Last week, the Bureau of Industry and Security (BIS) of the US Department of Commerce announced that it will be adding Huawei Technologies and its affiliates to the Bureau’s Entity List. This action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to US national security or foreign policy interest.
BIS is committed to preventing US-origin items from supporting Weapons of Mass Destruction (WMD) projects, terrorism or destabilizing military modernization programs.
“This action by the Commerce Department’s BIS, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List. This will prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” said Secretary of Commerce Wilbur Ross.
With Huawei on the US Entity List, US companies like Google, Intel and Qualcomm have swiftly acted on the US announcement and is not planning to do any business with the company. Android and Google have suspended business dealings which includes hardware and software products with Huawei. With this announcement, Huawei smartphone consumers will abruptly lose access to Android operating system updates. Not only this, Huawei users will also lose access to application and services including Google Play Store, Google and Gmail app.
Sensing the announcement, Huawei has planned 5G devices based on Balong 5000 chipset but there are many hardware and software modules which needs to be procured from US companies like Qualcomm, Intel, Xilinx and others.
Huawei has launched indoor and outdoor CPE, 5G CPE 2.0 (mmWave) and 5G CPE 2.0 (Sub-6 GHz) based on Balong 5000. The company is planning to launch 5G smartphone MateX based on Balong 5000 chipset in July 2019. On the hotspot front, Huawei is launching 5G Mobile WiFi based on Balong 5000 chipset in September 2019. The company is also launching 5G CPE pro Indoor CPE based on Balong 5000 in June 2019. All these launches will get delayed and also increase cost as Huawei has to find alternatives or get in-house capabilities. Finding alternatives are not easy as one can see from Apple and Intel experiment as finally Apple had to sign with Qualcomm for 5G devices.
Ren Zhengfei, founder, Huawei said that the US government’s decision to blacklist Huawei could see Huawei’s projected growth rate dip below 20 percent in 2019. The projected growth rate will dip further as it will have its impact on all segments – Consumer, Carrier and Enterprise users. The announcement will also impact its national and international sales and also impact its brand value. Overall loss in revenue for Huawei is dependent on duration of the announcement.