Huawei demands hundreds of millions of yuan in compensation from Flextronics for unjustified seizure of supplies and equipment

According to Reuters, Huawei sent a lawyer's letter to Flex on Monday, demanding financial compensation of hundreds of millions of yuan for the previous unreasonable seizure of Huawei's equipment and materials. 

It is reported that the compensation Huawei is seeking this time includes lost revenue, wasted materials, equipment replacement and other expenses.

In the lawyer's letter, Huawei pointed out that Flex's Chinese subsidiary "ignored Chinese laws" and refused to return Huawei's production equipment, raw materials and semi-finished products at its Zhuhai factory, worth approximately RMB 400 million.

A Huawei spokesman did not comment on the Reuters report.

Flex said it was preparing a statement but could not release it immediately.

In fact, earlier reports said that the Huawei materials seized by Flex actually reached 700 million yuan, of which about 400 million yuan was in Flex's factory in Zhuhai, and about 300 million yuan was in its overseas factories.

In addition, although Flex later agreed to allow Huawei to pull back the materials, they had to be transported through a third party that was not on the US "Entity List". As a result, Huawei was charged an additional fee.

Since Huawei was included in the Entity List, overall, most US suppliers have "had to" comply with the US government's ban, and it has not caused any substantial damage to Huawei's operations, so Ren Zhengfei said that the "friendship" has not yet ended. The only one that may have truly severed ties is Flextronics, which was once one of Huawei's 92 core suppliers.

Flextronics is currently the world's second largest EMS contract manufacturer, with factories in 30 countries on five continents and about 200,000 employees. Its business includes mobile phone circuit board design, communication engineering, auto parts manufacturing and logistics. Flextronics entered China in 1987 and has nearly 100,000 employees in China.

Flex's cooperation with Huawei mainly includes providing assembly services for Huawei base stations, mobile phones and other products. Huawei's flagship models including the P30 are all manufactured by Flex.

In the Huawei supply cut incident, Flextronics can be described as a "straightforward" company. It stopped all cooperation with Huawei, including Flextronics' foundry business for Huawei in China and Europe, and also terminated existing orders with Huawei.

After the cooperation was terminated, Huawei sent nearly 100 trucks to Flex's factory in Zhuhai on May 18, trying to pull back its own equipment and materials. According to Flex's processing model, these equipment and materials should have belonged to Huawei, but Flex refused to return them on the grounds of "according to relevant US export control laws and regulations" and privately detained Huawei's equipment and materials.

At present, Huawei has removed Flex from its supply chain system, and Flex is also facing the problem of layoffs.