Huawei feels U.S. squeeze in U.K. and Japan
Chip designer Arm and major mobile carriers step back from Chinese company
U.K.-based chip design company Arm Holdings PLC is suspending its business with Huawei Technologies Co. following Washington’s blacklisting of the Chinese technology giant, according to a person familiar with the matter, the latest non-U.S. company to be swept up in the restrictions on the Chinese firm.
Meanwhile, mobile-phone carriers in Japan and the U.K. have suspended launches of Huawei models over concerns that U.S. curbs on exports to the Chinese company will jeopardize the phones’ performance.
Licenses from Arm are crucial to Huawei underlying chip designs used in a wide array of Huawei’s own chips. Huawei, the world’s largest maker of telecommunications equipment, is also one of China’s most advanced makers of semiconductors, a technology that is a national priority for Beijing.
In a statement, an Arm spokeswoman declined to comment on the suspension, but said: “Arm is complying with all of the latest regulations set forth by the U.S. government.”
A Huawei spokesman said: “We value our close relationships with our partners, but recognize the pressure some of them are under, as a result of politically motivated decisions. We are confident this regrettable situation can be resolved.”
The suspension of Arm’s business follows last week’s order by the U.S. Commerce Department requiring companies wishing to export U.S. technology to Huawei to apply for a license, citing national security grounds. The department has indicated that it doesn’t intend to grant many licenses.
Though Arm is headquartered in Cambridge, U.K., the U.S. restrictions cover technology that meet a certain threshold of U.S.sourced material, which experts identify as about 25%. News of the suspension was earlier reported by the BBC.
Though Arm technology is widely used by Huawei, the impact on the company of the suspension will be mild in the short term because Arm licenses for Chinese customers are overseen by a joint venture formed last year in China and majorityowned by a Chinese investment fund, according to Rex Wu, a technology analyst at Jefferies.
Arm is not the first non-American company to face restrictions: earlier this week, German chip maker Infineon Technologies AG said it would terminate the delivery of some components originating in the U.S.
In Japan, KDDI Corp. and SoftBank Corp. both said Wednesday they are postponing the sale later this month of the Huawei P30 lite while they gauge the impact of the U.S. restrictions. NTT Docomo Inc., which commands half the Japanese wireless market, said it is considering halting preorders for new Huawei phones, including the P30 Pro.
Two of the U.K.’s biggest carriers said they were removing Huawei phones from 5G rollout plans.
BT Group PLC’s EE had planned to use phones from Huawei, market leader Samsung Electronics Co. and others in launching the next-generation wireless service later this year, but will hold off on including Huawei handsets, according to a person familiar with the matter. It couldn’t ensure customers full access to Google services on the Chinese company’s phones, the person said.
Vodafone Group PLC said Wednesday it was halting preorders for the 5G version of the Huawei Mate 20X, which it had intended to offer as part of its 5G rollout. “This is a temporary measure while uncertainty exists regarding new Huawei 5G devices,” a Vodafone spokesman said. “We will keep this situation under review.”
Huawei, which recently supplanted Apple Inc. as the world’s second-biggest smartphone vendor, has insisted that U.S. restrictions on product sales won’t have a major impact on its businesses. The limits include chips and other parts—and even the operating system for Huawei phones. Alphabet Inc.’s Google will no longer be able to license its Android system to Huawei for new phone models without getting a hard-to-obtain export license.
Smartphones have been a bright spot for the company, which has faced a U.S. campaign to thwart its global 5G ambitions on the grounds Beijing could use its equipment for spying—claims Huawei has long denied. Though Huawei phones are virtually unavailable in the U.S., worldwide shipments were up 50% in the first quarter, bucking a slump in the broader market.
Huawei has carved out a following in Japan with a diverse lineup touting high-resolution cameras that can capture images in the dark. Shipments more than doubled in 2018 to nearly 2 million phones; that is 6% of total smartphone sales in Japan, making it the No. 5 provider, according to Japanese research firm MM Research Institute.
In the U.K., one of Huawei’s most prestigious markets, the company on Tuesday launched a marquee phone, the Honor 20. The lower-priced Huawei-owned line is aimed at younger users.
Washington last week acted to deter Huawei from sourcing components from U.S. companies by requiring suppliers to get export licenses, which officials indicated they aren’t likely to grant. On Monday, U.S. officials said they would waive that measure for 90 days for suppliers of certain types of equipment and software, allowing Google to continue providing software updates for some Huawei phones.
Still, long-term confidence in the company’s phones has taken a hit. Among other concerns, future Huawei models could lack the full capabilities of Android. Instead Huawei would have to use open-source versions of the operating system, shorn of proprietary Google apps such as Gmail and Google Maps, with Google unable to provide tailormade updates and security patches.
“We need to check how widespread the impact of the restrictions will be,” a spokeswoman for Japan’s KDDI said of its decision to withhold the P30 lite.