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Huawei says “survival” is primary focus as U.S. expands restrictions on semiconductor sales

May 18, 2020, 10:38 AM UTC

Huawei Technologies rotating chairman Guo Ping told attendees at the company’s annual analysts’ summit Monday that “survival” is the firm’s key objective in the wake of a new U.S. further restricts the Chinese telecom manufacturer’s access to semiconductors.

“Huawei is capable of designing some products, but we are not able to do a lot of other things. Currently, the priority for Huawei is to seek survival. Survival is the key word for us at present,” Guo said, responding to a question from a journalist joining via Zoom.

On Friday the U.S. Department of Commerce (DoC) announced a new rule requiring any semiconductor manufacturer outside of the U.S. to gain a special license in order to sell chips to Huawei if the U.S. technology is used at any stage of production.

The new rule specifically targets Huawei’s in-house chip design team, HiSilicon, which uses software developed by U.S. companies to design chips. The ruling also jeopardizes Huawei’s partnership with Taiwan Semiconductor Manufacturing Corp (TSMC), in particular. The Taiwanese fabrication plant manufacturers chipsets that HiSilicon designs.

According to Nikkei Asian Review, TSMC has already halted taking further orders from Huawei even though the Chinese company is TSMC’s second-largest customer. Orders placed before May 15 and due for delivery before September will still be completed, as the DoC’s new rule was issued with a 120-day suspension.

Happy anniversary

The U.S. ruling on Friday comes almost exactly one year after the Commerce Department added Huawei to its entity list, requiring U.S. companies to obtain special permission to trade with Huawei.

U.S. semiconductor manufacturers—some of which derive the majority of their revenue from sales to Huawei—lobbied Washington and won a 90-day reprieve on the Huawei blacklist last year. That reprieve has been renewed five times, most recently on Friday.

Despite the reprieves, Huawei suffered a $12 billion shortfall in its revenue projections last year as the U.S. piled more pressure on the company. Google decided to halt providing Android services to Huawei last year, as the threat of the entity list loomed. The impact was visible in the first quarter of this year, as Huawei’s overseas smartphone sales plummeted 35% over the same period in 2019.

In a statement today, Huawei said it expected business will “inevitably be affected” by the new rule, which it described as “discriminatory” as well as “arbitrary and pernicious.” The company says it is currently “undertaking a comprehensive examination of this new rule” to determine the extent of its impact.

Hit back

Last year China’s Ministry of Commerce responded to Huawei’s blacklisting by threatening to create an entity list of its own, to target U.S. companies. Despite once warning that the list was near completion, the threat never materialized.

Last Friday, however, after the U.S. Commerce Department announced its new restrictions, state-run tabloid Global Times once again raised the spectre of a Chinese retaliation.

“China is ready to take a series of countermeasures against a US plan to block shipments of semiconductors to Chinese telecom firm Huawei, including putting US companies on an ‘unreliable entity list,’” the Global Times said, citing an anonymous source and naming Qualcomm, Apple, Cisco and Boeing as possible targets of reprisal.

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