The Trump administration’s sanctions are hitting Huawei hard, and the Chinese tech giant now says it will run out of processors chips for its smartphones by September without access to U.S. venders, according to a weekend Associated Press report.
Huawei, one of the world’s leading telecommunications providers, has been blacklisted since May 2019 from sourcing components for its devices from U.S. companies under an executive order from President Donald Trump. In a sweeping escalation of the ongoing tech feud between the U.S. and China, the ban targeted several foreign companies that intelligence officials argued could pose a threat to national security. In recent months, the White House further ramped up restrictions and the Federal Communications Commission designating Huawei a national security risk, and the fallout has left Huawei scrambling.
While Huawei’s own engineers design one of its most advanced processors, the Kirin chip, production is handled by contractors that rely on U.S. manufacturing technology, Richard Yu, president of the company’s consumer unit, said at the China Info 100 industry conference on Friday per AP. Without access to those suppliers, production will end on September 15 in what Yu called “a very big loss for us.”
“Unfortunately, in the second round of U.S. sanctions, our chip producers only accepted orders until May 15,” Yu said. “Production will close on Sept. 15. This year may be the last generation of Huawei Kirin high-end chips.”
As a result, he added, the company has “no chips and no supply” for its smartphones, which recently surpassed rival Samsung as the world’s top-selling brand for the first time with 55.8 million devices sold in Q2, according to the tech research firm Canalys. Yu attributed the success in the first half of 2020 to increased demand in China and strong sales of high-end products, but predicted Huawei’s smartphone overall sales this year would drop below 2019's total of 240 million devices sold.
A life preserver may be incoming, however. According to the Wall Street Journal, the American chip company Qualcomm is lobbying U.S. policymakers to ease sanctions and allow it to sell chips to Huawei for the production of their 5G phones. The company argues that the export ban doesn’t just hurt Huawei: By cutting Qualcomm off from potential sales of essential components in Huawei’s device, the ban is essentially handing the market—worth as much as $8 billion annually—to foreign competitors like Samsung and Taiwan’s MediaTek.
“If Qualcomm is subject to export licensing, but its foreign competitors are not, U.S. government policy will cause a rapid shift in 5G chipset market share in China and beyond,” the company said in a presentation to federal officials reviewed by the Journal. That would not only cripple American tech research but possibly threaten the country’s global leadership in 5G, which would be “an unacceptable outcome for U.S. interest.”
The Commerce Department can grant licenses to individual businesses to circumvent the ban and sell to Huawei, which Qualcomm argues would generate billions of dollars in revenue for the company to put into its own development and create new technologies. Other American chipmakers have applied for similar licenses, including Intel, Micron Technology, and Xilinx, the Journal reported.
And it’s understandable American companies would be fighting to get a slice of that pie. Even blacklisted by the U.S. and with the coronavirus pandemic raging, Huawei announced it had generated $64.8 billion in revenue during the first half of 2020—not quite the same growth it saw in previous years, but still nothing to sneeze at.