Huawei Makes End-Run Around U.S. Ban by Using Its Own Chips
Huawei Technologies Co., the Chinese technology giant barred
from doing business with U.S. suppliers, is finding a way around the strict
limits imposed by the Trump administration.
The Commerce Department, citing national security concerns,
has largely forbidden American companies from selling Huawei the computer chips
it needs to make a piece of equipment integral to newly introduced high-speed
wireless networks. In response, China’s largest technology company ramped up
its own capabilities to manufacture the gear, which is known as a base station.
In a sign that the self-reliance is working, Huawei in the
fourth quarter sold more than 50,000 of these next-generation base stations
that were free of U.S. technology, according to Tim Danks, the U.S.-based
Huawei executive responsible for partner relations. That’s only about 8% of the
total base stations that Huawei’s sold as of February, but the company is
quickly ramping up at its secretive HiSilicon division to make more of these
American component-free devices, Danks said.
“It’s still our intention to return to using U.S.
technology,” he said. The longer Huawei goes without access to U.S. suppliers,
the more unlikely it is to be able to return to using them, Danks added.
A base station is a typically suitcase-sized piece of
machinery that’s used to help connect wireless phones to fixed-line networks
carrying internet traffic, and it’s an essential ingredient in the next, or
fifth, generation of mobile networks. Popular among telecommunications
providers, Huawei’s base stations are widely considered among the most reliable
for the price.
Read about how Trump’s blacklisting of Huawei is failing to
halt its growth.U.S. officials accuse Huawei of stealing valuable intellectual
property and violating a trade embargo with Iran. The Trump administration
blacklisted the company last year, saying there’s a risk Huawei could give
Beijing access to sensitive data coursing through telecommunications networks
that employ its gear. Huawei has denied the allegations. Critics also said the
U.S. government imposed the sanctions to hobble China’s leadership in key
aspects of 5G technology.
As of early February, Huawei had shipped about 600,000 5G
base stations to mobile phone companies racing to upgrade networks to the new
standard, which is designed to deliver data at faster speeds to a broad range
of wirelessly connected devices -- not just mobile handsets. Most of these base
stations were made using stockpiled chips bought before the ban.While Huawei
doesn’t disclose its suppliers, base stations typically rely on a kind of
processor called a field programmable gate array that’s made by Intel Corp., a
chipmaking colossus based in Santa Clara, California, and Xilinx Inc., in
neighboring San Jose. Those chips provide flexibility that makes it easier to
update machines as new standards and features are added. Huawei’s chips are
application-specific, meaning they’re tailored to particular functions and it
takes more time and money to replace them. That’s a disadvantage at a time when
new technology, such as 5G, is in its infancy and still subject to big changes.
Read more: Huawei Engineers Go to 24-Hour Days to Beat Trump
Blacklist
The U.S. initially clamped down on all shipments of U.S.
supplies to Huawei, which had spent more than $10 billion a year on U.S.
products, but later began making some exceptions. Xilinx and fellow chipmakers
Micron Technology Inc. and Broadcom Inc. have all reported falling earnings on
reduced or eliminated sales to Huawei.
Attempts by the U.S. to persuade European and other allied
countries to ban Huawei equipment have fallen short, and chipmakers in Asia and
Europe continue to supply it.
For their part, American chipmakers have argued that banning
the supply of parts that Huawei can get elsewhere is counterproductive, saying
that the lost revenue crimps research and development budgets and the ability
to produce the best chips in the future.
Huawei’s HiSilicon chip unit designs semiconductors and has
them manufactured by industry-leading plants owned by Taiwan Semiconductor
Manufacturing Co. But Washington is even now said to be looking into ways to
curb the world’s largest contract chipmaker on grounds of national security,
and deprive Huawei of its largest semiconductor manufacturing partner.
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