Earlier this month, Huawei sealed the sale of its Honor smartphone brand to a group of about 30 Honor agents and dealers including China Telecom and some state-run businesses. The motivation behind the deal is the stringent restrictions that the U.S. has clamped on Huawei. The embargo extends to blocking the company from accessing its U.S. suppliers, including Google Mobile Services which has now been replaced by its own ecosystem. The restrictions also prevented Huawei from using Google’s core apps like Gmail, YouTube, the Play Store, Search, Maps, etc on its international models.
In a well-scripted move one year after the U.S. first placed the company on the Entity List, the Commerce Department initiated an export rule volte-face that prevents manufacturers from exporting chips to Huawei if they were manufactured using U.S. technology unless a license was sought. The Commerce Department recently modified the rule to say that it would allow Huawei to receive chips but only those suitable for 4G, not 5G. Of course, this rule has significantly slowed the company’s progress in meeting production milestones.
Yesterday, Huawei founder Ren Zhengfei, in a message to Honor employees leaving Huawei, urged them to be more industrious to surpass expectations for the new company. Huawei has already set the mark in excellence as the second-largest smartphone manufacturer in the world. Ren also stressed that it was indeed a difficult decision to let go of Honor so as to safeguard the jobs of millions of Honor’s agents and salespeople.
Counterpoint Research analyst Flora Tang says that the chances of survival of Honor are bright if it can resume production. As expected, Huawei’s rivals in China are taking advantage of the U.S. sanctions by scaling up production massively while Huawei is unable to build new phones. Of the 51.7 million handsets that Huawei built in Q3 2020, about 26% were Honor phones.
During the speech, the Huawei founder also said, “Wave after wave of severe U.S. sanctions against Huawei has led us to finally understand, certain American politicians want to kill us, not just correct us.”
However, when President-elect Joe Biden is sworn in as the 46th U.S. president, U.S. policy toward Chinese interests could be relaxed. It will be interesting to see whether the new administration continues to ban Huawei devices and networking equipment based on yet-to-be-established concerns that Huawei uses backdoors on its products to collect data from U.S. consumers and corporations and shares it with government workers in Beijing. (via)
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