As of Tuesday, September 15, the world’s largest maker of smartphones and telecommunications equipment, Huawei Technologies, may find business a little more difficult – in fact much more difficult.
Non-US suppliers around the world can no longer ship goods to Huawei if their products contain US technology. The US chip ban threatens to cut off the supply of key components to Huawei’s smartphones – from semiconductors and displays, to camera lenses and vital circuit boards.
How can Huawei survive the crisis? Using inventory and reshaping the supply chain would be the answer.
“This is a very significant threat!” Edgar Perez, an independent consultant, told CGTN. However, he added that in the short term, Huawei could rely on its stocks.
Fortunately, the company has prepared well for this. In recent days, we’ve heard that a plane full of chips has come from Taiwan, bringing in supplies, especially before today’s unfortunate ban. Now looks like the company is well prepared for at least six months, ”said Perez, keynote speaker and founder of MrEdgarPerez.com.
Huawei has been stocking all kinds of chips since late 2018. Over the past three months, the company’s last-minute chip orders have pushed Taiwan’s overall growth in electronics exports to the mainland by 30% year-on-year.
Gai Keke, associate professor at the School of Computing and Technology at the Beijing Institute of Technology, said the US ban would cause short-term difficulties but force China to develop its own semiconductor industry .
“I think Huawei’s phone will have serious problems due to the short-term chip shortage,” Gai said, “but in the long term, I’m confident in Huawei’s development.” Gai’s confidence comes from his observation that Huawei has already adjusted its business strategy, expanding into more consumer electronics like laptops.
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China imported 445 billion chips in 2019, worth more than US $ 300 billion. Imports of wood chips overtook crude oil as the most imported goods in 2013 and continued to grow in subsequent years. The China Semiconductor Industry Association expects chip imports to exceed US $ 300 billion in 2020 for the third year in a row.
Huawei’s grief over a chip shortage shows China’s dependence on imported semiconductors. But “the Chinese government has already realized the importance of basic technological research (on semiconductors),” Gai said. “The ban only hampers business in the short term, but it changes a lot in the long term.”
For the price, it has been reported that Huawei’s high-end models may see the price increase at some retailers due to the limited product supply expected. Perez said: “The price increase will only be temporary. People often get sentimentalized Huawei phones, driving up retail prices. But that’s not going to last. Because when you buy one phone, you don’t. just care about the price, you also want to make sure that there is customer service and that key components can be replaced if necessary. Huawei won’t in six months . “
In the face of the ban, Huawei could move forward to diversify its suppliers and become self-sufficient in its chip supply, but that should take time.
“In the medium term, the company will, of course, have to explore an option to innovate in the supply chain … in the design, manufacture, packaging and testing of chips. The company will have to be involved in these areas to ensure no involvement of American technology, ”Perez echoed to Gai. “It will take time, yes. But in the meantime, it is important that the company finally comes back stronger.”
Before the chip ban, Huawei overtook Samsung to become the world’s leading smartphone seller with more than 200 million units in 2019. Perez said if the company could not fix the chip supply issue, its smartphone sales could drop to 50 million in 2021.
