Huawei looks at licensing to get around US bans

As DC cracks down further, Huawei looks at licensing smartphone designs to Xnova and TD Tech, which may have better luck getting access to silicon.

Pádraig Belton, Contributor, Light Reading

November 16, 2021

4 Min Read
Huawei looks at licensing to get around US bans

Huawei is looking at licensing its smartphone designs to other businesses which can buy semiconductor components that Ren Zhengfei's company cannot due to US blacklists.

The Shenzhen tech giant has seen its sales fall in four consecutive quarters, with its third-quarter revenues released on October 29, at 135.4 billion yuan ($21.2 billion), 38% lower than a year before.

US sanctions have effectively knocked Huawei out of the handset market, with its rotating chairman Eric Xu expecting the company's smartphone revenue to dip by $30 billion to 40 billion this year.

Figure 1: Walk on by: Huawei is looking for ways to mitigate the effects of the US sanctions on their smartphone business. (Source: Sipa US / Alamy Stock Photo) Walk on by: Huawei is looking for ways to mitigate the effects of the US sanctions on their smartphone business.
(Source: Sipa US / Alamy Stock Photo)

And this is having significant repercussions for the rest of the company. Its revenues for the first three quarters of the year, 455.8 billion yuan ($71.32 billion), were down roughly a third on the same period a year before. In response, Huawei is reportedly considering licensing its own smartphone designs to Xnova, which is owned by China Postal and Telecommunications Appliances Company, or PTAC. (PTAC in turn is owned by China General Technology Group Holding, which is directly controlled by China's central government.)

A second arrangement is said to be underway with TD Tech Ltd, a joint venture Huawei founded with Nokia in 2005, with involvement from several other companies such as Siemens. The company has already rebranded the Huawei Mate 40 Pro to sell under its own name, according to press reports. Xnova and TD Tech will attempt to get around US sanctions which first Donald Trump's administration and subsequently that of Joseph Biden have applied on Huawei.

Huawei has since then been unable to purchase semiconductors from Taiwan Semiconductor Manufacturing Company (or TSMC), the world's largest and most advanced chipmaker. It also has not been able to access Google's Android apps, or 5G wireless modems from Qualcomm.

Networking in Shenzhen

Meanwhile Huawei is also looking into selling its server business too. Now unable to buy processors from Intel, it is looking to sell the server business to a consortium which will include at least one government-backed buyer, in a deal likely to stretch to billions of yuan.

A state-owned firm in Zhengzhou and partner of the server business, Henan Information Industry Investment Company, is said to be one member of the consortium. The Hubei provincial government's asset manager and Huaqin Technology Company, a consumer electronics company, are also reportedly interested.

Tightening up the beltway

Washington's stance against Huawei toughened even further last week, when Biden signed a Secure Equipment Act. This law says the US Federal Communications Commission (FCC) should no longer even review applications from Huawei, ZTE, and three other Chinese companies which had been previously ruled a security threat.

The move comes a month after the FCC voted to withdraw permission for China Telecom to operate its US subsidiary. In practice, the change means there will no longer be special exceptions for network operators to continue using Huawei's equipment. The FCC until now had the ability to approve exceptions on a case-by-case basis.

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The three smaller Chinese companies also affected by the law are Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, and Zhejiang Dahua Technology Company.

These moves in Washington have had knock-on effects elsewhere, including most recently in Canada. Analysts say Huawei is likely soon to be excluded from the country's 5G infrastructure as the Liberal government of Prime Minister Justin Trudeau prepares to release a new policy on 5G mobile networks.

With Democrats and Republicans in America apparently growing more and more estranged from one another, it's spiritually comforting to know there is one thing on which they can apparently agree.

Namely, sticking it to Huawei.

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Pádraig Belton, contributing editor special to Light Reading

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Pádraig Belton

Contributor, Light Reading

Contributor, Light Reading

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