China will take countermeasures if Washington imposes chip ban on Huawei: executive
Published: Mar 31, 2020 08:03 PM

Photo:Screenshot of Huawei online event on March 26, 2020

If the US government arbitrarily changes the rules of the market, the Chinese government will not remain idle and just watch Huawei put on the chopping board, as it will have no other choice but to take similar countermeasures against US firms, a Huawei executive told the Global Times on Tuesday.

"Why China could not ban US produced 5G chips, smartphones and other smart terminals containing 5G chips in China market based on the same cybersecurity reasons?"asked Huawei Rotating Chairman Eric Xu.

Even if the US bans TSMC from supplying Huawei, the Chinese technology company still has many other choices for chip supply - such as companies from South Korea, the island of Taiwan, and companies in the Chinese mainland like Samsung, MediaTek, and Unisoc, Xu added.

The comments, which were made during the release of Huawei's annual financial report on Tuesday, also come as the US is mulling new restrictions on the Chinese technology giant. 

After putting Huawei on a trade blacklist in May last year, Washington is reportedly moving ahead with new restrictions to cut off Chinese telecom equipment provider Huawei's supply chain by requiring foreign companies that use US equipment to obtain a license before shipping their chipsets to the Chinese company. 

A source in a Reuters report was quoted as saying the rule change is aimed at curbing sales of chips to Huawei by Taiwan Semiconductor Manufacturing Co, which is also the major producer of chips for Huawei's chipset set unit HiSilicon.

Brushing off the US' intensified crackdown, the Chinese technology giant Huawei posted strong annual revenue growth of 19.1 percent year-on-year in 2019. Revenue stood at 858.5 billion yuan ($120.7 billion), while net profit rose 5.6 percent year-on-year to 62.7 billion yuan.

Moreover, despite lagging overseas sales under the threat of a US ban, its consumer businesses continued to grow, with global shipments achieving growth of 16.8 percent year-on-year for 2019, securing its position as the world's second-largest handset manufacturer with a total of 240 million phone sales.

"In the face of the crackdown and mounting pressure from different sides, Huawei has maintained its normal growth rate over the past year, " Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, told the Global Times on Tuesday, noting that the performance showed the firm's technological strength.

The annual report showed that the US impact on it was obvious - as more than 59 percent of its 2019 revenue comes from domestic sales, with an increase of 36.2 percent growth year-on-year, while overseas revenue saw a slower growth, Jiang Junmu, chief writer at telecom industry news website, told the Global Times on Tuesday. 

After being included on the US Entity List since May 16 last year, Huawei has stepped up its research and development efforts to "plug holes" and is committed to restructuring the supply chain. The proportion of overseas sales has also dropped, with an estimated loss of about $10 billion, the Huawei executive disclosed.

"Huawei was able to reverse the unfavorable situation mainly with its heavy investment in research and development over the past year," Jiang said, noting that these technological innovations gave Huawei products and solutions as well as industry-leading capabilities, allowing overseas operators to continue to choose it even under the pressure of the US government.

Huawei invested 15.3 percent of its 2019 revenue - or 131.7 billion yuan - into R&D, up from its R&D input of 101.5 billion yuan in 2018. Its total R&D spending over the past decade exceeded 600 billion yuan.

Having gotten over a tough 2019, the firm is still facing another difficult year ahead in 2020, both under the US crackdown and the unexpected blow of the COVID-19 pandemic.

"2020 will be the toughest year for Huawei, as we will be on the US Entity List for a whole year, and industry players have also estimated that Huawei has used up its 'reserves' in preparation for a US ban, Xu said, adding that the COVID-19 outbreak is another situation that we hadn't expected, which may bring about a global economic recession and declining demand.

"We certainly can't say how the COVID19 pandemic will evolve. If it can't be well controlled, it will lead to a long-term challenge and raise uncertainties about whether Huawei could serve the market," Xu said.

Moving forward, Huawei must be well prepared for a possible "technology decoupling" that may be forced on it by hardliners in the US, shoring up Huawei's competitiveness in high-end chipsets as well as pivotal software like the Harmony-OS for smartphones, a close follower of Huawei surnamed Li told the Global Times on Tuesday.

"In 2020, we'll strive to survive, and hope we can publish an annual report next year," Xu said.

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