Huawei cuts orders to suppliers following US trade blacklist

Huawei has scaled back orders to major suppliers that produce components for its smartphone and telecom infrastructure products and has decreased its estimates for smartphone shipments in 2019, according to a report from Nikkei Asian Review.

It’s potentially a sign that Huawei, the second-largest smartphone maker by market share, is already starting to feel the repercussions of being placed on a US trade blacklist that prevents US firms from doing business with Huawei without government permission. The news comes after the South China Morning Post recently reported that Huawei has ceased some smartphone production.

The major chipmaker Taiwan Semiconductor Manufacturing Co. confirmed to the publication that Huawei has scaled back its orders since the ban went into effect, while another unnamed supplier that makes power components for the company’s phones and telecom equipment said Huawei has halted some orders. Huawei is said to have slashed orders to its supply chain by as much as 30%, according to the report.

The company has canceled some orders for its base-station business, and it will suspend orders for smartphone components after this summer, a representative for the power-component supplier told Nikkei Asian Review. Auras Technology, a Taiwan-based supplier of cooling components, said a Chinese company’s orders have been affected, according to the report, although it did not name Huawei specifically.

The report also indicates that Huawei’s smartphone sales could already be taking a hit. The Chinese tech giant lowered its predictions for smartphone shipments in the second half of 2019 by 20 to 30% after the ban, Nikkei Asian Review reported, citing a source with knowledge of Huawei’s orders.

However, it’s unclear whether the decrease in orders can be attributed directly to the recent US sanctions. There’s a chance Huawei could be scaling back production because of inventory buildup, Nikkei Asian Review said.

But Frank Gillett, a vice president and principal analyst at the market-research firm Forrester, previously told Business Insider it’s possible that the ramifications on Huawei’s sales from US firms like Google severing ties with the firm could appear fairly quickly. “I’ve got to think we’re going to see a hit on sales immediately,” he said. “Anyone buying a phone has to wonder for how long Google will allow software updates and operation, because it’s not clear yet.”

Business Insider has reached out to a Huawei representative for comment.

Following Huawei’s placement on the US government’s so-called Entity List, which effectively bans US companies from doing business with the Chinese tech firm without a government license, a number of tech firms and components makers cut ties with the company. These include the chipmakers Qualcomm and Intel, the chip designer Arm, and Google, which makes the most popular smartphone software platform.

Huawei has been preparing for a scenario in which it can no longer work with US companies on future products. It’s developing its own operating system to replace Google’s Android software, and according to Bloomberg, it has stockpiled chips and components for future products. Huawei CEO Ren Zhengfei also previously told Nikkei Asian Review that he expects growth to slow only slightly in the wake of the ban.

Huawei has suggested it may be willing to work with the US government to ease cybersecurity concerns in the future. Andy Purdy, the chief security officer for Huawei USA, hinted when speaking with CNBC that the Chinese tech firm would be open to implementing “risk mitigation measures” in order to do business in the US.

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