Huawei rebukes US attempts to stymie foreign competition with chip rule

Latest move to block chipmakers that use US technology from supplying to Huawei without a licence is the US government's attempt to "crush" competitors beyond its borders and will undermine trust international companies have in US technology and supply chains, says Huawei.
Written by Eileen Yu, Senior Contributing Editor

Huawei has called out the US government's latest move to restrict semiconductor exports as another attempt to stem foreign competition and reveals its disregard for customers. The new export rule also undermines the trust international companies have in US technology and supply chains, it said, which will eventually harm America's own interests. 

Speaking at the company's annual global summit in Shenzhen, China, Huawei's rotating and acting chairman Guo Ping said the past year has been difficult and challenging, due to its addition to the US government's Entity List on 16 May 2019. US companies are prohibited from transferring goods to companies on the list unless they have procured a licence from the US government. 

The move prompted Huawei to increase its research and development investment by 30% as well as invest in reengineering its products, Guo said. This had led to redesigns of more than 1,800 boards and rewrites of some 16 million lines of its software codes, he said, adding that the company has also sought out alternative sources for many of its materials.

He noted, however, that it was too soon to say how the latest restrictions on chip exports would impact Huawei's product development; specifically, its smartphone production. 

The US Department of Commerce on Friday announced plans to "restrict Huawei's ability to use" US technology and software to design and manufacture its semiconductors abroad. It said this would stem the Chinese company's "efforts to undermine US export controls". 

This meant that manufacturers of chip designs and chipsets that used US technology and software to produce these components for Huawei and its affiliates on the Entity List would no longer be able to do so without prior permission from the US government. US Secretary of Commerce Wilbur Ross claimed it was acting out of national security and foreign policy interests. 

The move is expected to affect Taiwan Semiconductor Manufacturing Company (TSMC), which supplies the bulk of Huawei's smartphone chips. Just last week, the chipmaker unveiled plans to build and operate an advanced semiconductor fab in Arizona, USA, with construction slated to start next year and production targeted to commence in 2024.

In response, Huawei said in a statement Monday that it "categorically opposes" the latest rule that specifically targets the Chinese company, noting that the US government already added it to the Entity List last year "without justification".

Despite the lack of access to "key industrial and technological elements", Huawei said it had complied with all US government regulations while fulfilling its contractual obligations to customers and suppliers. 

"Nevertheless, in its relentless pursuit to tighten its stranglehold on our company, the US government has decided to proceed and completely ignore the concerns of many companies and industry associations," the Chinese smartphone maker said. "This decision was arbitrary and pernicious, and threatens to undermine the entire industry worldwide. This new rule will impact the expansion, maintenance, and continuous operations of networks worth hundreds of billions of dollars that we have rolled out in more than 170 countries."

It added that more than 3 billion consumers who use Huawei products and services worldwide also would be affected. 

"To attack a leading company from another country, the US government has intentionally turned its back on the interests of Huawei's customers and consumers. This goes against the US government's claim that it is motivated by network security," the Chinese company said.

In the long term. the US government's decision would damage the trust and collaboration as well as fuel conflict within the global semiconductor industry, it added. 

Huawei said: "The US is leveraging its own technological strengths to crush companies outside its own borders. This will only serve to undermine the trust international companies place in US technology and supply chains. Ultimately, this will harm US interests."

Guo said the company needed time to evaluate the new regulation before it projected the potential impact. As an ICT equipment and device manufacturer, he added, Huawei could redesign its products but it lacked the ability to perform other tasks. 

Pointing to its recent earnings report, he said the company's business had been severely affected since being added to the Entity List, losing $12 billion in revenue last year. He added that it now was more difficult for Huawei to win contracts. 

But there was one lesson the US could teach, he said, stressing the need for unified global standards. He said the US chose to go with a different communication standard during the 2G era and, as a result, adoption of telecom equipment from the US declined. It lost its competitiveness and industry leadership, Guo said, noting that none of Huawei's competitors in 5G today hailed from the US. 

In comparison, EU promoted the GSM standard and the region's operators and telecom equipment providers all benefited from this, he said.

These developments underscored how the benefits of unified global standards and international organisations, including Huawei, would continue to promote unified standards, he added. 

Huawei said it has deployed more than 1,500 networks worldwide and some 600 million customers use its devices. 

According to Guo, the company's procurement spending climbed 27% CAGR over the past seven years and it was committed to maintaining a diverse supply chain. 

On US suppliers specifically, he said Huawei spent $18.7 billion buying from the country last year and would continue to do so if the US government allowed it. 

With the digital economy estimated to be worth $23 trillion by 2025, he added that the future of ICT remained bright and Huawei would continue to invest in three key areas: connectivity, computing, and smart devices. 

Guo said: "Today the world is an integrated collaborative system. The trend of globalisation shouldn't and will not likely be reversed. Fragmented standards and supply chains benefit no one, and further fragmentation will have a severe impact on the entire industry."

Pointing to the 2,000 companies that were on the US Entity List last year, with more companies to be added, he said such lists have fuelled doubts into who suppliers can work with, saying that it has fractured global trust and cooperation and aggravated conflict between suppliers.

"The industry as a whole should work together to strengthen IPR protection, safeguard fair competition, protect unified global standards, and promote a collaborative global supply chain," he said. 

Huawei previously cautioned that the Chinese government was likely to roll out countermeasures if the US continued to impose trade sanctions on the company.


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