No surprise, Huawei cuts back in US

Huawei Technologies’ US research arm, Futurewei Technologies, has decided to cut back, with 70% of the division’s 850 staff being laid off. The news comes just as it appears that Huawei is about to be given a reprievefrom a blacklist by the US government, with negotiations between the China and the US set to resume in Beijing. So what is going on?

On the face of it, the move is understandable from an operations perspective. Futurewei has played a key role in filing thousands of patents for Huawei. However, its work has been at a standstill since May 17, when its Shenzhen-based parent was placed on the Entity List. Apart from layoffs, Huawei is also terminating any open source projects, projects related to near-term Huawei products, and any R&Din critical technology, the company has said.

Founder Ren Zhengfei said that Huawei had planned to invest US$600 million this year in R&D through the US subsidiary, but the blacklist had blocked any results from research being transferred to Huawei and it forbade any contact with Huawei personnel. 

Futurewei was established by Huawei in Texas in 2001. Last year, Huawei invested US$510 million in the company’s R&D. Huawei said in a statement to the media that the decision has been a difficult one and the company would strictly follow the US law to provide the necessary remunerations and benefit to those who were let go.

Are we the only ones wondering why Huawei couldn’t just wait a bit longer to see which way the political winds in the US might blow? It might be that the answer is that Huawei has its sights set on the longer term. It doesn’t take a political genius at the moment to see that US-China relations are deteriorating, despite any progress that may be made in current trade talks. In the circumstances, it would be better to close up shop and see if Huawei can lure R&D talent back home to Shenzhen. 

Which it is already doing, announcing this week that it would pay a starting salary to PhDsof US$300,000. Keeping in mind that Shenzhen now offers foreigners tax-equalization subsidiesin line with Hong Kong’s 15% income-tax rate, that has got to be looking extremely inviting to any of those PhDs being laid off at Futurewei. 

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