U.S. companies pull out of Japanese companies to fill vacancies, supply 5G parts to Huawei

July 1 (UPI) — The U.S. is restricting U.S. companies to help China push ahead with 5G networks, but some Japanese companies are filling the gap and supplying Huawei with 5G equipment parts and profiting from it, according tomedia reports. China is spending $150 billion to promote 5G network services nationwide, with plans to build 500,000 5G base stations by the end of this year. These services typically use devices from Huawei.

U.S. companies pull out of Japanese companies to fill vacancies, supply 5G parts to Huawei

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“The Chinese government is actively promoting the popularity of 5G, ” said Tsuneo Murata, chairman of Murata, an electroniccomponents maker. This is a very marketable market for our parts business. “

As most Japanese consumer electronics brands have gone into decline, supplying parts and materials to global technology companies has become a very important business in the country.

Japan is trying to supply parts and materials to both countries while trying to avoid political mines in the context of u.S. and Chinese competition for leadership in technology and Washington’s consideration of meddling in private sector restrictions on Huawei. The question is how long companies from other U.S. allies, such as Japan and Germany and South Korea, can supply Huawei.

“When the U.S. first implemented export controls, its rules primarily affected U.S. companies,” said Wendy Cutler, a former acting U.S. trade representative and deputy director of the Asia Society’s Institute of Policy Studies. But over the past year, the U.S. has come to realize that companies like Huawei still have access to all export-controlled technologies.

She said the “export control action” would soon be transmitted to America’s allies. “If you look at the U.S. government’s announcement thoroughly, you’ll know what’s next.” “

In May, the Trump administration said it would impose export restrictions to cut off Huawei’s ties with overseas suppliers, mainly for semiconductor products sold by TSMC to Hess Semiconductor, a subsidiary of Huawei.

At present, For Japanese companies affected by the outbreak of the new crown virus, China remains one of the few markets that can bring significant returns. Japan’s Anritsu’s operating profit rose 75 per cent in the most recent quarter from a year earlier, helped by strong demand for 5G network-related products in China and Asia. The company’s machines are used to measure the normal operation of 5G equipment such as base stations.

“As Chinese smartphone makers continue to expand internationally and push their products to more and more overseas market users, China’s demand for our products has been growing,” said Takeshi Shima, senior vice president of Aeringer. “

Although beijing has been encouraging support for chinese goods to strengthen domestic manufacturing, many Japanese parts suppliers have infiltrated China’s supply chains over the years and are able to make steady money.

Jeffery analyst Sho Fukuhara says Chinese companies still rely on Japanese suppliers, which also have operations in the U.S. “The U.S. doesn’t want Chinese goods, and China doesn’t want American goods, which allows Japan to benefit from these two big markets, ” he said. “

Murata is working on a small component called multilayer ceramic capacitors that helps control current and storeenergy for semiconductors. The component is widely used in a wide range of products, from smartphones to automobiles. According to capacitor manufacturers, a single 5G base station typically requires about 15,000 such components.

Murata said orders for capacitors in the first quarter of this year rose nearly 50 percent year-on-year, thanks to the adoption of 5G equipment.

Many of those less impressive components have gone to Huawei’s smartphones and 5G devices. Liang Hua, Huawei’s chairman, said in November that the company was expected to buy about $10 billion in spare parts from Japan in 2019. With such purchases, he says, “we can now deliver core products to our customers in a timely manner, without relying on Parts in the United States.” “

Policymakers in Washington worry that if China leads the way in building a reliable, large 5G network, it could export more equipment to other countries in the future, which could become dependent on China. China is also on track to take the lead in new technologies such as driverless cars, supported by fast wireless speeds.

A congressional authorization report released earlier this year by the Center for the New American Security said the U.S. should expand restrictions on sales to China for 5G systems to include sales of foreign companies. “Cutting off Huawei’s ability to purchase components from the international market, rather than just preventing it from purchasing U.S. components to manufacture 5G network equipment, will pose significant operational challenges for Huawei’s 5G network construction.”

Martin Chorzempa, a researcher at the Peterson Institute for International Economics, said one approach the U.S. is considering is to make it harder for u.S. companies supplying Huawei to use U.S. components.

The risk, he said, is the “de-Americanization” of global supply chains, in which foreign companies would completely circumvent U.S. technology from U.S. export controls.

That’s why the restrictions announced by the Trump administration in May related to Huawei only address chip changes, Mr. Cherzpipa said. He noted that semiconductors are considered capable of hitting Huawei directly, but for now, other parts suppliers are not subject to those rules and are therefore able to continue supplying Huawei.

Panasonic is one of them. The company is expanding its plant in Guangzhou, China, which produces circuit board materials for equipment such as 5G routers.

At the same time, companies are preparing for tighter regulation. Takeshi Shima of Amri says he’s trying to figure out how much the company will be affected if the U.S. enacts new restrictions. “Japanese companies will have to look at the rules carefully. “