Huawei is apparently struggling with its process to shift crucial parts of its production to China. According to a new report, a few of its suppliers are reluctant to shift operations, especially with uncertainty clouding the semiconductor industry.
The Chinese tech giant has been actively working to get more of its supply chains into China. This arrives after the company faces increasing scrutiny from the US government, which recently cut off its smartphones’ chip supply from TSMC. The shift would, therefore, ease its process of sourcing and help keep US pressure away, although, the same idea might not be welcomed by a few of its key suppliers.
At the moment, one of the most important supply aspect Huawei is focusing on is its chip supply, with the chip packaging and testing being the last step in manufacturing semiconductor components. In other words, the company wanted its chip suppliers to shift the base of operations to China to avoid future US sanctions against it. Furthermore, Huawei is also bringing on board second tier domestic suppliers to boost localization efforts to develop the semiconductor industry in China.
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Notably, the company is only accepting new suppliers if their production sites are in China. Unfortunately, this shift may be easier said than done due to various key factors. The Coronavirus pandemic is one such important reason, since avoiding bold moves at this point, and building a strong base is a safer move for suppliers. Similarly, the shift may also involve certain geopolitical risks as well.
According to a source, “the global pandemic which already hit demand as well as the U.S. strong hostility against Huawei have weakened suppliers’ incentive to swiftly address the Chinese company’s push.” Additionally, “there are suppliers who also need to address their U.S. semiconductor clients’ requests to produce outside of China over security reasons, so they chose not to expand their Chinese capacity.” So, while the move would be beneficial for Huawei, the process is complex and could negatively impact the suppliers.
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(Via)
