Chinese vendors Huawei Technologies and ZTE have been slowing down their 5G base station installation in the country, the Nikkei Asian Review reported.
According to the report, the two Chinese vendors told some of its suppliers to slow down shipments of some 5G base station-related products in June, so the vendors can redesign products and change some equipment to remove as much U.S. content as possible.
The report also said that Chinese carriers are more cautious about their 5G investment plans, mainly due to uncertainties over the likely returns of such investments.
“We were told by our client to slow down our shipments to them in June, and the shipments almost came to a complete stop in July,” a ZTE components and parts supplier executive told Nikkei. “We have to go through our product verification tests again as the client changed so many of their designs and we don’t know when exactly the client will ask us to resume normal shipping.”
A Huawei component and parts supplier told the Japanese publication that Huawei had introduced changes in some designs and replaced equipment used in the manufacturing process, which had slowed installation of 5G base stations. “On top of that, we also faced order cuts from the client for the rest of this year after a strong inventory-building demand in the first half of this year,” said an executive at the Huawei supplier.
In May of this year, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced plans to restrict Huawei’s ability to use U.S. chipmaking equipment and software to design and manufacture its semiconductors abroad.
The BIS had said that the move “cuts off Huawei’s efforts to undermine U.S. export controls,” and that the government agency is amending its longstanding foreign-produced direct product rule and the Entity List to “narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”
Huawei was added to the Entity List in May 2019, after the Department of Commerce concluded that the vendor was engaged in activities that were contrary to U.S. national security or foreign policy interests.
However, the U.S. government believes that Huawei has continued to use U.S. software and technology to design semiconductors and says that the company is therefore “undermining the national security and foreign policy purposes of the Entity List by commissioning their production in overseas foundries using U.S. equipment.”
Under the new regulation, companies using U.S. chipmaking technology — including foreign chipmakers –will be required to obtain a license before supplying components to Huawei.
Chinese operators built a total of 257,000 new 5G base stations in the first half of the year, according to a recent report by Chinese news agency Xinhua, citing data from the Ministry of Industry and Information Technology (MIIT).
The total number of 5G base stations in China had reached 410,000 by the end of June, MIIT data showed. Chinese mobile operators are expected to deploy over 600,000 5G base stations by the end of the year, covering cities above the prefecture level in the country.