With one supplier after the other severing ties with Huawei following its inclusion in the entity list, the Chinese giant has started to feel the pinch and is apparently cutting back on production of smartphones now. The South China Morning Post reports that Foxconn, which assembles the company's phones, has now stopped many production lines as the beleaguered company has reduced orders for new devices.
On the surface, Huawei is playing it cool and perhaps that's why the people who are privy to this matter have said that the information is supposed to be private. However, the decision to halt production lines isn't necessarily indicative of anything as smartphone production schedules are usually pretty flexible and can be tailored according to changing market conditions. On that note, it is not known if the production cut is temporary or long term.
Meanwhile, Huawei's largest smartphone assembler Flextronics International has also apparently halted three of the four production lines in response to the U.S. government's ban. Needless to say, the supply of Huawei phones will reduce significantly in the coming days.
Prior to this, Huawei was seemingly on track to become the number one smartphone maker in the world. The analytics firm IDC said that in the first quarter of 2019, the Shenzhen based company achieved year-over-year growth of 50.3 percent, while its rivals, the current market leader Samsung and Apple saw their market share decline. To meet the growing demand for Huawei phones, Foxconn presumably began a massive recruitment drive earlier.
Now, it appears that demand has slowly begun to dry up. Some consumer websites have reported that Huawei phones are attracting fewer clicks. And it's not just about demand, as Huawei is losing access to vital components needed to make new phones. To recap, the U.S. has blacklisted the company and to comply with the government's orders, various companies including Google, ARM, and Qualcomm have suspended business relations with Huawei.
Without these partners, the future of the company's phones seems uncertain. Although the current phones should theoretically not be affected as a result of the fiasco, the phones of many consumers in Hong Kong are apparently malfunctioning and this might have something to do with recent updates. Huawei currently has no answers and this will only further reduce the confidence of consumers in the company.
In 2012, the U.S. accused Huawei and ZTE of espionage and the later was also banned temporarily. In a bid to cover all bases should a similar situation arise, Huawei also began ramping up its efforts to become self-sufficient soon afterward. The company also began working on its own operating system and apparently, the development process is in a chaotic state right now.
Later on, when the company's chief financial officer, Meng Wanzhou was arrested in December 2018, Huawei reportedly began stockpiling components and it appears to have a year's worth of supply right now.
Although the company makes its own chipsets, recently the U.S. based firm Synopsys also decided to stop selling its chip design tools to Huawei. Without the EDA tools, Huawei will have to rely on existing chip designs and likely fall behind the competition.
As Zhao Ming, president of Huawei's sub-brand Honor recently admitted, the company might not be able to achieve its goal of dethroning Samsung by 2020, given the current situation. Previously, the company had said that it has seen a drop in sales in Spain, which is one of its biggest markets in Europe. Carriers in the UK and Japan have also pulled the company's phones from their 5G network launch.
Although the situation seems grim right now, China is too big an economy to be ignored by the U.S. and therefore, chances are that things will get better after the G20 summit which will take place this month.