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Sony and Kioxia seek U.S. approval to bypass Huawei ban

  • October 4, 2020
  • , Nikkei Asia , 2:01 a.m.
  • English Press

TOKYO — Japan’s Sony and memory chipmaker Kioxia have applied for U.S. approval to restart supplies of components to China’s Huawei Technologies, now under a de facto ban on accessing equipment made with American tech, Nikkei has learned.


There was no indication as of Saturday that their applications had been approved. The Japanese companies join South Korea’s Samsung Electronics and SK Hynix in seeking licenses from the U.S. Department of Commerce to sell to Huawei, one of the world’s top makers of smartphones and telecommunication infrastructure.


Without Commerce Department approval, Sony and Kioxia face a risk to their earnings. The two companies supply components for products, such as 5G devices, that have become caught up in the high-tech race between the U.S. and China.


Sony ranks as the world’s top supplier by market share of image sensors for mobile phones. Huawei is estimated to account for about a fifth of the Japanese company’s roughly 1 trillion yen ($9.5 billion) in image sensor sales, making it the second-biggest buyer, after Apple.


Sony in August forecast a 45% decline to 130 billion yen in the sensor segment’s operating profit for the year ending March 2021. The company attributed this slump mainly to a drop in smartphone sales during the coronavirus pandemic, but analysts say the image sensor earnings outlook could see further downgrades as a result of the escalating U.S. crackdown on Huawei.


Kioxia, a spinoff of Toshiba formerly known as Toshiba Memory, also stands to take a hit from sanctions on Huawei. Smartphone memory chips provide about 40% of the company’s sales, with Huawei accounting for several percent of the total.


U.S.-China tensions were one factor in parent company Kioxia Holdings’ recent decision to delay a Tokyo initial public offering that had been set for Oct. 6.


Intel is among a few U.S. chipmakers that have secured licenses to supply Huawei with components for personal computers. But U.S. restrictions on Huawei’s access to technology for telecommunications — an area where Washington has identified China’s rapid advances as a threat — are expected to become tighter.


Japanese, Taiwanese and South Korean companies together supply 2.8 trillion yen ($26.4 billion) worth of parts to Huawei yearly, estimates Akira Minamikawa, a director at U.K. research firm Omdia. That business would be left in limbo if Huawei’s production is disrupted.


Huawei’s procurement from Japanese suppliers grew by more than 50% last year, Jeff Wang, chairman of the Tokyo-based subsidiary Huawei Japan, said in an online presentation in August. Wang credited the gain to Japan’s “extremely important role in global supply chains.”

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