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Monday, May 20, 2019, 18:16
Top US tech firms begin to cut off vital Huawei supplies
By Bloomberg
Monday, May 20, 2019, 18:16 By Bloomberg

Top US corporations from chipmakers to Google have frozen the supply of critical software and components to Huawei Technologies Co, complying with a Trump administration crackdown on China’s largest technology company.

Chipmakers including Intel Corp, Qualcomm Inc, Xilinx Inc and Broadcom Inc have told their employees they will not supply Huawei till further notice, according to people familiar with their actions. And Alphabet Inc’s Google cut off the supply of hardware and some software services to the Chinese giant, another person familiar said, asking not to be identified discussing private matters.

Google has confirmed suspending some services while sources said, Intel Corp, Qualcomm Inc, Xilinx Inc and Broadcom Inc have frozen supplies

The moves, which had been anticipated, hamstring the world’s largest provider of networking gear and No. 2 smartphone vendor. The Trump administration on Friday blacklisted Huawei and threatened to cut it off from the US software and semiconductors it needs to make its products. Blocking the sale to Huawei of critical components could also disrupt the businesses of American chip giants like Micron Technology Inc and retard the rollout of critical 5G wireless networks worldwide - including in China. That in turn could hurt US companies that are increasingly reliant on the world’s second largest economy for growth.

READ MORE: Restriction will hurt US' 5G deployment, Huawei says

If fully implemented, the Trump administration action could have ripple effects across the global semiconductor industry. Intel is the main supplier of server chips to the Chinese company, Qualcomm provides it with processors and modems for many of its smartphones, Xilinx sells programmable chips used in networking and Broadcom is a supplier of switching chips, another key component in some types of networking machinery. Representatives for the chipmakers declined to comment.

Huawei “is heavily dependent on US semiconductor products and would be seriously crippled without supply of key US components,” said Ryan Koontz, an analyst with Rosenblatt Securities Inc. The US ban “may cause China to delay its 5G network build until the ban is lifted, having an impact on many global component suppliers.”

Blocking the sale to Huawei of critical components could have ripple effects across the global semiconductor industry

To be sure, Huawei is said to have stockpiled enough chips and other vital components to keep its business running for at least three months. It’s been preparing for such an eventuality since at least the middle of 2018, hoarding components while designing its own chips, people familiar with the matter said. 

In an interview with Reuters in March, Eric Xu, rotating chairman of Huawei, struck a defiant note in anticipation of retaliatory actions by US companies. "No matter what happens, the Android Community does not have any legal right to block any company from accessing its open-source license," he said. 

Popular Google apps such as Gmail, YouTube and the Chrome browser that are available through Google's Play Store will disappear from future Huawei handsets as those services are not covered by the open source license and require a commercial agreement with Google. 

But users of existing Huawei devices who have access to the Google Play Store will still be able to download app updates provided by Google. Apps such as Gmail are updated through the store, unlike operating system updates which are typically handled by phone manufacturers and telecoms carriers, which the blacklist could affect, the source said. 

The American clampdown also deals a direct blow to Huawei’s fast-growing mobile devices division. Huawei will only be able to access the public version of Google’s Android mobile operating system, the world’s most popular smartphone software. It won’t be able to offer proprietary apps and services from Maps and search to Gmail, said the person, who requested anonymity speaking about a private matter. That will severely curtail the sale of Huawei smartphones abroad.

Huawei, the world’s largest smartphone brand after Samsung Electronics Co, was one of a select few global hardware partners to receive early access to the latest Android software and features from Google. Outside of China, those ties are critical for the search giant to spread its consumer apps and bolster its mobile ads business.

ALSO READ: Huawei opposes US export control decision

The Chinese company will still have access to app and security updates that come with the open-source version of Android. Reuters reported the moves earlier. “We are complying with the order and reviewing the implications,” a Google representative said, without elaborating.

"For users of our services, Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices," the spokesperson said, without giving further details. 


With Reuters inputs

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