Intel, Qualcomm, Broadcom, and Xilinx All Move to Cut Off Huawei

Google has announced it will cut off Huawei’s access to the Google Play Store and to the core components of the Android ecosystem that are actually built by Google rather than being distributed under the AOSP (Android Open Source Project). My colleague, Ryan Whitwam, has more on these developments.

But these aren’t the only companies moving to cut Huawei off. Intel, Qualcomm, Broadcom, and Xilinx have also announced they are suspending sales of products to Huawei as well. This seems largely equivalent to the ZTE ban that was levied (and then withdrawn) at roughly this same time last year, but Huawei is a much larger company than ZTE, with a significant share in many markets. Its US market share is small, but outside the US, Huawei is a major player.

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

Huawei is said to have prepared for this by stockpiling chips for several months, a process it began since at least the middle of 2018. One wonders if this might have something to do with the surge in data center sales that appeared in the back half of 2018 — between stockpiles and tariff fears, some of the sales into that space may have represented companies making certain they’d have stock on-hand, even if an agreement fell through between the US and China in their ongoing trade war.

Now, how much will this harm Huawei? It’s market-dependent and hard to say. Unlike smaller ZTE, Huawei has its own silicon division, for example. But its inability to do business with US suppliers will significantly weigh on the company going forward, particularly companies like Intel (and presumably AMD as well). All of the major CPU vendors are US companies, and there’s no way Huawei can build itself a server-class ARM CPU to replace them in the immediate future (not to mention the difficulty of constructing an equivalent software stack).

How things play out now will likely depend on how the larger US – China trade deal progresses. Putting additional pressure on Huawei is almost definitely part of the Trump Administration’s efforts to secure a better trade deal for the United States. But the impact of these embargoes will be to substantially limit Huawei’s ability to launch into new product markets, like laptops, Supply chains could be snarled as companies move to different partners or seek different customers for their goods. Unlike ZTE, this issue isn’t going to instantly cause the company to close, but some of Huawei’s business units are going to be impacted here. We’ve covered the development of China’s homegrown IC and CPU markets, at least on occasion, and the country remains well behind Intel and AMD when it comes to fielding top-end architectures. The Loongson family of CPUs, based on MIPS64, is not yet a fungible replacement for x86 or ARM chips provided by other companies.

Huawei is still moving ahead with existing launch schedules, but it won’t surprise us if this changes in the not-too-distant future, assuming these issues can’t be addressed. It may not go out of business, but rocky times are definitely ahead.

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