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Huawei faces dilemma over Russia links that risk further US sanctions

The last time Western sanctions hit Russia after annexing Crimea, President Vladimir Putin turned to Huawei to rebuild and upgrade the territory’s communications infrastructure. The controversial Chinese technology company is now positioned to help the Putin regime on a much larger scale, despite Washington’s threat to impose further sanctions on it.

In the Crimea, Russia “tore Western telecom equipment in military territory heavily and replaced it with Huawei and ZTE,” said Husok Li-Makyama, a telecom expert at the European Center for International Political Economy. If Nokia and Ericsson do indeed leave Russia in full, Moscow “will need Chinese companies more than ever, especially Huawei,” he said.

Although a Initial drop In phone shipments, Huawei was an early winner of the Ukraine War. Its phone sales in Russia rose 300% in the first two weeks of March, while other Chinese brands Oppo and Vivo also recorded triple-digit sales increases, according to analysts at MTS, the largest cellular operator in Russia.

Its four Russian research centers recruit dozens of engineers, including machine learning scientists in Novosibirsk, speech recognition researchers in St. Petersburg and big data analysts in Nizhny Novgorod. Huawei has also added new sales and business development openings in Moscow since the invasion of Ukraine began, according to its website.

But experts say Chinese technology companies like Huawei and rival Shiomi risk violating sanctions if they continue to send phones and telecom equipment to Russia. They need approval from Washington because the electronics often contain advanced semiconductors or are manufactured with American tools, making them new sanctions on Moscow.

Huawei may face additional sanctions from Washington – such as Trump’s order banning ZTE from accessing any U.S.-related technology – that would bring another major blow to the Chinese company’s operations.

“My bet would be that it’s impossible for [Huawei and other Chinese phonemakers] Export legally to Russia, “said Kevin Wolf, a former Department of Commerce and sanctions expert.

“Theoretically it is possible [Huawei] Were able to understand how to create a cell or base station without American tools, software, etc. But it’s hard to believe they’ll be able to find it all [semiconductors] Not made with American tools. “

Huawei has been working to get rid of the US semiconductor supply chain since the US sanctions imposed by the Trump administration Cut his access to chips. Guo Ping, the company’s swivel chair, told reporters Monday that it relies on a chip repository. He added that Huawei is working to redesign products to bypass the U.S. supply chain by achieving parallel performance from less advanced chips.

The sanctions have hurt Huawei’s high-end smartphone business the most, causing revenue from its consumer products to shrink 50 percent last year, the company said Monday. Huawei’s total revenue last year fell 29% year-on-year to Rmb636.8bn ($ 100 billion), through near-uniform sales in its telecom and enterprise business lines.

Huawei’s heir apparent, Meng Wanzhou, who recently Returned to China After nearly three years in detention in Canada amid alleged violations of sanctions against Iran, Huawei teams have said they “have been under a lot of pressure over the past few years.”

“It made us more united and made our strategy clearer,” she said.

Russia needs Huawei. The retreat of Apple and Samsung put half of the smartphone market up for grabs, while the suspension of Ericsson and Nokia from their businesses in Russia left a hole in the supply of telecom equipment for broadband infrastructure and cellular networks that needed to be maintained and eventually upgraded.

Russia was Huawei’s first foray into foreign markets more than two decades ago and sanctions deepened ties, as Huawei found a willing buyer of a network infrastructure that was increasingly avoided in Western capitals and a deep pool of engineering talent. Like Crimea, when Russia needed a reliable company to provide the backbone of a new sanctions-protected national payment system, called Mir, it turned to Huawei.

Huawei has already won a significant portion of contracts for the distribution of 4G and 5G networks in Russia, analysts said. Huawei and its Chinese counterparts ZTE control about 40 to 60 percent of the wireless network equipment market in Russia, according to market research firm Dell’Oro, with Nokia and Ericsson making up the rest.

Opportunities for Huawei may also be in collaboration with its sanctions protection projects with Russia, including the Harmony operating system developed for its phones after losing access to Google Mobile services.

Vladimir Pozanov, CEO of Russian phone maker BQ, told Russian media last week that the company is considering installing HarmonyOS on new devices. Huawei said it has no plans at the moment to “launch or promote HarmonyOS outside of China.”

“Huawei has a huge share of the Russian market. Said Yang Guang, an analyst in Beijing at technology consulting firm Strategy Analytics. “Still, as a commercial organization, they will probably wait and see for now.”

Washington is watching Huawei closely. Matthew Borman, an export official at the U.S. Department of Commerce, on Tuesday threatened Chinese companies to circumvent sanctions on Russia with a “total ban [of] Not just trading but any “or even” denial order transaction. . . Like the one we imposed on ZTE. “

Borman said Washington has given a significant number of Export licenses Foreign vendors continue to sell to Huawei, but can be canceled.

Huawei’s Guo said the company is “carefully reviewing” the new sanctions. Huawei declined to answer further questions about its plans in Russia.

Nian Liu contributed a report from Manhoi

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Huawei faces dilemma over Russia links that risk further US sanctions Source link Huawei faces dilemma over Russia links that risk further US sanctions

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