Can Huawei survive without an ARM

The right to the circuits


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This is already the case in China. Most Google services there are blocked anyway, Great Firewall and censorship prevent access to the majority of Western providers. Most Chinese do not know WhatsApp, YouTube or Snapchat; they have their own applications. Huawei and Xiaomi have long had their own platforms and app stores. But: will Huawei succeed in establishing its own system worldwide?

Possibly yes, because the Trump shock could accelerate the development, believe some analysts and describe Trump's export restrictions against China as an own goal. "It's probably not good for the US economy in the long term," says Zhao Minyuan, an economist at the University of Pennsylvania Bloomberg quoted. The more trust the US loses, the more trading partners around the world would look for alternatives. That would ultimately weaken the dominance of American providers.

Dan Wang of the independent economic research institute Gavekal is much more skeptical. Huawei's claim that the company is adequately armed for US sanctions is what he calls "propaganda". Wang believes that without access to US technologies, Huawei will not be able to survive long because both the smartphone and network businesses require US components that cannot be easily replaced. Huawei needs a number of components for its devices, for which there are only a few suppliers outside of the United States.

No new processors without ARM

The critical components aren't just chips, says Wang. For example, Huawei also uses special lasers from US companies for its network equipment business. In addition, companies from other countries are now also questioning their cooperation with China under pressure from the USA. Huawei threatens the Iran effect. According to the financial information service Bloomberg The company is said to have already stored semiconductors for 5G network technology for at least three months in preparation for possible US sanctions.

For the main processors, the company does not depend on technology from abroad per se, but on licenses. Huawei manufactures the heart of every smartphone itself, but its own division, HiSilicon, produces the "Kirin" series of chips. Particularly ingenious: the part for receiving data with 5G is already on the new generation chips. So Huawei is better than its US competitor Qualcomm in some respects.

But the rights to the circuits are a huge problem. The highly complex web of connections was developed by a British company: ARM Holdings, based in Cambridge. Its parent company is the Japanese major investor Softbank. Now ARM is also threatening to deprive the Chinese of the rights to use the architecture of these cell phone processors.

That would be a disaster for Huawei. The company could manufacture the Kirin chips in its factories and the cell phones would also work. But the move would be illegal. The sale of smartphones would be vulnerable in any court in Western countries - and strictly speaking in China too. Huawei would be swept out of the world market just as it would if the hardware itself were missing. Worse still: Huawei cannot design new central chips without the help of ARM. The Chinese are not that far.