Can Huawei survive complete ban on exports of American technology?
Huawei Technologies Co, which has been battling US trade sanctions since it was added to a blacklist a few years ago, may be facing added pressure amid reports that Washington may stop approving export licences for a wider array of technology to the Shenzhen-based company.
Former US President Donald Trump added Huawei to the Department of Commerce’s Entity List on national security grounds in 2019, a move that has hobbled the Chinese tech giant’s once-lucrative smartphone business. However, the Commerce Department later agreed to certain export exemptions if the technology involved was deemed as less of a threat.
According to various media reports citing people familiar with the situation, including one from the Financial Times, the Biden administration is now considering no longer granting such licences, although a decision has not been made yet.
Huawei declined to comment on the reports of additional US punishments.
China’s foreign ministry has accused the United States of deliberately using national security as an excuse to target Chinese businesses.
“China strongly opposes the US’s unscrupulous and unjustified suppression of Chinese companies by stretching the concept of national security and abusing state power,” Chinese foreign ministry spokeswoman Mao Ning said at a regular press briefing on Tuesday. “Such moves violate the principle of market economy and international trade rules and dampen international confidence in the US business environment.”
If confirmed, a wholesale US technology ban would completely sever Huawei’s access to US suppliers such as Qualcomm, Nvidia and Intel, dealing a fresh blow to its operations. For example, Huawei’s latest flagship smartphone, the Mate 50 unveiled in late 2022 and which uses Qualcomm chips that do not support more advanced 5G connectivity, would be impacted.
Analysts at BOCI, the international investment banking unit of Bank of China, wrote in a note that tightened US export controls on Huawei mean that its smartphone business “may face new risk”. Meanwhile, investor sentiment on China tech “may be weakened on rising [geopolitical] tensions”, they wrote.
Huawei, despite its business woes and more uncertain prospects, remains a symbol of national pride in China, even though it is no longer a market leader in smartphones.
Huawei was featured as one of the “brands that have strengthened the country”, in a documentary released by state broadcaster CCTV this week. In a programme focusing on the company’s smartphones, Huawei executives – including consumer business group chief executive Yu Chengdong and smartphone unit vice-president Li Xiaolong – discussed how the company has overcome “difficulties” to become more self-sufficient and launch the Mate 50.
The CCTV documentary series also features other Chinese companies such as Alibaba Group Holding and Great Wall Motor. Alibaba is the owner of the South China Morning Post.
Analysts are watching Huawei’s situation closely, to gauge whether this symbol of technological achievement in China can survive tighter US scrutiny. Huawei’s founder Ren Zhengfei already warned the company’s employees last year that it must focus on survival at all costs.
Huawei “is now racing against time to diversify its business into new segments less dependent on advanced semiconductors”, said Dan Wang, an analyst at research firm Gavekal, in a note last month.
As revenue at its smartphone businesses has slumped amid a shortage of advanced chips, the company has doubled down on industrial digitalisation services, based on its prowess in 5G, artificial intelligence and other technologies. After success at home with projects such as its automated smart terminal at Tianjin Port, Huawei is looking to build momentum.
In a 2023 New Year’s message sent to employees on December 30, Huawei’s rotating chairman Eric Xu said the company has exited “crisis mode” and it is “back to business as usual” this year.
After reporting its worst ever sales performance in 2021 with a 29 per cent slump, privately-held Huawei is expected to report 636.9 billion yuan (US$94.5 billion) in revenue for 2022, basically flat compared to the previous year. South China Morning Post
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