On Wednesday, the U.S. Department of Commerce restricted Huawei’s access to American technology, banning the company from buying U.S. technology without special approval. The Trump administration has already filed criminal charges against Huawei for stealing technology, but has not yet made any straight shots at the company beside calling it an espionage threat.
The damage inflicted by the ban could be catastrophic if not fatal for Huawei.
A few years ago, ZTE, a much smaller Chinese telecom equipment company found itself in a similar position as Huawei. After being added to the entity list in 2016, ZTE halted production and nearly went out of business until the Trump administration intervened and softened the sanctions.
As the world’s biggest telecom equipment manufacturer, Huawei buys microchips and other specialized parts from U.S. companies including Intel, Qualcomm and Qorvo. Of the $70 billion that Huawei spent on components and other supplies last year, $11 billion went to U.S. companies, revealed Huawei spokesman Joe Kelly. The ban will possibly disrupt Huawei’s supply chain, delay China’s 5G roll-out, and obstruct the trade talks.
In response to the ban, Huawei’s subsidiary Hisilicon announced that it has long been worried that the firm could one day be unable to obtain chips and technology from the United States and had prepared to soften any impact.
Hisilicon CEO Ms.He Tingbo issued an internal letter today mentioning that many years ago, Hisilicon made a bet on “extreme survival” and started to “spare tires” that could help the company stay afloat in the future.
“Now, the history makes all the ‘spare tires’ important overnight, ” says He Tingbo, “In the future, there will not be another decade to build spare tires and then replace them. The buffer zone has disappeared, and every new product has to be technology dependent at the time it was built. ”
Featured image credit to Paul Sawers / VentureBeat