US sanctions to slow down deployment of 5G technology: Huawei exec

The U.S. Commerce Department’s move to expand sanctions against Chinese telecommunications giant Huawei threatens to delay the rollout of 5G technology globally, Paul Scanlan, the company’s chief technology officer said.

Speaking to Yahoo Finance’s On The Move, Scanlan did not specify the extent of the delays, but acknowledged Washington’s move to effectively shut down Huawei’s supply chains will further complicate 5G ambitions for the largest equipment maker in the space. It has already been delayed because of the coronavirus outbreak.

“This is a thing that's very difficult to understand,” Scanlan said. “This type of action, instead of trying to fix the world and collaborate and make improvements, prevents collaboration and the development of the use-cases that everybody had, that 5G hoped to be able to deploy,” Scanlan said.

Last week, the Commerce Department moved to expand export restrictions against Huawei by requiring foreign semiconductor makers using American software and equipment to obtain licenses to continue selling to the world’s second largest smartphone maker. The tighter sanctions came nearly a year after the department added Huawei to the “entity list,” citing national security concerns.

‘Survival is the key word’

Huawei has repeatedly denied allegations of spying and intellectual property theft.

A media statement released overnight, characterized Washington’s actions as “arbitrary and pernicious,” accusing the U.S. of “leveraging its own technological strengths to crush companies outside its own borders.”

“This will only serve to undermine the trust international companies place in U.S. technology and supply chains. Ultimately, this will harm U.S. interests,” the statement said.

On Monday, rotating chairman Guo Ping said U.S. actions would “inevitably” affect the company’s outlook. Speaking at the company’s annual analyst day, Ping struck a notably downbeat tone when asked about the impact expanded restrictions will have, saying “We still haven’t figured it out.”

“Survival is the key word for us at present,” he said.

Beijing has vowed to take “all necessary measures” to respond to the latest restrictions, calling Washington’s actions an abuse of power and violation of market principals.

A statement posted by China’s Commerce Ministry said the regulations threatened the security of the “global industrial and supply chain,” according to the Associated Press.

“The U.S. uses state power, under the so-called excuse of national security, and abuses export control measures to continuously oppress and contain specific enterprises of other countries,” the statement said, adding China will “take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises.”

A delivery man hands over drinks near a Huawei retail store in Beijing on Monday, May 18, 2020. China's commerce ministry says it will take "all necessary measures" in response to new U.S. restrictions on Chinese tech giant Huawei's ability to use American technology, calling the measures an abuse of state power and a violation of market principles. (AP Photo/Ng Han Guan)

Tightening export controls has prompted Huawei to increase expenditures dramatically to diversify its supply chains. The company increased its R&D spend by 29.8% last year, while its inventory rose by 73.4%, according to figures provided by Huawei.

Scanlan said the company had ninety-one 5G commercial contracts signed as of February, with roughly 700,000 5G base stations in store globally.

“You know the U.S. always stood for trust and different collaboration and innovation. Now you are systematically going after a company because ... we are the leader in 5G,” Scanlan said. “We are going to evaluate and study exactly what the U.S. department has stated is going to become the new law. We will figure out and see how we play in accordance with that law. “

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita