US Sanctions Are Squeezing Huawei, but for How Long?

Huawei, the crown jewel of China’s tech industry, is reeling from a financial one-two punch delivered by US chip sanctions and a campaign aimed at cutting international markets.

But with Huawei rapidly expanding into new markets and the Chinese government investing heavily to gain technological independence from the West, that leverage may not last for long.

The US government has targeted Huawei over alleged espionage and ties to the state, claiming that the company’s 5G wireless equipment poses a security risk. The rise of Chinese companies is viewed by many in the West as linked to the Chinese government’s power and its brand of techno-authoritarianism.

Huawei’s latest financial report, issued Wednesday, shows the financial cost of the US campaign. Revenue growth slowed to 3.8 percent last year, from 19 percent in 2019; international sales dropped sharply, especially in Europe.

The company’s smartphone sales have taken a big hit. Having ranked second in worldwide shipments behind Samsung in 2019, Huawei fell outside of the top five smartphone makers at the end of 2020, according to research firm Canalys.

“The US has been successful in checking the overall growth of Huawei, but it’s doubtful it will crush it as a global technology power,” says Peter Cowhey, dean of the School of Global Policy & Strategy at UC San Diego and a former US government official.

The US has banned Huawei networking equipment from domestic 5G networks and persuaded other countries, including the UK, Canada, and Australia, to impose similar restrictions. Last year, the US also imposed export controls to cut off the supply of high-end chips to Huawei and advanced chipmaking equipment to China, effectively crippling Huawei’s ability to make high-end smartphones.

“The supply restrictions for our smartphone business has caused us a great impact, and we haven’t been able to see a clear picture in the supply for our smartphones,” Ken Hu, a Huawei deputy chairman, said at a press conference held at the company’s headquarters in Shenzhen on Wednesday. “We think this is a very unfair situation to Huawei, and it has caused a lot of damage to us.”

Microchips are China’s Achilles’ heel, because it doesn’t have domestic capability to make the nanoscale features found on the most advanced and most powerful of these components. Chinese chipmakers such as SMIC produce chips for lower-end products, including internet-of-things devices.

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