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Japanese Chipmakers Scramble To Replace Huawei Sales After U.s. Ban

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Sani Ibrahim
Abubakar Tafawa Balewa,University
Agricultural economics and extension
100Level, Nigeria.
(Nikkei Asian Review) — U.S. sanctions against Huawei
Technologies that took effect Tuesday have forced Japanese
chipmakers to cast a wider net for business to fill the gap left
by a loss of sales to China’s largest telecommunications
equipment supplier.
The U.S. Commerce Department banned all exports to the
Chinese telecommunications company of semiconductors
made with American technology, exempting only shipments
that are already en route. Japanese companies supplied about
1.1 trillion yen ($10.4 billion) in parts to Huawei last year,
according to U.K. research company Omdia.
This ban was the main reason Sony last month trimmed its
capital spending plans for the three years through fiscal 2020
by about $470 million. The Japanese company brings in
billions of dollars annually from sales of image sensors to
Huawei, which were completely halted by Tuesday.
Sony is considering applying for a license to sell to Huawei.
But “we need to work on diversifying our customers,” a
company executive said.
One opportunity lies in selling to smartphone makers, including
Apple and Chinese players, that are positioned to eat into
Huawei’s market share if the ban forces the company to cut
production. Sony also looks to develop sensors for a broader
range of applications, including autos and industrial
machinery, rather than rely so heavily on mobile devices.
Renesas Electronics on Tuesday stopped supplying Huawei
with semiconductors for 5G network base stations. Meanwhile,
the Japanese chipmaker is ramping up marketing to rival base
station manufacturers, such as Sweden’s Ericsson and
Finland-based Nokia.
Toshiba spinoff Kioxia suspended shipments of flash memory
to Huawei on Tuesday. The company plans to repurpose
capacity that would otherwise be idled by the ban to produce
chips for other smartphone-makers and for data centers.
The sweeping nature of the sanctions presents compliance
challenges. Even supplying chips to a third party could run
afoul of U.S. export regulations if the products in question are
ultimately used by Huawei. Jeff Wang, chairman of the Tokyo-
based subsidiary Huawei Japan, last month noted Japan’s
“extremely important role in global supply chains.”
Businesses are being forced to scrutinize the routes that their
parts take to avoid potentially risky transactions, and getting a
full picture will take time.
Toshiba on Tuesday temporarily halted all shipments of hard
disk drives and chips, citing the need to determine if any of its
products are covered by the ban.
Any companies that violate the sanctions will be barred from
importing American software and technology covered by the
export regulations, whether from the U.S. or from third
countries. The rules span such a massive number of products
that such a ban would be a major hindrance to manufacturing
and marketing.
Violators may face other penalties on top of this, including
fines of up to $1 million and imprisonment, along with the
reputational risks that come with breaking U.S. regulations.
“We have to be cautious about our investment plans from
fiscal 2021 onward as well,” said a Sony executive who
worries about the Huawei row dragging on.
As for Huawei, production there is not expected to take a hit
right away, as the company rushed to stock up on parts before
the sanctions took effect. The spot price of DRAM chips —
vital for smartphone production — has jumped 7% since early
this month, which a representative from a semiconductor
trading company chalked up to a final rush of buying by
Huawei.
But the company’s smartphone shipments are forecast to
plunge 70% in 2021 compared with the expected total for this
year, by one estimate. DRAM “prices will fall around mid-
September as [Huawei] stops building up its inventories,” said
Akira Minamikawa at Omdia.

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