INTC Intel Corporation

By Stu Woo 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 13, 2019).

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.

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 said in a May 2017 interview.

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

(END) Dow Jones Newswires

June 13, 2019 02:47 ET (06:47 GMT)

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