Huawei Technologies Co. is planning extensive layoffs at its U.S. operations, according to people familiar with the matter, as the Chinese technology giant continues to struggle with its American blacklisting.
The layoffs are expected to affect workers at Huawei’s U.S.-based research and development subsidiary, Futurewei Technologies, according to these people. The unit employs about 850 people in research labs across the U.S., including in Texas, California and Washington state.
Huawei declined to comment. The exact number of layoffs couldn’t be determined, but one of the people said they were expected to be in the hundreds. Some of Huawei’s Chinese employees in the U.S. were being given the option of returning home and staying with the company, another person said.
Futurewei employees have faced restrictions communicating with colleagues in Huawei’s home offices in China following the May 16 Commerce Department decision to put Huawei on its so-called entity list, which blocked companies from supplying U.S.-sourced technology to Huawei without a license, according to these people.
Several employees have already been notified of their dismissal, while additional planned cuts could be announced soon, these people said.
The blacklisting has limited Huawei’s ability to buy critical U.S. components and software for its products, which include its smartphones and cellular base stations that are popular outside the U.S. Huawei bought $11 billion worth of American technology last year.
A reprieve for Huawei appeared to be in sight after President Trump said at the Group of 20 summit at Osaka, Japan, last month that he would allow some tech exports to the company to resume. Beijing sees an easing of restrictions on Huawei as a precondition for any trade deal with Washington.
On Tuesday, Commerce Secretary Wilbur Ross said the U.S. would begin granting export licenses to Huawei suppliers whose sales to the Chinese company don’t put national security at risk. Meanwhile, Treasury Secretary Steven Mnuchin has been urging U.S. suppliers to apply for licenses.
The U.S. says Huawei gear poses a security risk because the giant telecommunications company has no choice but to comply with demands from China’s authoritarian government to conduct cyber espionage on its behalf. Huawei says it is an independent company with no government ties and has challenged U.S. officials to provide evidence of espionage.
Huawei is the world’s largest maker of telecommunications equipment and the No. 2 vendor of smartphones, ahead of
and behind only
But despite its dominant position in many markets, the company is effectively blocked from selling its gear to major U.S. carriers following a 2012 Congressional report that said it could be a security risk. Huawei has denied this.
In the U.S., Huawei’s roughly 1,500 employees mainly handle equipment sales to rural wireless carriers across the country, while others do research for an array of technologies at Futurewei. Huawei employs more than 180,000 people world-wide.
But the Commerce Department’s May 16 entity listing complicated Futurewei’s ability to continue working with its home offices in China, because Futurewei’s R&D efforts could amount to U.S.-sourced technology under Huawei’s entity listing, these people said.
Under the listing’s rules, “any unlicensed transfer of any technology of any sort by anyone from the U.S. to Huawei is prohibited,” said Kevin Wolf, a partner at the law firm Akin Gump who was a Commerce Department official during the Obama administration.
In addition to the U.S. blacklisting, Huawei is also contesting a pair of indictments by the U.S. on charges related to intellectual-property theft and violations of U.S. sanctions on Iran. Meanwhile, U.S. officials have been lobbying allies around the world to block Huawei from participating in their 5G network rollouts. That effort has had mixed success.
Analysts say the entity listing poses the most serious threat to Huawei given its reliance on American chips and other technology. Huawei founder Ren Zhengfei said last month that the measure would cost Huawei $30 billion in lost revenue this year and next. And the company’s international smartphone sales fell 40% in the month after the blacklisting was announced, though the decline has since moderated. Huawei had more than $100 billion in revenue last year, according to its annual report.
On Friday, Huawei Chairman Howard Liang said at a news conference at the company’s Shenzhen headquarters that the company has yet to see any benefit from Mr. Trump’s pledge to roll back export restrictions and said the Chinese firm should be removed from the entity list altogether.
Huawei smartphones run on Google’s Android operating system and among other restrictions, the entity listing prevents Google from licensing the software on future Huawei phone models. Though Huawei is working on its own replacement operating system, known as Hongmeng, Mr. Ren said in a recent interview with a French newspaper that it was originally designed for telecommunication networks and said “we don’t have a clear plan yet” for developing a software ecosystem around the operating system.
—Asa Fitch and Eli Binder contributed to this article.
Write to Dan Strumpf at firstname.lastname@example.org
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8