Huawei Stockpiles 12 Months of Parts Ahead of US Ban

Huawei Stockpiles 12 Months of Parts Ahead of US Ban

Trump admin has just made it known it will likely ban Huawei from acquiring US-made semiconductors

Huawei Technologies told global suppliers six months ago it wanted to build up a year of crucial components to prepare for trade war uncertainties, even as it moved to secure new sources and become more self reliant, sources familiar with the plans told the Nikkei Asian Review.

Meanwhile, concerns are mounting in Huawei’s Asian tech supply chain about collateral damage from the U.S. government’s move to potentially block American and even foreign companies from doing business with the world’s leading telecom equipment maker, whose global procurement totals around $67 billion a year. Shares in companies whose fortunes depend in part on Huawei business sold off Thursday.

The reaction followed a statement Wednesday by the U.S. Department of Commerce that it was placing the company on a export control list. The listing, once in effect, means that all of Huawei’s American suppliers will require U.S. government approval to sell to the Chinese company.

The lack of detail in the statement creates uncertainty for Asian manufacturers. Many important Huawei suppliers in the region including Sony and Taiwan Semiconductor Manufacturing Co. — the world’s largest contract chipmaker — have held internal meetings to assess the implications, multiple sources told Nikkei.

Multiple sources said that Huawei’s preparations for a worst-case scenario — a U.S. ban on business with key suppliers — started more than six months ago and were not limited to chips but spanned a wide range of electronics, including passive components and optical parts. For some components that are subject to higher risks of export controls, Huawei has stockpiled six months’ to more than a year’s worth of supply, while holding at least three months’ worth of less crucial ones, the sources said.

The world’s second-largest smartphone vendor also started at the beginning of this year to certify more suppliers of chips, optical components, camera-related technologies and other parts in places outside the U.S., people familiar with the matter said.

“Previously, Huawei would only use the world’s top one or two suppliers for electronic components, but this year it assigned the team to extend the reach to three to four suppliers for each component,” said a source with direct knowledge of the plan. “The most important goal is to avoid the worst case that Huawei’s products in smartphone, servers, and telecom equipment could not be delivered because of a U.S. ban or other trade war uncertainties.”

The Chinese company also set a goal of developing its own versions of semiconductor devices, including high-end radio frequency and optical chips, for which it still relies heavily on U.S. vendors in two and a half years.

Huawei’s worst-case scenario moved closer to reality when the U.S. Commerce Department said Wednesday it would add Huawei and 70 affiliates to its so-called Entity List, which requires U.S. companies and foreign entities to obtain licenses if their businesses relate to “the sale or transfer of American technology to a company or person” on the list. “The license may be denied,” the department said.

Jefferies Equity Research said in its latest report that the U.S. government is not expected to approve such licenses…….more here

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