Home / Blogs

The Unbelievably High Cost of the War Against Huawei

Dave Burstein

U.S. companies were selling $11 billion a year of parts to Huawei before the blockade. Losing those sales is just the start of the damage. Every other Chinese and Russian company is making sure to find non-US suppliers. The U.S. has threatened India and Turkey with sanctions as well.

As other companies replace U.S. components, the impact will be tens of billions more than the $11 billion of Huawei suppliers. Redesigning mobile phones and other products can take from three months to three years, so sales will be lost over time.

The relative decline in sales at Qualcomm and Broadcom suggests they are seeing other customers are cutting back, not just Huawei. That isn't certain yet, however.

European companies are considering similar self-protection. A very senior German engineer tells me German companies in automotive and electronics are also designing out components only available from the U.S. Given how few electronic products are produced and manufactured in the U.S., the ultimate impact can be enormous.

No company is more vulnerable than Google. 90% of Google's income is from advertising, much of it dependent on YouTube and Gmail. Huawei Harmony is ready to replace Android, although it has some rough edges. Android has an obsolete file system that wasn't designed for a mobile phone. Huawei's F2FS file system replacement is 60% faster. (While the file system is faster, the press reports that Hong Meng/Harmony is 60% faster overall were misinterpretations.)

Huawei is now making most R.F. parts and sourcing others in Asia

Huawei has replaced all but two components in the radio frequency front end with Asian parts. After satisfying Huawei's needs, these vendors will inevitably win other contracts away from Broadcom, Skyworks, and other U.S. parts makers.

Huawei's HiSilicon remains primarily a supplier to the parent company but also sells parts to others. For example, it is now selling its 4G IoT chip. If HiSilicon sold other mobile manufactures R.F. parts to replace U.S. company's R.F. parts, it could make some money. The government would be happy because it would reduce the semiconductor trade deficit.

Broadcom, Qualcomm, and others will undoubtedly lose some future sales to newly emerging suppliers. China has engineers who design state-of-the-art R.F. components for military and aerospace. Chinese academics are doing important R.F. research. The capability is there.

China is already investing over US$100 billion for domestic memory chip manufacturing. The government is ready to fund other components, including R.F.

What percentage of sales and value could disappear?

Qualcomm, Broadcom, Skyworks, Qorvo, and other companies directly affected have a market value of half a trillion dollars. Reduced sales to China would have a large effect. 20% of half a trillion is far more than any previous estimate of the cost of blockading Huawei.

An estimate like that is hard to believe but not unreasonable.

By Dave Burstein, Editor, DSL Prime – Dave Burstein has edited DSL Prime and written about broadband and Internet TV for a decade. Visit Page
Follow CircleID on
SHARE THIS POST

If you are pressed for time ...

... this is for you. More and more professionals are choosing to publish critical posts on CircleID from all corners of the Internet industry. If you find it hard to keep up daily, consider subscribing to our weekly digest. We will provide you a convenient summary report once a week sent directly to your inbox. It's a quick and easy read.

I make a point of reading CircleID. There is no getting around the utility of knowing what thoughtful people are thinking and saying about our industry.

Vinton Cerf, Co-designer of the TCP/IP Protocols & the Architecture of the Internet

Share your comments

To post comments, please login or create an account.

Related

Topics

Whois

Sponsored byWhoisXML API

New TLDs

Sponsored byAfilias

Cybercrime

Sponsored byThreat Intelligence Platform

Cybersecurity

Sponsored byVerisign

IP Addressing

Sponsored byAvenue4 LLC

Domain Names

Sponsored byVerisign

DNS Security

Sponsored byAfilias