Huawei has spent billions on a two-year stockpile of American chips

What just happened? Huawei has revealed they have spent over $23 billion on stockpiles of “essential components” as a countermeasure to US trade sanctions. The stockpile will last at least eighteen months, and if necessary, could be stretched a further six months. But even with enough raw supplies, Huawei may not be able to weather the storm.

According to industry sources who spoke with the Nikkei Asian Review, Huawei began stockpiling towards the end of 2018. At the time they said they were “shocked or sometimes amused” by the “ungrounded and senseless” allegations leveled against them. Now they’re publicly in panic mode, and justifiably enough as Huawei isn’t allowed to sell to American companies or buy software or hardware designed by them. Thus far the ban has manifested at the consumer level with the restriction (or complete absence) of Android software and other Google services on Huawei smartphones.

However, Huawei sells more than smartphones and it’s their server and networking infrastructure that stands to suffer the most. A big portion of the stockpiled chips are Intel and AMD server processors, and FPGAs from Xilinx. Unfortunately for Huawei, much of the stockpile is probably already out of date. Server processors recently doubled in core count, and PCIe 4.0 is steadily being rolled out. The situation is worse with FPGAs, though: these are extremely specialized processors that are often customized to the client’s needs, an opportunity Huawei has now lost.

Huawei has spent billions on a two-year stockpile of American chips 1

But that’s not all. Huawei hasn’t been able to buy much of its stockpile direct, instead buying from retailers and other third-parties which has translated in a price increase and no support. They won’t be able to problem-solve effectively, get refunded on defective hardware, or get software or infrastructure updates.

As a necessary remedy to US’ restrictions, Huawei has renewed its focus on developing its own hardware. Subsidiary HiSilicon is working on developing CPUs, GPUs, FPGAs, modems, and dozens of other specialized chips, but it’s easy to assume those won’t be ready as drop-in replacements in the short term, otherwise they wouldn’t be stockpiling in the first place.

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