Western Digital today announced that it's severing ties with Huawei following the company's blacklisting by the U.S. Department of Commerce, according to Nikkei, which reported that the storage company might reverse that decision if it's given the go-ahead from the U.S. government.
Losing access to Western Digital as a supplier will make it even harder for Huawei to manufacture its smartphones. The company's said to have stockpiled enough components to last it between three months and a full year without needing to restock, but eventually that time will pass. Huawei reportedly had to delay laptop development and manufacturing; having to do the same for smartphones could be a disaster.
Huawei was blacklisted in May, and even though many companies announced their intent to abide by U.S. policies soon after that announcement, not all of have figured out how they plan to move forward. Some received a temporary license to continue working with Huawei until August 18, and if relations between the U.S. and China improve before then, Huawei might be whitelisted once more.
U.S. companies also have the option of applying for a special license to continue working with Huawei. Nikkei reported that Western Digital is weighing that option, quoting chief executive Steve Milligan as saying the storage company is "working with the U.S. government at various different levels" and that it might apply for a special license from the U.S. Bureau of Industry and Security to continue supplying Huawei despite the ban.
It's not an easy situation for companies to navigate. Failing to comply with U.S. laws could lead to fines and other punishments. Severing ties with Huawei right away only to have the company whitelisted if the U.S. and China settle their differences might cost U.S. companies a large customer. Western Digital appears to be trying to have it both ways by abiding by the ban while making it abundantly clear that it would really rather not.
The desire to play it safe doesn't appear to be strictly financial. Milligan told Nikkei that Huawei makes up less than 10% of Western Digital's revenues. But the companies did just announce (opens in new tab) a Strategic Cooperation Agreement in April to "agree to a common goal of market success through the continuation of their relationship in the areas of HDD, SSD and NAND flash storage technology." That could make a clean break kind of awkward.
Either way, here's another entry on the list of companies that plan to sever ties with Huawei. The list already included Google, the U.S. semiconductor industry, Arm and Tokyo Electron. We suspect the list will continue to grow as the August 18 deadline approaches. At this rate, no matter what Huawei claims about its hardware stockpile or ability to make its own operating system, running its business will get harder.