American contract electronics manufacturer Flex—earlier called Flextronics—has stopped shipments to smartphone and telecom equipment brand Huawei to comply with the US administration’s decision to put the company on its trade blacklist.
Flex, which has three manufacturing facilities in India, began making Huawei smartphones at its plant in Sriperumbudur, near Chennai, in September 2016. Besides Huawei phones, Flex also makes smartphones for Lenovo, including those under the Motorola brand, from the Chennai plant. The ban will also affect India shipments.
“We are continuing to evaluate the Entity List regulatory amendment issued relating to Huawei and will ensure that Flex remains in compliance with the US and all other applicable trade laws,” Brian Kemp, a spokesperson for Flex, told ET. “While we’re reviewing the details of the order and its implications, we have stopped shipments globally to Huawei and its affiliates until further notice.”
Kemp did not disclose additional details, citing confidentiality with Huawei.
The US has been probing Huawei for alleged violation of sanctions against Iran. It has also added it to a list of companies considered a threat to national security. Huawei has denied any wrongdoing.
However, after the blacklisting, the US allowed a 90-day reprieve that enabled, among other things, engagements with Huawei on support to the existing network, equipment and handsets, 5G developmental work, and disclosures on cyber-security vulnerabilities.
Huawei is among a clutch of Chinese brands that were able to buck the trend in a global milieu of shrinking smartphone sales, according to analysts.
Counterpoint Research said Huawei is the seventh largest smartphone brand sold in India with a 3% market share and its ban will have an impact on its users in the country.
“Close to 88% of their phones are sold on Flipkart and Amazon. So Huawei will have to deal with the question of whether they should stop selling on these platforms – If someone buys a Honor and tries to add a Google account, they most probably won’t be able to activate it: so it remains to be seen how Huawei and channel partners plan to tackle this without hurting the brand,” Neil Shah, research director of Counterpoint, said.
Huawei India said on its Twitter handle that existing users of its products will not be affected and that it is an important partner in helping the open-source Android platform develop and grow.
“Huawei will continue developing an Android ecosystem that benefits users and the industry. Further, Huawei and Honor devices will continue to get security updates and sales services. We are covering all the stock which has been sold and in-stock globally,” Huawei India said on its microblogging platform.
ET’s email to Huawei seeking a comment on the matter remained unanswered till as of press time.
Counterpoint Research said Huawei overtook Apple after its sales number jumped 50% year-on-year to 59.1 million units in the first quarter of 2019, a period that saw 5% decline in global shipments and was the sixth consecutive quarter of downtrend for smartphones.
Huawei’s slew of new features like reverse wireless charges, onboard AI, advanced camera and a dual-brand strategy with Honor has helped grab market-share among the youth in China, said Counterpoint.
In its annual report filed with the Securities and Exchanges Commission on Tuesday, Flex said a majority of its business pertained to electronics original equipment manufacturers, though it has diversified into newer industries. While its 2018 report listed Huawei as a “key customer” under the communications and enterprise compute markets, the 2019 report did not feature the Chinese company.