U.K.-based chip design company Arm Holdings PLC is suspending its business with Huawei following Washington’s blacklisting of the Chinese technology giant, according to a person familiar with the matter. Meanwhile, mobile-phone carriers in Japan and the U.K. have suspended launches of Huawei smartphone models over concerns that U.S. curbs on exports to the company will jeopardize the phones’ performance.
In addition to being among the world’s biggest suppliers of telecom equipment and smartphones, Huawei is one of China’s most-advanced makers of semiconductors. That technology is a national priority for Beijing, but licenses from Arm are crucial to the underlying designs for an array of Huawei-made chips.
A Huawei spokesman said: “We value our close relationships with our partners, but recognize the pressure some of them are under, as a result of politically motivated decisions. We are confident this regrettable situation can be resolved.”
The company, which recently supplanted Apple Inc. as the world’s second-biggest smartphone vendor, has insisted that the U.S. export restrictions won’t have a major impact on its businesses. Its telecommunications equipment has been favored by many carriers world-wide for being both technically advanced and affordable.
The U.S. Commerce Department last week, citing national security, said companies wishing to export U.S. technology to Huawei must apply for a license—which the department indicated would be hard to come by. On the same day, President Trump said he had signed an executive order enabling the U.S. to ban telecommunications network gear and services from “foreign adversaries.”
The executive order added to a campaign by Washington to blunt the emergence of Huawei as a global supplier of telecommunications equipment. The U.S. contends that the company and its equipment are at the disposal of Beijing, and has warned allies against involving the Chinese company in the rollout of next-generation wireless networks. Huawei has long denied allegations that it is under the sway of its government.
The Commerce Department restrictions cover technology that meet a
threshold of U.S.-sourced material that experts identify as about 25%.
Arm’s headquarters are in Cambridge, U.K., though it has substantial
operations in the U.S. It isn’t the first non-U. S. company to back away
from Huawei; earlier this week, German chip maker Infineon Technologies
AG said it would terminate the delivery of some components because of
their U.S. content. News of the Arm suspension was earlier reported by
the BBC.
Though Arm technology is widely used by Huawei, Jefferies
technology analyst Rex Wu thinks the impact of the supply suspension
should be mild in the short term because Arm licenses for Chinese
customers are overseen by a China-based joint venture
that is majority-owned by a Chinese investment fund. Some key Arm
licenses owned by Huawei should remain valid, Mr. Wu said in a research
note.
Smartphones have been a bright spot for the Huawei—and until recently
not a primary target of U.S. actions. Though Huawei phones are
virtually unavailable in the U.S., world-wide shipments were up 50% in
the first quarter, bucking a slump in the broader market.
With last week’s Commerce Department action, Huawei’s phone
business is now more vulnerable. To comply with the new export
requirements, several U.S.-based suppliers to the business, including
Qualcomm Inc., Lementum Holdings Inc. and Analog Devices Inc., have
already started suspending shipments.
In Japan, wireless carriers
KDDI
Corp.
and SoftBank both said Wednesday they are postponing the sale
later this month of the Huawei P30 lite while they gauge the impact of
the U.S. restrictions.
NTT Docomo
Inc.,
which commands half the Japanese wireless market, said it is
considering halting preorders for new Huawei phones, including the P30
Pro.
Two of the U.K.’s biggest carriers said they were removing Huawei phones from their plans for rolling out 5G wireless networks.