Huawei Chief Xu: we won’t let ourselves be slaughtered

Huawei Chief Xu: we won’t let ourselves be slaughtered

Beijing. 1.4.2020

If there are further sanctions against Huawei, they will retaliate. Huawei will not be slaughtered. With this warning, Huawei chief Xu reacted to a Reuters report according to which officials of the Trump administration had established new rules. Danac is said to have throttled the sale of chips from Taiwan Semiconductor Manufacturing Co (TSMC) to Huawei. TSMC manufactures chips that Huawei designs.

„The Chinese government would not stand by and watch Huawei being slaughtered. I believe there would be countermeasures,“ Xu emphasized to the Chinese media.

The US claims that 5G equipment from China could pose a security risk to the US. Xu countered that China could apply the same logic to American equipment with US chips.

„If China takes countermeasures, the disruptive impact on industries worldwide would be enormous. Once Pandora’s box is opened, it would have a devastating chain effect on the global ecosystem. Huawei would not be the only one to be destroyed,“ Xu said, adding that American companies „would not get off scot-free.

The strong rhetoric is a measure of the potential damage that such a rule change could have on Huawei, he said. Last year, the company was blacklisted by the Trump administration, which restricts the way American companies can do business with Huawei. However, some loopholes allowed the companies to continue to supply certain components to Huawei.

The new rule change aims to cut off supplies to Huawei where it hurts. Huawei does not manufacture its own chips. Instead, it designs them and they are manufactured by TSMC. If Huawei is cut off from this supply, it could be very damaging. Such a change would be an escalation of tension between the US, Huawei and ultimately China.

The blacklist has already harmed Huawei. On Tuesday the company reported revenues for 2019 that were $12 billion below its own internal expectations.

Xu pointed out that other companies would also produce chips for Huawei if the change in the US rule came into effect. As examples he cited Samsung, MediaTek from Taiwan and Unisoc from China.

„Even if Huawei can no longer produce chips, I believe that many other Chinese companies will enter the market and produce home-grown chips,“ Xu told CNBC.

Semiconductors are a key area of Beijing’s ‚Made in China 2025‘ plan, a government initiative to boost the production of higher-value products.

China plans to produce 40% of its semiconductors by 2020 and 70% by 2025. This is supported by $10 billion of investment from Beijing in the country’s chip industry, although experts told CNBC that China still lags far behind the US in the semiconductor industry.