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High chip story? Huawei’s back-up plan experts are not convinced

SAN FRANCISCO/HONG KONG (Reuters) – Chip experts are calling from Huawei for the claims that could provide a stable supply chain without U.S. help, saying that the technology the Chinese telecom network gear maker to buy from the American companies, it would be “hard to replace”.

FILE PHOTO: Visitors walk along Huawei’s booth during the Mobile World Congress in Barcelona, Spain, February 27, 2017. REUTERS/Eric Gaillard/File Photo

The Asset management officially added Huawei a trade-black Thursday, the issue of the restrictions that make it difficult for the tech giant to do business with American companies, in the latest broadside against the company that the U.S. government see as a threat to national security.

The head of Huawei’s HiSilicon chip division, on Friday shrugged off concerns over interruptions in supply, saying: it has been a long time preparing for this kind of “extreme scenario”.

Huawei will strive for technological “self-reliant” going forward, He Tingbo said in a letter to the staff.

But that is easier said than done, industry experts say.

“I would be surprised if HiSilicon can, without any U. S. suppliers,” said Linda Sui, a Strategy Analytics analyst.

A China-based on a US-based tech company previously told Reuters that none of Huawei’s U.S. suppliers “can be replaced by Chinese ones, which are not within a few years, at least”.

As an example of Huawei’s dependence on US companies, an expert pointed to the likelihood that the tech giant makes use of chip design software from industry leaders, Cadence Design Systems Inc. and Synopsys Inc.

Huawei designs its microprocessors and other chips for products including the Mate-series flagship smartphones.

The U. S of the companies software is considered as the golden standard, used by manufacturers worldwide perfect chip blueprints and test before committing them to physical silicon, where a single error can set back a chip for months.

“It is difficult to replace,” said Mike Demler, a senior analyst at The Linley Group. “Cadence and Synopsys virtually all the ground beneath for everything you need,” he said.

“I’m sure there is an equivalent that tries to fill the same roles of Chinese companies, but the Chinese just do not present we are aware of outside of the country.”

Cadence and Synopsys did not respond to requests for comment. Huawei said that it is not a reaction.

SPECIALIZED CHIPS, LASERS

Huawei also has the exposure to the AMERICAN suppliers of special lasers and modules, such as NeoPhotonics, Lumentum and Finisar.

The lasers that are used to send information in the form of light signals through fiber-optic cables are essential for the Huawei, the world’s leading telecom network equipment business.

Companies such as Finisar, which is purchased by II-VI, Inc., and Lumentum have decades of work to make large quantities of lasers, said Philip Gadd, a retired chip executive who once ran Intel’s silicon photonics division.

“Even if the Chinese could do it, I don’t think they could come up to scale,” he said.

Finisar is the determination of the impact of the Huawei ban, according to a person briefed on the matter.

Finisar and Lumentum not return requests for comment. NeoPhotonics, which receives the bulk of its revenues from four companies such as Huawei, declined to comment.

Huawei has sought the development of the private options in the area, and partly by the purchase of a former British Telecom research center in 2012 and the startup Caliopa in 2012.

“The Chinese have been on an acquisition path,” said a silicon photonics executive. “They are buying up pieces where they could. A lot of the (U.S. government) restrictions have come too late.”

But Huawei is based on the so-called chip “foundries”, especially Taiwan Semiconductor Manufacturing Co Ltd (TSMC), for the complex task of the physical production of the chips that it designs. That is a common practice in the chip industry.

By contrast, many silicon photonics companies such as Finisar, still have their own chips.

MARCH TO SELF-RELIANCE

Huawei has been under pressure since the beginning of the decade about the U.S. allegations in the gear could be a conduit for Chinese espionage, a concern the company says is unfounded.

The United States has all the way up the rhetoric in the past year, calling on the allies to the bar of the company of the next generation 5G mobile networks, while locking horns with China in a trade war.

Against this background, Huawei is an important part of China’s campaign to develop its own capabilities in chips and reduction of the dependence on imports from companies like Qualcomm, Intel and Samsung Electronics .

Huawei’s chip division earned more than $7.5 billion worth of chips last year, its rotating president Eric Xu told Reuters. That compares with an estimated $21 billion worth of chips that Huawei acquired from external suppliers.

A Huawei spokesman said the company will use HiSilicon products to replace banned American components where possible, but refused to provide more details.

HiSilicon He has described the self-sufficiency efforts as a “long march in the history of technology” that would pay with the United states is “crazy decision”. “All the loose ties we make, now is the time to use them!”

Reporting by Stephen Nellis in San Francisco, Sijia Jiang in Hong Kong, Josh Horwitz in Shanghai, Yimou Lee in Taipei; Writing by Miyoung Kim; Editing by with the ipad has Himani

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