Huawei uses partners to circumvent US sanctions
Huawei uses partners to circumvent US sanctions

Huawei's smartphone business has been hit by US sanctions and plans to license its phone designs to third parties in order to acquire key components.

The Shenzhen-based tech giant plans to license its design to a division of the state-run China Post and Telecom Equipment Corporation (PTAC), which later tried to buy banned components from the Trump era blacklist.

The division is called Xnova and they sell Huawei branded Nova mobile phones through their e-commerce site. Through the collaboration, Xnova will offer its own branded materials based on the company's larger design.

Chinese telecom equipment company TD Tech also sells mobile phones developed by Huawei under its own brand. As negotiations continue, the partnership can change.

After US sanctions cut it off from major chip makers TSMC, Google's Android apps and Qualcomm's modem, the move may be Huawei's best chance to salvage its smartphone business.

Since Huawei was first criticized by the Trump administration, its declining consumer business sales have fallen for four straight quarters.

About a year ago, the company sold its subsidiary Honor to a consortium led by a state-owned company in Shenzhen, which exempted the company from US sanctions.

Company CEO George Zhao said Honor can now purchase components from suppliers such as Qualcomm.

This success prompted the Huawei subsidiary to find new partners to continue its consumer activities.

The company's engineers have begun redesigning the circuits of some of its flagship smartphones, which were previously powered by the company's internal HiSilicon chip, to fit in with Qualcomm or MediaTek processors.

Huawei expects the partnership to increase smartphone shipments. Including in-house models and models sold by partners, there will be more than 30 million units next year.

Huawei strives for cash income

PTAC is a subsidiary of China General Technology Group, which is a major manufacturer and importer of machinery that is directly controlled by the central government.

TD Tech was founded in 2005 and its assets come from companies such as Siemens AG. Although the German multinational has stated that it is no longer involved in the project.

Huawei has worked hard to find new cash revenue to fill the void left by its rapidly declining consumer electronics business. Last year, the company's revenue was 483 billion yuan ($75.6 billion), which is equivalent to IBM's annual revenue.

The latest deal is unlikely to bring any significant profit to the Chinese giant. However, this partnership may be a necessary condition to help the company maintain its smartphone development skills.

The Biden government has shown no sign of easing sanctions against the company. Although CFO Meng Wanzhou recently reached an agreement to release her from detention in Canada for two years under house arrest as part of an extradition request from the United States.

Executives like Meng's father Ren Zhengfei vowed to continue making smartphones.

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