6/12/2019 Huawei Cancels Launch of New Laptop as U.S.

Restrictions Sting - WSJ

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TECH

Huawei Cancels Launch of New Laptop as

U.S. Restrictions Sting
Chinese tech company also pauses production at its personal-computer business

Huawei’s Richard Yu presents a Huawei MateBook X Pro laptop at the Mobile World Congress in Barcelona on Feb. 24. PHOTO:
MANU FERNANDEZ ASSOCIATED PRESS

By Stu Woo
Updated June 12, 2019 7 11 a.m. ET

HONG KONG—China’s Huawei Technologies Co. has canceled the launch of a new laptop and
paused production at its personal-computer business because of restrictions on buying U.S.
components, according to a person familiar with the matter.

The moves mark Huawei’s first tangible setback from the U.S. Commerce Department’s move to
ban American companies from selling supplies to the Chinese company, while also
demonstrating the importance of American businesses in the global personal-computing
supply chain.

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6/12/2019 Huawei Cancels Launch of New Laptop as U.S. Restrictions Sting - WSJ

Huawei, the world’s No. 2 smartphone brand, has a relatively small and new personal-computer
business. It makes three laptops, the first of which made its debut in 2016. It relies on Microsoft
Corp.’s Windows operating system and Intel Corp.’s chips.

The head of Huawei’s consumer business, Richard Yu, told CNBC on Wednesday that the
Commerce Department caused the company to cancel its new laptop launch, adding that it may
never release that product if it remains on the Commerce Department’s blacklist. The news site
the Information had reported the cancellation earlier.

The Commerce Department banned American companies from selling components to Huawei
over national-security concerns, though it has granted suppliers 90-day exemptions. U.S.
officials say Beijing could order Huawei to tap into the hardware it makes to spy or disable
communications. Huawei says those accusations are groundless.

The U.S. offensive is focused on Huawei’s core business, which is making cellular-tower
hardware, internet routers and other telecom equipment. Washington has banned such
electronics in the U.S. and is campaigning for allied countries to blacklist them too.

Huawei also has an ambitious consumer division, which accounted for 45% of its revenue in
2018. Its executives had previously said they aimed to eclipse Samsung Electronics Co. as the
world’s top smartphone brand. But the Commerce Department’s blacklisting could stop Huawei
from using some versions of Android, the world’s dominant operating system, and other
software from Alphabet Inc.’s Google on its phones. That could affect sales in Europe, where
Huawei is popular, but where people also rely on Google apps, said IDC analyst Francisco
Jeromino.

“If we had not encountered anything unexpected, we would have become No. 1 by the fourth
quarter” of this year, said Shao Yang, chief strategy officer of Huawei’s consumer business, at a
conference on Tuesday. “We have to wait a bit longer to achieve that.”

The company is trying to make smartphones without American components. It recently

trademarked its own operating system, called Hongmeng, to replace Android, and Mr. Yu, the
Huawei executive, has said it could be ready for use in China by the end of the year. Huawei has
also invested heavily in a subsidiary that makes smartphone chips.

Compared with its smartphone business, Huawei has approached the laptop industry with a
beginner’s restraint. “Today we are not targeting, top one, top two, top three like that, because
we are a newcomer to this industry,” Mr. Yu, the Huawei executive, said in a May 2017
interview.

Write to Stu Woo at Stu.Woo@wsj.com

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