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Huawei Technologies Co. has quietly spent months rushing to stockpile critical radio chips ahead of the Trump administration’s sanctions, making sure it can continue to supply Chinese operators as part of their $ 170 billion deployment of 5G technology at least until 2021.
PartnerTaiwan Semiconductor Manufacturing Co. started increasing production of Huawei’s 7 nanometer in late 2019The Tiangang communication chips, the most crucial part of 5G base stations, said people familiar with the matter. The Taiwanese contract maker ultimately shipped more than 2 million units at Huawei’s request before sanctions ended last month, one of the people said, asking not to be identified to discuss internal matters. The sheer scale of orders at one point made TSMC executives question whether they had underestimated global demand, the person said.
Huawei’s breakthrough in securing essential supplies underscores the mixed success of a US campaign against China’s largest tech company since 2018. Citing national security concerns, theThe White House began by trying to curb the sale of US software and circuitry to Huawei before ultimately imposing drastic restrictions on its suppliers, including TSMC. It’s this last burst, athe ban on the sale of off-the-shelf, off-the-shelf semiconductors, which ultimately capped Huawei’s smartphone business and forced it to cut production of devices, people said. Representatives for Huawei and TSMC declined to comment.
But the Tiangang chip, designed in-house by a secret divisionHiSilicon has been shown to be essential in keeping 5G activity afloat. Huawei had relied on TSMC in the months before Washington closed this loophole and it can now continue to provideChina Mobile Ltd.,China Telecom Corp. and China Unicom – the trio of operators now aggressively building a nationwide 5G network that Beijing sees as essential to boosting the world’s second-largest economy. A representative for China Mobile declined to comment for this story. A spokesperson for China Telecom said the company would communicate any impact of the restrictions on Huawei, but declined to comment on the chip sourcing discussions. Unicom representatives did not respond to requests for comment.
“The United States has demonstrated an intense willingness to restrict Huawei’s ability to offer 5G technologies. The US government’s claims on extraterritoriality have made it more difficult for Huawei to maintain access to critical components, ”said Dan Wang, analyst at Gavekal Dragonomics. In 2012, only one-third of Huawei’s revenue was generated in China, which was close to two-thirds last year. “Huawei is more dependent on domestic sales due to both US pressure and its strong hold on the fast growing Chinese market.”
How Huawei landed at the center of the global tech struggle: QuickTake
Huawei has told Chinese wireless carriers that its component inventory is fully capable of supporting base station construction in 2021 and beyond despite U.S. sanctions, according to people familiar with the matter. The company started shipping 5G base stationswithout US components since at least the end of last year.
It is not known how long these stocks can last. Rotary Chairman Guo Ping said last month that the company has “sufficient inventory ”for its communications equipment business. But he’s looking for supplies for the smartphone unit, which on Thursday potentially unveiled itslast major phone before a shortage of components forces to rethink the range of devices. “We are suffering from the US government’s third round ban. This unfair ban, ”said head of consumer companies Richard Yu in a live broadcast.
Even assuming that Huawei has cached enough silicon for the needs of Chinese carrier customers, it may have had to make performance sacrifices due to shortages of second tier components. Resorting to less sophisticated local alternatives can hamper areas such as the rate of energy use, the people said. To remedy this, Huawei pledged to compensate carriers for a portion of these additional electricity costs, they said. A typical 5G base station consumes around four times the power of a standard 4G model.
Read more:Avoided by US, Huawei wins $ 170 billion 5G race in China
What Bloomberg Intelligence says
The gains made by Chinese technology leaders may be larger than previous generations for smartphones, cellular base stations, servers and chipsets, but less relevant amid the trade dispute. Huawei and its peers face similar circumstances if the United States restricts its use of intellectual property, but can still expand into China through vertical integration. The country’s technological trajectory could then move away from global trends.
– Anand Srinivasan and Charles Shum, analysts
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As Washington gains traction in its efforts to pressure its allies from Australia to the UK to avoid Huawei equipment, the main source of income for the Chinese company remains its own home country. Huawei has so far wonmore than half of public carrier’s 5G orders this year, securing contracts worth billions of dollars, Bloomberg News reported earlier.
Chinese carriers have built690,000 5G base stations since the technology was released about a year ago, according to the Ministry of Industry and Information Technology. National operators have yet to announce plans to purchase base stations for 2021, but ministry officials said construction of the country’s network will continue over the next three years.
– With the help of Debby Wu, Yuan Gao and Shirley Zhao
(Updates with comments from the Chief Consumer of the Seventh Paragraph)