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Trade War

Huawei hits back at US Congress and vows to reduce dependence

Chinese company to boost chip development with billion-dollar investments

Huawei's booth is the most popular one at MWC Shanghai, where industry executives and partners lined up to get in. (Photo by Cheng Ting-Fang)

SHANGHAI -- Huawei Technologies executives have pledged to pour billions of dollars into basic science research and continue boosting in-house chip development, while lambasting the "ignorance" of American lawmakers over the escalating technology cold war between China and the U.S.

"We are committed to spending $10 billion to $20 billion for research and development every year," Joe Kelly, vice president of international media affairs at Huawei, told the Nikkei Asian Review in an interview Thursday. "Among this spending, 10% would be focused on basic science research including mathematics, algorithm development, physics, materials and others."

The Chinese electronics company ranks as the world's largest telecom equipment producer and No. 3 smartphone maker after Samsung Electronics and Apple.

Kelly's comment came as Huawei on Thursday made public Chairman Eric Xu's criticism of U.S. congressmen Marco Rubio and Jim Banks.

The two Republicans sent a letter last week to Education Secretary Betsy DeVos to question whether research partnerships between Huawei and U.S. universities pose serious national security concerns and require close investigation.

"It seems that their bodies are in the information age but their minds are still in the agrarian age," Xu told an industry publication in an interview at this week's Mobile World Congress Shanghai, the largest telecom trade show in Asia. Huawei shared the response with news outlets.

Joe Kelly, Huawei's vice president of international media affairs, said his company would not be distracted by the Washington-Beijing trade disputes. (Photo by Cheng Ting-Fang) Joe Kelly, Huawei's vice president of international media affairs, said his company would not be distracted by the Washington-Beijing trade disputes. (Photo by Cheng Ting-Fang)

The chairman also described U.S. politicians as "closed-minded, ill-informed" and said "their behavior shows ignorance of how science and innovation work today, but also their own lack of confidence."

Xu's harsh remarks illustrate Huawei's mounting challenges in the world's largest economy. A bipartisan group of U.S. lawmakers including Rubio last week asked Google to review its partnership with Huawei, which they saw as a security threat.

Earlier this year, a deal with telecom operator AT&T to sell Huawei handsets in the U.S. did not work out due to security concerns. The Chinese company's telecom and networking gears also are locked out of the market for years.

Kelly downplayed the importance of the U.S. market, where Huawei has few business interests. But he said the company's procurement from U.S.-based suppliers including Qualcomm and Intel totals around $10 billion a year.

"Huawei operates in 170 markets around the world. We will not get distracted by issues in one market," Kelly said in the interview. "We will leave political issues to the politicians to resolve."

Huawei's annual procurement budget is around $30 billion, Kelly said, with $10 billion coming from local vendors in China and $4.3 billion from Japan including Sony, Murata Manufacturing and Kyocera. The rest goes mostly to Taiwanese and South Korean suppliers.

The company intends to continue using multiple suppliers globally, Kelly said, even while enhancing its own core technologies in developing high-end chips for in-house use. He declined to comment on whether Huawei will shift more orders to Asian suppliers to avoid the risk of being shut out of American technologies and services like smaller peer ZTE.

"[Our semiconductor capabilities] give us more controls over the functionalities and capabilities of our product," Kelly said. "It gives us a [differentiation] in our products."

Huawei unit Hisilicon Technologies, China's top chip designer, adopts the most costly and advanced chip production technology -- which Apple also used for its cutting-edge core processors. Huawei's premium phones used the company-designed Kirin processors, with manufacturing done by Taiwan Semiconductor Manufacturing Co., the world's biggest contract chipmaker.

The Chinese tech powerhouse generated $92.5 billion in revenue for 2017, similar to the level of Google parent Alphabet and Boeing. Huawei is viewed as the biggest challenger for U.S. long-term tech supremacy, and also the great representative of China's growing ambition to lead in the next wave of technologies including artificial intelligence and 5G.  

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