Huawei is adjusting to a new normal—launching products while in limbo over its status on the U.S. "foreign entities" list.
On Monday, the Department of Commerce (DoC), which put Huawei on its prohibitive blacklist in May, issued Huawei a second 90-day reprieve on the ban, permitting U.S. companies to supply the Chinese tech manufacturer with vital components.
But at a product launch today, Huawei Rotating Chairman Eric Xu told journalists the company is assuming its place on the list may be permanent.
“We’ve already become used to living and working with entity list restrictions and we also believe it’s not very likely to be relieved from such a living and working state,” Xu said, answering a question on whether the restrictions would affect future development of Ascend 910—the “world’s most powerful A.I. processor,” which Huawei launched in Shenzhen today.
“Definitely there will be challenges we have to tackle, the efficiency will not be as high and we will need to take on more workload but this is not an insurmountable challenge,” Xu said.
However, Huawei founder and CEO Ren Zhengfei doesn’t sound so calm. In a memo to staff reported on Tuesday, Ren said the company was facing a “live or die moment” and that staff should prepare for “battle mode.”
'Live or die'
Huawei was first put on the DoC’s blacklist in May and the repercussions were instant. One of Huawei’s primary contract manufacturers, Flex, cut production levels for Huawei; Huawei cancelled the launch of a new laptop because it couldn’t ensure supplies; and Google announced it would stop providing Huawei with certain Android services.
However, the impact of the prohibition was felt by the U.S. suppliers that draw huge revenues from sales to Huawei, too. The Semiconductor Industry Association—which represents the likes of Intel and Qualcomm—lobbied Washington to rescind the ban. On May 20, four days after Huawei was blacklisted, the DOC changed tack and issued its first 90-day reprieve.
The DoC issued a second 90-day grace period on Monday this week, which it said was to allow time for rural U.S. network operators that rely on Huawei to transition off of the Chinese tech. However, at the same time, the DoC added a further 46 Huawei subsidiaries to the government’s blacklist. The next day, Ren sent his memo to staff.
“If you cannot do the job, then make way for our tank to roll; And if you want to come on the battlefield, you can tie a rope around the ‘tank’ to pull it along, everyone needs this sort of determination!” Ren wrote, deploying the sort of military metaphors the former People’s Liberation Army engineer is known for.
Huawei is now in a race to plug gaps in its supply chain that could be exposed if and when the DoC fully implements its prohibition. Two weeks ago the smartphone maker launched its in-house operating system, HarmonyOS, which could replace the current Android operating system that powers its smartphones, although Huawei admits it intends to stick with Google’s Android as long as possible.
Huawei is also developing its own chipsets for smartphones through the company’s semiconductor division, HiSilicon. However the unit only designs computer chips and outsources production to a third-party foundry—Taiwan Semi-Conductor Manufacturing Corp (TSMC), based in Taiwan.
HiSilicon also uses software provided by two U.S. companies, Synopsys Inc. and Cadence Design Systems Inc, to design its chips. At the launch for Ascend 910 today—which is a chip designed primarily for training A.I. models, not for powering smart phones—Xu said Synopsys and Cadence were no longer able to work with Huawei, but claimed “there will always be alternative companies.”
Huawei executives are typically bullish on the company’s prospects but Ren has been known to let slip troubling counter-narratives. In his memo to staff Tuesday, for example, Ren issued a warning about the company’s first half results, which reported a revenue surge of 23% over the same period last year, hitting Rmb401.3 billion ($56.6 billion).
“In the first half, our results looked good, it is likely because our Chinese clients were sympathetic and made payments in time, the big volume made cash flow look good, this doesn’t represent the real situation,” Ren said.
So is it business as usual or a battle to the last? At Huawei, the "new normal" might depend on who you ask.
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