(Bloomberg) -- Huawei Technologies Co. has stockpiled enough chips and other vital components to keep its business running for at least three months as the U.S. curtails its access to American technology, people familiar with the matter said.
The Trump administration on Friday blacklisted China’s largest tech company -- which it accuses of aiding Beijing in espionage -- threatening to cut off the American software and semiconductors it needs to make smartphones and networking gear. But it’s been preparing for such an eventuality since at least the middle of 2018, hoarding components while designing its own chips, the people said.
Government officials also privately warned Huawei executives last year to explore non-American alternatives, the people said, asking not to be identified talking about internal affairs. The three-month cushion is a conservative internal estimate and the company could well sustain operations beyond that time-frame, they said.
The moves against China’s national champion may have devastating consequences for the rest of the world. Blocking the sale to Huawei of critical components such as semiconductors could cripple its operation, depress the businesses of American chip giants from Qualcomm Inc. to Micron Technology Inc. and retard the rollout of critical 5G wireless networks worldwide.
“The impact on Huawei will be extremely significant. An obvious impact is on the supply chain, but there is another layer of impact on confidence and its overall business,” said Cui Kai, a telecom analyst with consultancy IDC. “It will also have a negative impact on the 5G technology evolution around the world.”
Ken Hu, Huawei’s deputy chairman, responded to the U.S. decision in a memo to employees.
"This decision is the latest move in the campaign against Huawei, waged by the US government for political reasons,” he wrote. “The company has known this could be a possibility for many years. We have invested heavily and made full preparations in a variety of areas, including R&D and business continuity, which will ensure that our business operations will not be greatly affected, even under extreme conditions.
That U.S. maneuver coincides with sensitive trade negotiations between Washington and Beijing. Huawei executives reckon their company has become a bargaining chip and they will be able to resume buying from American suppliers if a trade deal is reached, the people said. That’s why they calculate a three-month stockpile may be enough to tide them over.
If Huawei’s calculation is wrong, the consequences would be dire. If the ban isn’t resolved along with the trade dispute, the company would be severely handicapped in its ability to provide advanced wireless networks. Much of its carrier and smartphone businesses -- the two pillars of the company -- would be at risk.