Google and Other Suppliers Begin Cutting Off Huawei Following U.S. Trade Ban
Last week, president Donald Trump signed an order to restrict Huawei Technologies from selling its equipment in the United States in an attempt to curb Huawei's access to U.S. markets. This included placing Huawei on a blacklist that could forbid it from doing business with American companies.
Now, the effect of the blacklisting has hit the China supply chain this week, with chipmakers Intel, Qualcomm, Xilinx, and Broadcom all telling their employees that they will not supply Huawei until further notice. Additionally, Google has cut off the supply of hardware and some software services to Huawei, specifically suspending all business with the company "that requires the transfer of hardware, software and technical services except those publicly available via open source licensing" (via Bloomberg and Reuters).
Google's suspension is particularly troublesome for Huawei's hardware business:
The suspension could hobble Huawei’s smartphone business outside China as the tech giant will immediately lose access to updates to Google’s Android operating system. Future versions of Huawei smartphones that run on Android will also lose access to popular services, including the Google Play Store and Gmail and YouTube apps.
“Huawei will only be able to use the public version of Android and will not be able to get access to proprietary apps and services from Google,” the source said.
Although Gmail, YouTube, and Chrome will disappear from future Huawei smartphones, anyone who owns an existing Huawei device with access to the Google Play Store will be able to download app updates from Google. The impact of the blacklisting is expected to be "minimal" in China, because most Google mobile apps are already banned in the Chinese market, where popular alternatives from Tencent and Baidu are more common.
In regards to the presidential ban, Huawei is said to have been stockpiling enough chips and other vital components to keep its business afloat for at least three months, in preparation for such an event. According to sources close to the company, executives believe Huawei has become a bargaining chip in the ongoing trade war between the U.S. and China and that things will go back to normal once a deal is reached.
Huawei “is heavily dependent on U.S. semiconductor products and would be seriously crippled without supply of key U.S. components,” said Ryan Koontz, an analyst with Rosenblatt Securities Inc. The U.S. ban “may cause China to delay its 5G network build until the ban is lifted, having an impact on many global component suppliers.”
Apple has a long history with Huawei, which hasn't been completely amicable over the past few months. Earlier this year, the U.S. Justice Department announced a series of criminal charges against Huawei for bank fraud, wire fraud, obstructing justice, and stealing trade secrets, sometimes aimed at Apple. Despite all of the issues for the company, Huawei remains a dominant force in the China smartphone market and was far ahead of Apple in the first quarter of 2019.
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Top Rated Comments
That's the reality for Chinese companies like Huawei.