Figure-Technicians test equipment at a 5G base station in Lanzhou, China.

Netease Technology News July 1, according to foreign media reports, the United States is restricting US companies to help China promote the construction of 5G networks, but some Japanese companies are filling vacancies, supplying Huawei with 5G equipment parts and profiting from it.

China has spent US$150 billion to promote the deployment of 5G network services nationwide, and plans to build 500,000 5G base stations by the end of this year. These services usually use equipment from Huawei.

Tsuneo Murata, chairman of Murata, an electronic component manufacturer, said, "The Chinese government is actively promoting the popularization of 5G. For our parts business, this is a very marketable market."

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

With the United States and China competing for technological leadership, and the US government considering intervening in the private sector to restrict Huawei, Japan is trying to supply parts and materials to these two countries at the same time, while trying to avoid political landmines. The question is how long can Japan, Germany, South Korea, and other U.S. allied companies supply Huawei.

Wendy Cutler, a former acting US trade representative and deputy director of the Asia Society’s Policy Institute, said, “When the United States first implemented export controls, its regulations mainly affected American companies. But in the past year Here, the United States began to realize that companies such as Huawei still have access to all technologies subject to export controls.

She said that "export control actions" will soon be transmitted to American allies. "If you thoroughly study the announcement of the US government, you will know its next move."

In May this year, the Trump administration stated that it would implement export restrictions to cut off Huawei’s contact with overseas suppliers, mainly targeting semiconductor products sold by TSMC to Hisilicon, a subsidiary of Huawei.

At present, for Japanese companies affected by the new coronavirus epidemic, China is still one of the few markets that can bring considerable benefits. Thanks to the strong demand for 5G network-related products in China and Greater Asia, Anritsu's operating profit in the most recent quarter increased by 75% compared with the same period last year. The company's machines are used to measure the normal operation of 5G equipment such as base stations.

Anshi Senior Vice President Takeshi Shima pointed out, "As Chinese smartphone manufacturers continue to expand internationally and push their products to more and more overseas market users, China's demand for our products has been increasing."

Although the Chinese government has been encouraging support for domestic products to strengthen domestic manufacturing, many Japanese parts suppliers have penetrated into China's supply chain and have been able to make money steadily over the years.

Jeffrey analyst Sho Fukuhara said that Chinese companies still rely on Japanese suppliers, and these suppliers also have operations in the United States. He said, "The United States does not want Chinese goods, and China does not want American goods, which allows Japan to benefit from these two big markets."

Murata Corporation of Japan is committed to producing a small component called a multilayer ceramic capacitor, which helps control current and stores energy for semiconductors. This part is widely used in various products from smart phones to automobiles. According to capacitor manufacturers, a single 5G base station usually requires about 15,000 such components.

Murata said that benefiting from the adoption of 5G equipment, the company's capacitor orders in the first quarter of this year increased by nearly 50% year-on-year.

Many of the less important components flow to Huawei's smartphones and 5G devices. Huawei Chairman Liang Hua said in November last year that it is estimated that the company will purchase approximately USD 10 billion of parts from Japan in 2019. He said that through such purchases, "At present we can deliver core products to our customers in a timely manner, without relying on US parts."

Policy makers in Washington are concerned that if China takes the lead in building reliable large-scale 5G networks, it may expect to export more equipment to other countries in the future, and these countries may become dependent on China. China is also expected to take a leading position in new technologies supported by fast wireless networks, such as driverless cars.

A congressional authorization report released by the new US Security Center earlier this year stated that the United States should expand sales restrictions on Huawei’s 5G system to include sales from foreign companies. "Cut off Huawei's ability to purchase parts from the international market, not just prevent it from purchasing US parts to manufacture 5G network equipment, which will bring huge operational challenges to Huawei's 5G network construction.

Martin Chorzempa, a researcher at the Peterson Institute for International Economics, said that one way the United States is considering is to make it harder for companies outside the United States that supply Huawei to use American parts.

He said that the risk of doing so is the "de-Americanization" of the global supply chain. In this case, foreign companies will completely evade US technology to avoid being affected by US export controls.

Chelze Pippa said this is why the Trump-related restrictions announced by the Trump administration in May made changes only to chips. He pointed out that semiconductors are considered to be able to hit Huawei's key points, but for now, other parts suppliers are not subject to those regulations, so they can continue to supply Huawei.

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

At the same time, companies are preparing for stricter regulation. Anri’s Takeshi Shima said he is trying to figure out how much the company will be affected if new regulations are imposed in the United States. "Japanese companies will have to study those regulations carefully." (Lebang)

Source: NetEase Technology Report