Yesterday, Donald Trump placed Huawei and 70 affiliates on an export blacklist. Photo / AP
Yesterday, Donald Trump placed Huawei and 70 affiliates on an export blacklist. Photo / AP
President Trump's decision to blacklist Huawei threatens to cripple the Chinese technology giant as it prepares for its biggest commercial opportunity: the global roll-out of 5G telecom networks worth tens of billions of dollars.
For months, Huawei has found itself at the centre of a growing debate over the use of its equipment in 5G networks, amid US claims that the kit could be used for espionage by the Chinese government.
Late on Wednesday, Trump went a step further, placing Huawei and 70 affiliates on an export blacklist while also preventing the firm from selling any of its technology to the US.
At a stroke, the decision will create serious complications for the day to day running of Huawei, which generated sales of more than US$100 billion ($152.9b) last year.
Huawei will be unable to buy components from US firms without the permission of the government. That includes vital microchips produced by makers such as Qualcomm and Intel used in the motherboards of Huawei's technology.
Although Huawei has reportedly been stockpiling, it will be tricky for it to find alternative suppliers quickly.
If it wasn't already clear that the Trump administration's targeting of Huawei was part of a wider trade war with China, there can be few doubts now. The move is a drastic one that could all but take the wind out of Huawei.
Responding, a spokesman for Huawei said restricting it "from doing business in the US will not make the US more secure or stronger" and will "only serve to limit the US to inferior yet more expensive alternatives".
The same is likely to be true for the Chinese firm.
Speaking in Paris, Huawei rotating chief Ken Hu sought to drive a wedge between the US and its traditional allies, by focusing on the need for continued cooperation. "The only way for us to move forward is openness and collaboration," he said.
"Collaboration will help us to promote innovation globally. It will help us build hope for the future."
Nevertheless, the US move not without precedent - and for Huawei the signs are not encouraging.
Last year, the US Commerce Department hit Huawei's Chinese counterpart ZTE with a similar ban that severely damaged the business.
In 2018, Huawei spent US$70b as part of its routine purchase of components from firms across the globe. Of that US$11b went to US firms, above all to chip makers.
Trump's decision to blacklist Huawei threatens to cripple the Chinese technology giant. Photo / AP
A ban on buying from US firms will force Huawei to seek, in its own words, inferior and expensive alternatives. One solution has been to stockpile components to keep it going for up to 24 months.
Huawei's rotation chairman Eric Xu said recently it had a "contingency plan" in place for this scenario. Such stockpiling is also an admission that Huawei has few other options.
The damage from all of this will not be limited to Huawei. A slowdown for the firm would mean a slowdown in the rollout of 5G, in China and elsewhere. Global technology supply chains are so heavily intertwined that when one company is knocked off balance others are likely to tumble too.
In the UK, mobile carriers have been in anxious talks with security agencies making decisions about the safety of Huawei's gear, but the same carriers could face a whole new set of problems if the US ban hampers Huawei's ability to supply equipment.
Some countries, such as Australia, have already implemented a wholesale ban on Huawei's place in their future 5G networks, but others have retained the company as a key supplier for parts of their 5G infrastructure.
Operators have previously claimed Huawei's absence could push back the rollout of 5G networks by "nine months to a year".
But there will be winners too - above all, Huawei's main rivals Ericsson and Nokia.Borje Ekholm, chief executive of Ericsson, told The Daily Telegraph his company "has some analysis to do" about the latest development and what it means for the 5G market globally.
"The US is a big opportunity for Ericsson," he said.
"We have a big presence in the US. We have launched with the leading 5G providers in the market."
The ban is not yet in effect but US companies that earn a chunk of revenue from sales to Huawei will almost certainly dispute the decision. There could also be a response from China that could harm Apple in the country.
Authorities in China were swift to respond to the US action.
China's Foreign Ministry spokesman Lu Kang said Beijing opposed countries imposing unilateral sanctions on Chinese companies and would take action after the US announcement.
A response against US companies is almost inevitable.
