Huawei has been the center of tensions between the United States and the Chinese in regard to security and technology. According to the US, there are valid security concerns with Huawei and the American government has taken measures to help prevent any problems. But could this actually be a good thing for Chinese technology?
Background information
Huawei is one of the world’s largest telecommunications companies that was founded in 1987 in China. At the start of 2019, the company was poised to become one of the world’s largest smartphone manufacturers. However, over recent years Huawei was accused of a number of things – including using its products to spy on other countries – which caused concern due to the company’s close ties to the Chinese government.
Other claims filed are that Huawei has stolen technology from other companies, passing it off as their own, and these were proven to be true. As such, the company was red-flagged by the American government. In May 2019, the US cut off any access by Huawei to US components and technology, including things like Google Music and other smartphone services. This started what is now known as “the war on Huawei”.
The war continues
This ban meant that Huawei was now unable to work with companies like Google and Intel, and Huawei has had to completely change how it builds smartphones – without the use of Google-owned applications.
In May 2020, vendors were barred by the White House from using US technology to produce Huawei components, and in August 2020, the Trump administration further tightened restrictions on Huawei, blocking the company from having access to chip technology.
This new restriction is designed to block Huawei’s access to commercially available chips that have been made with tools that were purchased from the United States. This makes it clear that there should be no use of American software or fabrication equipment to produce products through Huawei. Not only that, but there are almost 40 companies that are affiliates of Huawei that have also been banned from receiving sensitive technology from the US.
Since the “war” started, there has been a lot of toing and froing from both the US Government and Huawei in regard to legal matters and criminal charges, but it seems the US isn’t planning on backing down any time soon.
Helping or hindering Chinese tech
While this could be to the detriment of Huawei, some also believe it could be a good thing and there are a few paths Huawei can take moving forward.
First, the US government could allow some suppliers to sell a limited number of chips to the company – though this doesn’t seem likely to happen. Second, the company could start producing its own chips using older technology that isn’t provided through the US at all.
And finally, Huawei could simply accept defeat and sell off the business or move into liquidation – though based on the company’s cash reserves, this would take a while to happen. In this scenario, Huawei’s chip-design arm, HiSilicon, would actually need to be sold off. HiSilicon was one of the top ten global design companies in the first half of 2020 by revenue. This sale would not only allow HiSilicon to sell chips to third parties in China (creating a great revenue for Huawei), it would also open the path for other large technology companies to take control of those superior quality tech engineers, or leading to the start of new design firms, all of which would be controlled within China.
This could lead to chip design in China taking the reins as the world’s largest from America’s Qualcomm, which currently makes almost 50% of their $24 billion revenue from Chinese sales.
Time will tell what becomes of Huawei, but if the US Government continues to push the company away, and if other countries around the world follow suit, it will almost certainly benefit China in the long term.
