Huawei: Spending on R&D grows

not supported by ‘ deep roots’ under the ground,” he said, referring to the lack of homegrown core technologies such as high-end chip manufacturing techniques.

“The chip curbs offer a good opportunity for Chinese companies to work together to reconstruct the semiconductor sector,” Wang added.

Huawei is rumored to have launched a project to partner with domestic companies to build a US-technology-free chip production line. Though Huawei has not commented, people familiar with the issue told China Daily that the company is seriously considering doing so.

Analysts said Huawei still has a certain inventory level of chips, which will give it time to come up with contingency plans, as well as to assess the progress of domestic semiconductor companies. They estimate that Huawei has a stockpile of processors for smartphones and 5G base stations that could last at least until early 2021 and possibly through most of the year.

To cope with curbs, Huawei said earlier that its R&D spending grew 29.8 percent to 131.7 billion yuan ($19.3 billion) last year, while inventories of components surged 73.4 percent on a yearly basis.

“Such a time window can give Huawei some wiggle room,” said Jiang Junmu, chief writer at Chinese telecom industry news website c114.com.cn.

The latest restrictions are unlikely to pose an existential threat to Huawei, which had global sales revenue of 454 billion yuan in the first half, despite potentially profound disruptions, Jiang said.

Also, the US government is facing mounting pressure from the country’s own semiconductor association and chip companies. This may force it to leave open the possibility of a reprieve for certain US suppliers, experts said.

“These broad restrictions on commercial chip sales will bring significant disruption to the US semiconductor industry,” said John Neuffer, president and CEO of the US Semiconductor Industry Association, which represents 95 percent of US semiconductor companies.

Some experts said Washington may allow certain US suppliers, such as Qualcomm, to continue selling chips to Huawei after the November presidential election.

However, Huawei is feeling the pain of tightened curbs. Anticipating that Huawei would face a shortage of chips, domestic rivals such as Oppo and Xiaomi Corp have raised their sales targets.

“The market is fiercely competitive. One company’s crisis is the opportunity for other players,” said Fu Liang, an independent analyst who has followed the industry for more than a decade.