By Dan Strumpf and Yoko Kubota
Huawei Technologies Co. has begun to feel the effects of U.S.
moves to curb its access to U.S. technology, as Google cut access
to some of its Android services on Huawei smartphones and a German
chip supplier said it was cutting deliveries to the Chinese
giant.
Alphabet Inc.'s Google will restrict access to certain Android
features to comply with a U.S. requirement that suppliers seek
licenses to keep selling to Huawei, according to people familiar
with the matter, a sign that the measures may bite into Huawei's
booming consumer-device business.
Huawei, which recently surpassed Apple Inc. as the world's No. 2
supplier of smartphones -- it now trails only Samsung Electronics
Co. -- relies on Google's Android operating system to run its
devices.
From now, Huawei will be able to use only the public version of
Android and won't have access to proprietary apps and services from
Google, according to a person familiar with the matter. Though
existing phones are expected to keep functioning largely as usual
for now, users could lose some app functions, including some
artificial-intelligence and photography features, the person
said.
In a separate move, German chip maker Infineon Technologies AG
said it was terminating the delivery to Huawei of some components
originating in the U.S., in a sign that even non-U.S. suppliers to
Huawei are being swept up in the U.S. trade restrictions. Infineon
didn't specify which components were affected by the action but
said the "great majority" of products it sells to Huawei aren't
subject to trade restrictions.
Separately, Qualcomm Inc., San Diego, has suspended shipments to
Huawei of its chips, and some employees have been told not to
communicate with the Huawei side, according to a separate person
familiar with the matter. Qualcomm chipsets are used in certain
Huawei smartphone models. Huawei also designs a large number of its
own chips for higher-end phones.
Last week the U.S. Commerce Department said it was adding Huawei
to its "Entity List" on national-security grounds, requiring
companies that export U.S. technology to the Chinese company to
apply for a license. The department has indicated applications are
likely to be denied, which would cut Huawei off from a range of
crucial American suppliers.
Huawei, the world's biggest maker of telecommunications gear,
draws upon suppliers from around the world, but it relies on
American companies to supply certain components that go into its
smartphones, cellular base stations and other products.
Huawei's founder and CEO, Ren Zhengfei, told reporters Saturday
that the impact on smartphone production would be limited even if
Huawei cannot import chips, according to a spokeswoman who
confirmed his remarks. Mr. Ren also said the company would stick to
an earlier forecast that its annual revenue growth would be under
20%.
A Huawei spokesman said the company would continue providing
security updates and after-sales services to existing Huawei
smartphone and tablets, "covering those that have been sold and
that are still in stock globally."
"As one of Android's key global partners, we have worked closely
with their open-source platform to develop an ecosystem that has
benefited both users and the industry," the spokesman said.
Melissa Chau, an analyst at IDC, said: "Google apps are
incredibly important to a company like Huawei, which is deeply
reliant on smartphone shipments outside of China, and representing
half of its global shipment figure." She said it was of "critical
importance to have this resolved as soon as possible."
A Google spokesman said the company was "complying with the
order and reviewing the implications." The spokesman added that
many Android functions would continue running as normal, including
access to the Google Play app-store service and security
protections from Google Play Protect. Reuters first reported the
halt by Google.
Google's standard suite of apps, like Google Maps and Gmail,
would continue to function normally, according to a person familiar
with the matter. However, Huawei phones might lose other Google
services as part of U.S. government action, this person said.
Proprietary apps and services such as some artificial-intelligence
capabilities that connect to Google infrastructure might cease to
function, according to this person.
Huawei's global smartphone shipments rose 50% in the first
quarter, bucking an industry-wide decline of 6.7%, according to
research firm International Data Corp. The consumer-business group
last year became the biggest source of revenue for the
Shenzhen-based technology giant, outpacing revenue from its carrier
customers for the first time. Last year, consumer sales including
smartphones, laptops and other gadgets accounted for 48% of
Huawei's $107 billion in revenue.
Huawei's smartphone growth has been fueled largely by sales in
Europe and China. Its devices aren't sold by major wireless
carriers in the U.S.
Qualcomm didn't immediately respond to a request for
comment.
Huawei has been stockpiling inventory and has developed its own
operating system to protect against a supply disruption. However,
it isn't clear when or if Huawei can easily switch operating
systems on existing smartphones.
Huawei's loss of some Android services could play out in a way
similar to the impact on its Chinese rival ZTE Corp. when it was
cut off from American technology for three months last year. While
ZTE phone users were able to continue using their phones as usual,
over time some phones lost functionality as they became unable to
receive certain software updates.
In the weekend interview, Mr. Ren said the company wasn't going
down the same path as ZTE, calling the two "different
companies."
--Patrick Costello contributed to this article.
Write to Dan Strumpf at daniel.strumpf@wsj.com and Yoko Kubota
at yoko.kubota@wsj.com
(END) Dow Jones Newswires
May 20, 2019 09:06 ET (13:06 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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