Nikkei: Huawei ban affects $26 billion of business in Japan, South Korea and Taiwan
Latest update time：2021-08-30 20:06
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New U.S. sanctions on Huawei Technologies Co. took effect on Tuesday, threatening to cripple production at a company that generates tens of billions of dollars in component sales each year from suppliers in Japan, Taiwan and South Korea, the Nikkei Asian Review reported.
The new ban, announced by the U.S. Commerce Department last month, essentially prohibits companies from supplying Huawei with any semiconductors made using equipment or design software produced in the U.S. Chip designers often use electronic design automation tools created in the United States, and chip manufacturing units using U.S. technology are common in advanced semiconductor manufacturing plants.
The ban is intended to prevent Huawei from sourcing key components for its smartphones and base stations through outside suppliers, but the impact is sure to extend far beyond the Chinese company. Huawei ranked first in global smartphone shipments for the first time last quarter, ahead of Samsung Electronics, and it is also the leading seller of mobile base stations with a market share of more than 30%.
Akira Minamikawa, director of British research firm Omdia, estimates that companies in Japan, Taiwan and South Korea together supply Huawei with 2.8 trillion yen ($26.4 billion) worth of parts each year. If Huawei's production is disrupted, that business will be in trouble.
Japanese companies, which supply nearly 30% of Huawei's components, will be hit the hardest. Sony alone reportedly sells billions of dollars worth of smartphone image sensors to Chinese companies every year. Image sensors are particularly beneficial to Sony.
Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, is believed to receive more than $5 billion in annual sales from Huawei. Taiwanese semiconductor designer MediaTek does nearly $500 million worth of business with the company each year.
Huawei is also a major memory buyer for Samsung Electronics.
The impact could also spread to suppliers of other components, such as batteries and circuit boards.
Huawei scrambled to source Chinese-made chips as an alternative. It outsourced more production to large chipmaker companies backed by the Chinese government.
But Washington is cutting off that route. According to US media, the Department of Defense is considering putting China's largest manufacturing company on a trade blacklist. Like other chipmakers, they rely on US technology. But from a report by Nikkei yesterday, it can be seen that China's largest wafer factory is beginning to reduce its reliance on US equipment.
The Commerce Department said it would allow exemptions to the Huawei ban. Sony is considering applying for a license to sell chips to the Chinese company, and South Korea's SK Hynix is also weighing the option. MediaTek told Nikkei that it had submitted an application.
But without special circumstances, getting a license "can be difficult," said Kana Itabashi, a Japanese expert on international trade law.
Some parts suppliers have already started looking for alternative buyers in case the need arises, namely, cutting off Huawei's business entirely.
LCD panel maker Japan Display is looking to sell to other major Chinese smartphone makers, including Oppo, Xiaomi and Vivo. These rivals see Huawei's troubles as an opportunity to win over suppliers.
According to a report by South Korea's Hankook Ilbo, a source pointed out that since the latest US ban took effect on the 15th, South Korean companies have adjusted their shipments to Huawei and stopped related supplies and production lines. The report further pointed out that Samsung Electronics and SK Hynix have stopped supplying Huawei. The report also mentioned that Huawei accounted for 3.2% of Samsung's sales last year, about 7.37 trillion won, and 11.4% of SK Hynix's overall sales, about 3 trillion won. The Korean media "The Elec" also quoted a source as saying that Huawei revealed to Korean contractors that the production target for mobile phones in 2021 is only 50 million units. Compared with Huawei's shipments of 240 million yuan in 2019 and the estimated 190 million yuan this year, it represents a 74% reduction in production.
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