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Huawei crackdown

Huawei blames US for global chip supply crunch

Chinese tech titan says sanctions have spurred damaging 'panic-buying'

Huawei Rotating Chairman Eric Xu says U.S. sanctions on Chinese companies has spurred a rush to stockpile chips and other components. (Source photos by Reuters and AP)

TAIPEI -- Huawei Technologies on Monday blamed the U.S. for the chip crunch rocking the global tech industry, saying Washington's sanctions against Chinese companies have spurred panic buying of semiconductors and other supplies.

"Because of the U.S. sanctions against Huawei, we have seen panic stockpiling among global companies, especially the Chinese ones. In the past, companies were barely stockpiling, but now they are building up three or six months' worth of inventory ... and that has disrupted the whole system," Rotating Chairman Eric Xu said at the company's 18th Huawei Analyst Summit.

The U.S. has placed Huawei and other Chinese tech companies on trade blacklists that restrict their access to American technology, citing national security risks.

"Clearly the unwarranted U.S. sanctions against Huawei and other [Chinese] companies are creating an industry-wide supply shortage, and this could even trigger a new global economic crisis," Xu added.

Xu's remarks come hours before the White House plans to host a summit aimed at addressing the chip shortage, with an emphasis on its impact on the automotive industry. Dozens of executives from U.S., Asian and European tech companies and automakers -- including General Motors, Ford, Google, Intel, Taiwan Semiconductor Manufacturing Co., Samsung Electronics, and NXP -- are slated to attend the event. White House officials have already acknowledged that the chip shortage may be difficult to solve in the short term.

Xu said the U.S. trade restrictions on Huawei have not only undermined the company but also damaged the relationship of trust that existed in the global semiconductor supply chain. Now, he said, more and more countries are pushing to onshore chip production and boost their own tech self-reliance, rather than relying on cross-border supply chains. This will entail at least $1 trillion in upfront investment, which will push up semiconductor prices by 35% to 65% and ultimately lead to higher costs of electronic devices for end users, he added, citing a recent report submitted to the White House by the Semiconductor Industry Association, the top U.S. chip industry alliance. 

The rotating chairman also said Huawei is planning its strategy under the assumption that the company will remain on Washington's so-called Entity List, which restricts its access to American technologies, for a long time. While Huawei's inventories for its business-to-business segment are currently sufficient, they "will not last for a long, long time," Xu acknowledged.

Other Chinese companies worry they will face a similar situation to Huawei, Xu said, adding that he believes there will be companies willing to invest in chip manufacturing to satisfy the needs of Huawei and other Chinese companies while maintaining compliance with U.S. rules.  

"If it can be done ... and if our inventory level can help Huawei to last until that time, then this would be how we address the problems and the challenges we face," Xu said.

He acknowledged that currently no chip manufacturers globally are able to help Huawei to put its chip designs into production because of the U.S. export control rules. Nevertheless, he said, Huawei will continue to fund its team for chip research and development "as long as we are able to afford it."

Huawei said it will also continue to invest in software engineering over the next five years in hopes of further boosting the company's resilience and making its products more competitive, Xu said. The company in late 2018 approved a plan to spend $2 billion to develop its software capability.

The company said the biggest breakthrough and opportunities for the next decade will be in the automotive industry. Huawei began research and development into connected and autonomous car systems in 2012.

Xu said Huawei will invest $1 billion in its automotive business in 2021, with a focus on building components for smart vehicles, including self-driving software platforms.

Instead of building and assembling cars itself, as domestic smartphone rival Xiaomi recently announced, Huawei said it will provide its self-driving technology to several car makers including Gac Group and Great Wall Motor. Huawei also confirmed that it has partnered with luxury electric vehicle maker Arcfox of Beijing Automotive Group and will demonstrate its autonomous driving technology in Shanghai this Saturday.

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