Huawei built three-month stockpile ahead of US ban

Bloomberg

Huawei Technologies Co has stockpiled enough chips and other vital components to keep its business running for at least three months as the US curtails its access to American technology, people familiar with the matter said.
The Trump administration blacklisted China’s largest tech company — which it accuses of aiding Beijing in espionage — threatening to cut off the American software and semiconductors it needs to make smartphones and networking gear. But it’s been preparing for such an eventuality since at least the middle of 2018, hoarding components while designing its own chips, the people said.
Government officials also privately warned Huawei executives last year to explore non-American alternatives, the people said, asking not to be identified talking about internal affairs. The three-month cushion is a conservative internal estimate and the company could well sustain operations beyond that time-frame, they said.
The moves against China’s national champion may have devastating consequences for the rest of the world.
Blocking the sale to Huawei of critical components such as semiconductors could cripple its operation, depress the businesses of American chip giants from Qualcomm Inc to Micron Technology Inc and retard the rollout of critical 5G wireless networks worldwide.
“The impact on Huawei will be extremely significant. An obvious impact is on the supply chain, but there is another layer of impact on confidence and its overall business,” said Cui Kai, a telecom analyst with consultancy IDC.
“It will also have a negative impact on the 5G technology evolution around the world.”
Ken Hu, Huawei’s deputy chairman, responded to the US decision in a memo to employees. “This decision is the latest move in the campaign against Huawei, waged by the US government for political reasons,” he wrote.
“The company has known this could be a possibility for many years. We have invested heavily and made full preparations in a variety of areas, including R&D and business continuity, which will ensure that our business operations will not be greatly affected, even under extreme conditions.”
That US maneuver coincides with sensitive trade negotiations between Washington and Beijing. Huawei executives reckon their company has become a bargaining chip and they will be able to resume buying from American suppliers if a trade deal is reached, the people said. That’s why they calculate a three-month stockpile may be enough to tide them over.
If Huawei’s calculation is wrong, the consequences would be dire. If the ban isn’t resolved along with the trade dispute, the company would be severely handicapped in its ability to provide advanced wireless networks.
Much of its carrier and smartphone businesses — the two pillars of the company — would be at risk.
An outright ban on Huawei elevates fears in Beijing that President Donald Trump’s broader goal is to hamstring China, igniting a protracted cold war between the world’s biggest economies.
In addition to a trade fight that has rattled global markets for months, the US is pressuring allies and foes alike to avoid using Huawei in the 5G networks that will form the backbone of the modern economy.
In the longer term, Huawei still has to assure its customers — many of the world’s largest telecommunications carriers — that it can not just build, but also maintain, their wireless networks.

Huawei CEO sees slight impact from US curbs
Bloomberg

Huawei Technologies CEO and founder Ren Zhengfei said he expects US restrictions won’t hurt the Chinese company’s growth much, Nikkei reported.
“Huawei’s growth may slow, but only slightly,” Ren told Japanese reporters
at the telecommunications equipment maker’s headquarters in Shenzhen, China, according to Nikkei. It was his first media statement since President Donald Trump and the US Commerce Department imposed restrictions. The closely held company’s revenue growth may fall short of 20 percent, Ren said.
Trump signed an order that’s expected to restrict Huawei and Chinese competitor ZTE Corp from selling equipment in the US, and the Commerce Department put Huawei on a list that could block it from doing business with US companies.
Commerce Secretary Wilbur Ross said Huawei and its affiliates pose national
security risks to the US,
and that the restrictions are a separate issue from the US-China trade negotiations.
Huawei will be “fine” even if it can’t buy chips from
US suppliers, as “we have
already been preparing
for this,” Ren said, according to Nikkei.