are still in stock globally.”

Ben Wood, chief of research at CCS Insight, said: “We still don’t have a clear understanding of what Google has told Huawei and what elements of the Android operating system may be restricted, so it remains unclear what the ramifications will be. However, any disruption in getting updates to the software or the associated applications would have considerable implications for Huawei’s consumer device business.”

Bengt Nordström, CEO of Stockholm-based consultancy Northstream, said the implications of the Trump administration’s action would reach right across the telecoms industry.

“I think the US administration doesn’t understand what they have put in motion here,” he told Capacity. It will impact not only Huawei’s phone business but also suppliers of network components. “All vendors are working hard to be profitable. They way you make that work is to have global scale. If you are disrupting that you are disrupting the industry.”

The Bloomberg news agency said Broadcom, Intel, Qualcomm and Xilinx have told staff they will not supply Huawei “until further notice”. Ryan Koontz, an analyst with Rosenblatt Securities, told the agency that the US ban “may cause China to delay its 5G network build until the ban is lifted, having an impact on many global component suppliers”.

Reports say that Huawei has been stockpiling components for some time, expecting the possibility of an embargo. A report in the Times of India said that Huawei “has already stockpiled enough inventory for almost a year to support Indian telecom operators’ 4G expansion drive”.

In the US, Neil Shah, a research director at Counterpoint Research, told CNBC that Huawei has stocked “enough components for next 8-12 months so ideally should be little affected in the near term. Huawei would be expecting to get this resolved by then but there will always be a hanging sword.”

However, that does not apply to software, which needs licences from the suppliers. Huawei said: “We will continue to build a safe and sustainable software ecosystem, in order to provide the best experience for all users globally.”

Huawei has also been developing its own semiconductors so that in the long term it is not dependent on the likes of Intel and Qualcomm.

Paolo Pescatore, an analyst at PP Foresight, told Capacity: “All eyes are now on Huawei’s and the Chinese government’s response.” He said: “ The growing geo-political tensions between the two nations will continue to weigh heavily on the global economy and increase uncertainty for businesses.”