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ARM cuts ties with Huawei in severe blow for embattled company

Image credit: reuters

The Cambridgeshire-based chip designer Arm Holdings (ARM) has told its staff to stop working with controversial Chinese telecommunications company Huawei, following the blacklisting of the company by the Trump administration.

Last week, the White House confirmed that President Donald Trump had signed an executive order adding Huawei to the US ‘Entity List’: a list of companies which US companies may not work with without a government license.

Huawei has become a frequent target of Trump’s ire, with US officials urging US allies in Europe to block the world’s largest telecommunications equipment manufacturer from building their next-generation 5G wireless networks over espionage concerns, even threatening to withhold intelligence from the UK government if it allows Huawei limited access to its 5G networks. In January, US prosecutors announced almost two dozen indictments against the company, including for violating trade sanctions against Iran and stealing technology from US companies. Huawei has denied all the allegations.

Huawei’s inclusion on the Entity List has been a severe blow to the Shenzhen-based company, which has been vying with Samsung to become the world’s largest smartphone manufacturer. Huawei founder and CEO Ren Zhengfei has told reporters that the company has “not done anything which violates the law”.

Soon after its inclusion on the list, it was reported that Google would be limiting Huawei’s access to its Android software and services. This is likely to prevent Android OS updates reaching Huawei devices in the future, including Android’s next iteration (‘Q’) which is expected to be rolled out in autumn. If Huawei’s blacklisting is not resolved, key Google apps like Chrome, Google Maps, the Play Store and YouTube could be missing from future Huawei devices.

Huawei has reportedly been working on its own Mobile OS since 2012 with an eye on tensions with US authorities. This morning, Richard Yu, CEO of Huawei’s consumer branch, told CNBC that Huawei’s own OS could be ready for the Chinese market by the fourth quarter of 2019, with a version for other markets available by the first or second quarter of 2020.

“We are still committed to Microsoft Windows and Google Android. But if we cannot use that, Huawei will prepare the plan B to use our own OS,” Yu told CNBC.

However, Huawei may face its greatest difficulties due to lack of access to key hardware. While Huawei has its own HiSilicon Technologies Unit for developing key smartphone components, the company is dependent on semiconductor industries in the US and elsewhere. It could severely struggle to continue manufacturing handsets if its blacklisting is not resolved within the coming months. Huawei is thought to have stockpiled enough chips to continue smartphone production for a further three months.

According to internal documents acquired by the BBC, UK-based ARM has told its staff not to work with Huawei, ordering them to end “all active contracts, support entitlements and any pending engagements”. Despite Trump’s executive order targeting Huawei only limiting US-based companies, ARM is reportedly complying with the order due to its designs using technology with US origins. The company also has several offices based in the US.

The company confirmed that it would be complying with Huawei’s blacklisting in a statement to The Verge, adding that it “values its relationship with [its] longtime partner HiSilicon and [it is] hopeful for a swift resolution on this matter.”

ARM, which is owned by Japanese conglomerate SoftBank, dominates the market for smartphone and tablet processors. Huawei’s Kirin 980 processor, which was developed by Hisilicon and is found in recent models like the P30 Pro, Mate 20 Pro, Honor View 20, and Honor 20 Pro, uses four of ARM’s Cortex A76 and incorporates a Mali G76 core.

If Huawei cannot re-establish working ties with ARM, the company will be forced to switch to a new architecture which is not dependent on ARM’s cores. This problem will be exacerbated by the fact that US-based chipmakers Intel, Qualcomm, Infineon, Broadcom, and Xilinx have all confirmed that they would be complying with Trump’s executive order by limiting supplies to Huawei.

Intel is the only company other than ARM which currently designs CPU architectures to support the Android OS. If Huawei's blacklisting is not resolved, it could be forced to either design its own architectures from scratch or take the plunge of switching over to its own OS.

A Huawei spokesperson said: “We value our close relationships with our partners, but recognise the pressure some of them are under as a result of politically motivated decisions. We are confident this regrettable situation can be resolved and our priority remains to continue to deliver world-class technology and products to our customers around the world.”

Meanwhile, Japan-based Panasonic and US-based Lumentum have joined the growing group of tech companies publicly acknowledging that it will limit supplies of equipment to Huawei following Trump’s executive order. In the UK, EE CEO Marc Allera has confirmed that the company would “pause” the sale of 5G-enabled Huawei phones ahead of its imminent 5G launch, while a spokesperson for Vodafone said that the company was pausing Huawei pre-orders ahead of its 5G launch.

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