Huawei says it has backup plan if it can’t buy from US suppliers

Hisilicon, Huawei’s chip design house, says it has the solution.

FILE - In this July 4, 2018, file photo, a shopper walks past a Huawei store at a shopping mall in Beijing. Canadian authorities said Wednesday, Dec. 5, 2018, that they have arrested the chief financial officer of China's Huawei Technologies for possible extradition to the United States. (AP Photo/Mark Schiefelbein, File)

Chinese telecoms giant Huawei says it has a “backup plan” if it’s banned from purchasing chips from US suppliers.

The Shenzhen-based company was dealt a heavy blow from the US government when it was added to the so-called “Entity list”. US companies are barred from conducting business with companies on this list without government approvals.

In a statement published yesterday, Huawei said the US government’s decision to add it to the list was in no one’s interest and could “disrupt the current collaboration and mutual trust that exists in the global supply chain.”

The supply chain of Huawei, the world’s largest telecoms equipment vendor and the second-largest smartphone maker, relies on international suppliers. 33 out of 92 Huawei core suppliers are from the United States.

US Senator Marco Rubio tweeted shortly after the announcement of Huawei’s addition to the entity list decision that “very soon Huawei will lose access to important components like chips, antenna and phone operating systems.”

He Tingbo, the CEO of Huawei’s chip design house Hisilicon, acknowledged the implications of a potential supply chain shakeup in a letter to staff that was published by Chinese media. “Today, destiny has turned to this extreme and dark moment. The superpower (referring to the United States) has mercilessly interrupted the technical and industrial system of global cooperation,” she said.

She assured her staff that the firm has prepared for this day by developing its own chipsets, and many of these chipsets were kept in the safe as “backups”. “Today, by a historical decision, all the backups we developed in the past become the first choices overnight,” she wrote.

He’s letter came amid growing fear that its business could be crippled by the US heavy-handed crackdown, which has happened to another Chinese company , ZTE. It’s the world’s fifth largest telecoms equipment vendor and was nearly driven out of business when it was barred from buying components and services from US suppliers.

US companies also stand to lose big if Huawei is forced to seek replacements elsewhere.

According to Reuters, Huawei’s top five US suppliers – Flex, Broadcom, Qualcomm, Seagate, and Micron – made nearly USD 7.7 billion from their sales to Huawei last year.