No-win scenario in Huawei blacklist, IHS Markit reports

14 June 2019

The Huawei ban issued by the Trump Administration in May presents a no-win scenario for companies in the U.S. and the Chinese technology giant as each will likely face severe repercussions, according to new research from IHS Markit.

The Administration signed an executive order adding Huawei Technologies and its affiliates to the Bureau of Industry and Security (BIS) Entity List, in effect blacklisting the company and making it extremely difficult for U.S. companies to do business without having to cross major hurdles.

The move has already had an impact on Google, which suspended business with the Chinese tech giant. This action left a hole in Huawei’s ability to provide apps and services through Google on future smartphones. The fallout extends to semiconductor vendors such as Intel, Qualcomm, Xilinx and Broadcom, all of which said they won’t supply Huawei until further notice.

IHS Markit believes the pain of the blacklist will extend to U.S.-based Micron and Western Digital as well because the companies have substantial business with Huawei and is forced to now suspend sales of memory chips and storage devices to one of the world’s largest vendors.

“The implications of the Huawei ban are quite serious for Micron and Western Digital,” said Michael Yang, research and analysis director at IHS Markit. “When you lose the world’s largest mobile infrastructure equipment supplier and the second-biggest smartphone maker as a customer, it’s going to have a major impact. Meanwhile, Huawei faces some tough challenges as well, including finding new sources for semiconductor memory devices, accelerating internal development plans and developing China-based manufacturing capabilities.”

IHS Markit reported that Micron and Western Digital have ceased doing business with Huawei impacting both direct and indirect sales. This loss in revenue is not easy to replace given the competitive market for wireless communications, which is the second-largest global market for DRAM and the second largest market for NAND flash memory in 2018, IHS Markit said.

For Huawei, losing Micron and WD is a major blow to its memory supply as it now must turn to other players for components, meaning an interruption in supply is likely. However, in the storage market, Huawei must turn to Toshiba for hard disk drives, as the leaders in HDD storage — WD and Seagate — both reside in the U.S.

Learn more about IHS Market’s findings with its Mobile Infrastructure Intelligence Service.

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