Home / Tech / Huawei has reportedly cut orders to suppliers in a potential sign that it's already feeling the burn from being blacklisted in the US

Huawei has reportedly cut orders to suppliers in a potential sign that it's already feeling the burn from being blacklisted in the US

A Huawei company logo is seen at a shopping mall in Shanghai, China June 3, 2019. Picture taken June 3, 2019. REUTERS/Aly Song

  • Huawei has reportedly scaled back orders to suppliers and downgraded its smartphone shipments for 2019, according to a report from Nikkei Asian Review.
  • It’s potentially a sign that Huawei is beginning to feel the repercussions of its placement on a US trade blacklist that effectively bans US firms from doing business with the Chinese tech giant.
  • The move would come after US tech firms such as Google and Intel among others have cut ties with Huawei.
  • Visit Business Insider’s homepage for more stories.

Huawei has scaled back orders to major suppliers that produce components for its smartphone and telecom infrastructure products and has decreased its estimates for smartphone shipments in 2019, according to a report from Nikkei Asian Review.

It’s potentially a sign that Huawei, the second-largest smartphone maker in the world by market share, is already starting to feel the repercussions of being placed on a US trade blacklist that prevents US firms from doing business with Huawei without government permission. The news comes after the South China Morning Post recently reported that Huawei has ceased some smartphone production.

Major chipmaker Taiwan Semiconductor Manufacturing Co. confirmed to the publication that Huawei has scaled back its orders since the ban went into effect, while another unnamed supplier that makes power components for the company’s phones and telecom equipment said Huawei has halted some orders. Huawei is said to have slashed orders to its supply chain by as much as 30%, according to the report.

The company canceled some orders for its base station business beginning in June and will suspend orders for smartphone components after this summer, a representative for the power component supplier said to Nikkei Asian Review. Auras Technology, a Taiwan-based supplier of cooling components, said a Chinese company’s orders have been impacted according to the report, although it did not name Huawei specifically. 

The report also indicates that Huawei’s smartphone sales could already be taking a hit. The Chinese tech giant is said to have lowered its predictions for smartphone shipments in the second half of 2019 by 20% to 30% following the ban.

However, it’s unclear whether the decrease in orders can be attributed directly to the recent US sanctions. There’s a chance Huawei could be scaling back production due to inventory buildup, as Nikkei Asian Review notes.

But Frank Gillett, a vice president and principal analyst at market research firm Forrester, previously told Business Insider it’s possible that the ramifications on Huawei’s sales as a result of US firms like Google severing ties with the firm could appear fairly quickly. “I’ve got to think we’re going to see a hit on sales immediately,” he said. “Anyone buying a phone has to wonder for how long Google will allow software updates and operation, because it’s not clear yet.”

Business Insider has reached out to a Huawei representative for comment.

Following Huawei’s placement on the US government’s so-called Entity List, which effectively bans US companies from doing business with the Chinese tech firm without a government license, a number of tech firms and components makers have cut ties with the company. These include chipmakers Qualcomm and Intel, chip designer Arm, and Google, which makes the most popular smartphone software platform in the world.

Huawei has been preparing for a scenario in which it can no longer work with US companies on future products. It’s developing its own operating system to replace Google’s Android software, and it has reportedly stockpiled chips and components for future products. Huawei CEO Ren Zhengfei also previously told the Nikkei Asian Review that he only expects growth to slow slightly following the ban.

Huawei has suggested that it may be willing to work with the US government to ease cybersecurity concerns in the future. Andy Purdy, chief security officer for Huawei USA, hinted when speaking with CNBC that the Chinese tech firm would be open to implementing “risk mitigation measures” in order to do business in the US.

SEE ALSO: Samsung could emerge as the big winner from Huawei’s miserable week

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