The Huawei saga and its impact on southern China's economy

The Huawei saga and its impact on southern China's economy

Huawei phone shops and advertising in Shenzhen
Huawei phone shops and advertising in Shenzhen. (Photo: Olivia Siong)

ZHUHAI: Just before noon, workers at the Flex factory in southern China’s Zhuhai city streamed out to eateries across the road for lunch. 

It has only been a few days since production resumed at the end of May. Many workers had been told to take up to a week off work as the company evaluated regulations since Washington placed Huawei on a trade blacklist last month.

Flex, an American electronics manufacturer, is Huawei’s biggest smartphone assembler. The factory in Zhuhai reportedly employs about 40,000 people.

manufacturing china
Production lines at Huawei manufacturing centre in Dongguan. (Photo: Olivia Siong)

“They didn’t give us a reason but we kind of know,” said a worker who only wanted to be identified as Mr Liu. He has worked on a production line making Huawei products for about a year.

“Having worked for a long period of time, I also wanted to take a break,” added Mr Liu, who said he received the notification of the work suspension via Chinese messaging app WeChat.

“But of course, I would be a bit worried because this is still a job. To be suddenly told to take a break, I would more or less be concerned.”

READ: White House seeks delay on Huawei ban for contractors

Flex is one of the casualties in the increasingly bruising spat between China and the US, as Huawei became a major flashpoint in the trade war.

Photos circulating on Chinese social media recently showed trucks lining up outside the Flex factory. Some reports suggested that the trucks were sent by Huawei to take away raw material, although this was not verified.

flex factory china
Flex is one of the casualties in the increasingly bruising spat between China and the US. (Photo: Sun Zhanning)

In a statement to CNA, Flex said it has determined that most of the products it assembles for Huawei in China are not affected by US restrictions.

Since then, shipment of 90 per cent of these items has resumed.

close up of chinese worker in factory
A worker at the production line at Huawei manufacturing centre in Dongguan. (Photo: Olivia Siong)

Workers, however, were mixed about their future prospects.

“I will listen to what the company has planned. If there is work, we will work. If we are asked to take a break, we will take a break. There’s no point thinking too much,” said Mr Liu.

Another factory worker, 21-year-old Xu Wenfa, was more concerned.

“I’m a little bit worried … if there are fewer orders compared to the past, this means there is less work for us,” he said.

READ: Commentary: It's the US that has miscalculated in this trade war

At Huawei’s headquarters in neighbouring Shenzhen, the company was eager to show that it is business as usual.

On a tour organised for journalists, we were shown the company’s advancements in 5G technology and taken to its sprawling new European-inspired campus in Dongguan – China’s factory heartland.

They told us that up to 5,000 more workers are expected to move to the new facility, on top of the 20,000 already working there.

Reporters were also taken to Huawei’s manufacturing centre, although we were not allowed to film inside and could only take pictures.

What we saw though was a hive of activity - thousands of mobile phones, laptops and other wireless equipment are made there every day.

When asked if operations have been affected by the latest US ban, we were told that things were proceeding as normal.

Huawei's european inspired campus in Dongguan
Huawei's European-inspired campus in Dongguan. (Photo: Olivia Siong)

Huawei claimed that it will survive even without US supplies.

The Chinese tech giant can be self-reliant, it said, with its chip making arm prepared for such an extreme scenario.

But analysts said this could prove tricky – as it would take time for it to be on par with US suppliers.

READ: China to blacklist 'unreliable' foreign firms amid US trade war

READ: Analysis: Huawei badly needs the Chinese government, tech rivals to back its OS plans

This could not only have long term consequences for the company, but for southern China’s technological powerhouse Shenzhen – where the company is based.

“It may affect its profits, and, in two years if the US sanctions continue, then this could affect the survivability of Huawei,” said independent Shenzhen-based economist Song Qinghui.

“Huawei alone is the biggest tax revenue contributor among companies in Shenzhen and provides jobs for over a hundred thousand people. If Huawei is gone, the employment of these people will be a big problem. Shenzhen will also lose a big portion of its GDP.”

Besides Huawei, Shenzhen is home to some of China's biggest technology firms - including WeChat operator Tencent, drone-maker DJI and electric car maker BYD. 

But with the US also looking into the potential threat of Chinese drones and fears that more technology companies will be subject to sanctions, Mr Song said these are likely to weigh heavily on investors’ confidence and could eventually make a dent on Shenzhen’s brand as a high-tech innovation powerhouse.

Source: CNA/aa(gs)

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