Huawei responds to ‘arbitrary’ US rules by increasing R&D and inventory

arbitrary US rules Huawei
People walk past a Huawei shop, amid an outbreak of the coronavirus disease (COVID-19), in Beijing, China, May 18, 2020. REUTERS/Thomas Peter

SHENZHEN, China (Reuters) – Huawei Technologies in its first official response to the Trump administration’s move to curb its access to global chip supplies called it ‘arbitrary’ and said its business would be impacted.

“We expect that our business will inevitably be affected. We will try all we can to seek a solution,” Chairman Guo Ping said in his keynote speech at Huawei’s annual global analyst summit on Monday.

“Survival is the key word for us at present,” Guo said in a Q&A.

Guo said Huawei was committed to complying with US rules and it had significantly increased R&D and inventory to meet US pressures.

Friday’s move by the US Commerce Department expands US authority to require licences for sales to Huawei of semiconductors made abroad with US technology, vastly extending its reach to halt sales to the world’s No. 2 smartphone maker.

The company was added to the Commerce Department’s “entity list” a year ago due to national security concerns, amid accusations from Washington that it violated US sanctions on Iran and can spy on customers. Huawei has denied the allegations.

But China hawks in the Trump administration were frustrated that Huawei’s entity listing was not doing enough to curb its access to supplies.

Huawei said the new US decision was “arbitrary and pernicious, and threatens to undermine the entire industry worldwide”.

“Huawei categorically opposes the amendments made by the US Department of Commerce to its foreign direct product rule that target Huawei specifically,” it said in a statement, adding that Washington adding it to the entity list a year ago was also without justification.

Guo said that Huawei spent $18.7 billion buying from US suppliers last year and would continue to buy from them if the US government would allow it. He said customers have stood by the company, but acknowledged it had become harder to win contracts since the company was added to the entity list.

The company has had to rewrite 60 million lines of code and invest 15,000+ man years in research and development in a bid to deal with pressures created by being placed on the entity list.

It said Huawei has since remained committed to complying with all US government rules and regulations, but despite its efforts, the US government has decided to proceed and completely ignore the concerns of many companies and industry associations.

Huawei, which needs semiconductors for its smartphones and telecoms equipment, has found itself at the heart of a battle for global technological dominance between the United States and China, whose relationship has soured in recent months over the origins of the deadly coronavirus.

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(Reporting by David Kirton, writing by Miyoung Kim; editing by Jason Neely)

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