Huawei Bypassing US Sanctions by Collaborating With Chinese Smartphone Partners

By Nicole Hao
Nicole Hao
Nicole Hao
Nicole Hao is a Washington-based reporter focused on China-related topics. Before joining the Epoch Media Group in July 2009, she worked as a global product manager for a railway business in Paris, France.
December 20, 2021 Updated: December 22, 2021

Chinese telecom firm Huawei has turned to partnerships with Chinese companies to bypass U.S. sanctions that have crippled Huawei’s smartphone business. 

Once briefly the top smartphone maker in the world, Huawei has been in survival mode since Washington slapped sanctions on the company more than two years ago. The Trump administration said the firm posed a national security threat due to its ties to the Chinese Communist Party. 

Its smartphone business took the biggest beating after then-President Donald Trump in 2020 barred its access to critical U.S.-origin technology—including key computer chips needed to power its devices. The company is now largely shut out of the global smartphone market, and its domestic business is hurting as well.

Eric Xu, Huawei’s rotating chairman, said in September that the firm’s smartphone revenue could drop as much as $40 billion—or about 80 percent—this year, with new growth streams unlikely to make up for this shortfall in the near future. 

To stave off this hemorrhaging, the firm is diversifying to other areas from smart mining to electric vehicles. But in a bid to salvage its smartphone business, it has also found ways to bypass U.S. sanctions, namely by licensing its handset designs to Chinese third parties to thereby gain access to critical U.S. chips.

Partnerships

In early November, Huawei unveiled its first 5G smartphone on its official website, a device branded under TD Tech Ltd., a Chinese telecom equipment maker, named TD Tech N8 Pro. The phone is essentially a copy of the Huawei Nova 8 Pro, which was launched last year. The only difference is that the TD Tech device supports 5G—something few Huawei smartphones offer as a result of U.S. sanctions.

The listing was pulled from Huawei’s website within a week as well as from its online stories on Chinese e-commerce sites, including JD.com, Alibaba.com, and Suning.com.

According to a Nov. 16 article by NetEast, a Chinese news portal, an unnamed TD Tech staff member confirmed that the company purchases hardware from Huawei and brands the phone under its own name. It is currently selling the smartphone to business customers, but will sell it directly to consumers on their JD.com story by the end of the year, the staff member added. 

TD Tech is also due to release another rebadged Huawei phone called TD Tech 5G M40, essentially Huawei’s Mate 40E, as well as a suite of other Huawei products from smartwatches to tablets, according to Chinese media reports. 

TD Tech, which has offices in Beijing, Shanghai, and Chengdu cities, is a wholly-owned subsidiary of TD Tech Holding Limited, a Hong Kong-registered company. TD Tech Holding was founded by Huawei and Nokia Siemens Networks in September 2003. As of 2010, Huawei held 49 percent of the company’s shares, while Nokia Siemens held the remaining 51 percent, according to a post on TD Tech’s website at the time. It is unclear whether this ownership structure has changed since then. 

TD Tech’s links to Huawei extend to personnel.

The director of TD Tech Holding is Eric Xu, Huawei’s rotating chairman, according to November reports from Chinese and Hong Kong media. He is also a member of the company’s board, the reports said. 

Meanwhile, TD Tech’s general manager and legal representative is Dong Biao, a veteran Huawei senior manager, according to Qichacha, a Chinese company database. 

Deng’s resume posted on the Huawei website shows he joined the company in 1996. Since then he’s headed a range of divisions from telecommunications software and core network business to quality control. It’s unclear if Deng still works at Huawei. 

Honor

In November 2020, Huawei sold its Honor budget smartphone business to a consortium led by a state-owned company in Shenzhen, a move quarantining the operation from U.S. sanctions. Unlike Huawei, Honor is able to buy high-end 5G chips from suppliers including U.S.-based Qualcomm and Taiwan-based MediaKit. 

Honor has since shot up to rank number three in China’s domestic smartphone market, with a 15 percent share in the third quarter of this year, according to counterpoint research. Its fortunes contrast with that of Huawei. The company, which at its peak held 46 percent of the market, accounted for only around 8 percent in the third quarter.

Huawei said at the time of the sale that it wouldn’t hold any shares or be involved in the management or decision-making of the new company, called Shenzhen Zhixinxin Information Technology. But the company’s board and senior management feature many former Huawei staff. 

According to Chinese media reports, Huawei moved managers from its other businesses to lead the new firm. 

Five of Zhixinxin’s six board members are veteran Huawei employees. The chair, Wan Biao, was previously a member of Huawei’s board and headed Huawei’s consumer business immediately before moving to the new company. Wan is experienced in building supply chains and joined the firm to build up this area, Chinese media reported. 

The other four Zhixinxin board members from Huawei are Zhao Ming, the former president of Huawei’s Honor business, Fang Fei, a former production line vice president, Li Shanlin, a former vice president of human resources, and Peng Qiu’en, a former chief financial officer. Zhao is also the CEO of the new company, according to Chinese media reports.

Yang Jian, a former director of Huawei’s retail business for the China region, also took the position of Honor’s retail manager, according to Chinese media. 

Huawei also moved over 6,000 employees from its smartphone business to Honor, Chinese media reports said. 

Mobile Carriers

Huawei has also collaborated with several Chinese mobile carriers to launch 5G smartphones, branded under the carrier. Some of these models contain 5G chips from Qualcomm and MediaKit, both banned from supplying to Huawei. 

China Telecom in July a 5G smartphone under its Maimang series, which used to be a collaboration between China Telecom and Huawei. But China Telecom said on Weibo, the country’s Twitter-like platform, the brand is run solely by the carrier, though it did not reveal its manufacturer. Though on webpages selling the phone list Huawei as the provider of after-sale service.

China Mobile in June launched a series of 5G smartphones under the NZONE brand. The models use 5G chips from Mediatek, and are designed and manufactured by Huawei, the company said at the time. Also in June, China Unicom launched a 5G phone under its U-Magic label, which shares similarities in design with Huawei’s Enjoy series. 

The Epoch Times has reached out to Huawei, TD Tech, Honor, China Telecom and China Unicom for comment.

Nicole Hao
Nicole Hao is a Washington-based reporter focused on China-related topics. Before joining the Epoch Media Group in July 2009, she worked as a global product manager for a railway business in Paris, France.