Telecoms equipment maker Huawei Technologies will have to source 4G chips elsewhere to make its smartphones because it can’t buy more processors in the United States.
The Biden administration has stopped approving licenses for US companies to ship items to Huawei for national security reasons, Reuters reported. US officials have told Qualcomm Inc and Intel Corp that they should cut sales to Shenzhen-based Huawei, Bloomberg reported.
The Chinese Foreign Ministry accused the United States of violating the principle of market economy and international trade rules and infringing the legitimate rights and interests of a Chinese company.
Some Chinese IT columnists have said that while Huawei can either use inventory or buy chips from Taiwan to keep production of its Mate50 and P60 smartphones going for the time being, it will eventually run out of chips.
But some commentators have argued that if Huawei were to end its 4G smartphone business, it wouldn’t suffer much as this segment has a slim margin. They said Huawei is focusing on 5G2B, which uses mature processors such as 28nm chips and above.
In May 2019, the US Department of Commerce listed Huawei and its 70 subsidiaries on its so-called Entity List for national security reasons. Huawei then started using stock chips as well as self-developed Kirin chipsets to maintain the release of its smartphone.
In September 2020, Taiwan’s TSMC ceased production of Kirin chips, triggering a countdown for the Shenzhen chip inventory of HiSilicon, Huawei’s wholly-owned fabless semiconductor company. At the same time, Intel obtained a license from the US government to sell some of its 4G chips to Huawei. Qualcomm received the same license in November 2020.
When Huawei launched its flagship P50 smartphone in 2021, the company downgraded it to 4G. Its previous flagship version, the P40, is a 5G phone.
This type of retrograde maneuver, however, has only limited effectiveness, as media reports show that the US government has already stopped licensing US companies to sell 4G, Wifi 6 and 7, artificial intelligence and high-performance computer chips to Huawei.
“China is gravely concerned by the news and we are following the latest developments closely,” Mao Ning, spokesperson for China’s Foreign Ministry, said on Tuesday. “China firmly opposes the unscrupulous and unwarranted suppression of Chinese companies by the United States by extending the concept of national security and abusing state power.”
Richard Yu, General Manager of Huawei Consumer Business Group, said in a Weibo post that “Huawei will not be afraid of challenges and will continue to invest in research and development, improve and drive the industry forward. “.
Yu said Huawei’s Mate50 smartphones have enhanced user experience by using ultra-durable Kunlun Glass, Beidou Satellite, XMAGE camera imaging technologies and HarmonyOS. He said it was not easy to realize all these innovative technologies.
If the United States has already stopped licensing American companies to sell 4G chips to Huawei, the company’s consumer business will take a hit, a Guangdong-based IT columnist wrote on Wednesday.
He said Huawei’s Mate50 has applied many innovative technologies and can maintain its leading status in the markets by using Qualcomm Snapdragon 765G processor, which is a 7nm chip. He said that with Qualcomm’s processor, Huawei could use Unisoc T820, a 6nm, but Unisoc still has to rely on Taiwan’s TSMC to produce it.
He said Huawei would have to find new ways to source 6nm chips in the long run because it couldn’t compete in mainstream markets with slower processors.
In 2021, Huawei saw its total revenue drop 28.6% to 636.8 billion yuan ($100 billion) from 2020. Revenue from its consumer business nearly halved to 243.4 billion yuan. Huawei Chief Financial Officer Meng Wanzhou said last March that the company’s smartphone and tablet revenue had been impacted by US sanctions.
The company said its net profit for 2021 rose 76% to 113.7 billion yuan due to improved profitability in its core businesses.
Last year, Huawei posted global revenue of 636.9 billion yuan, almost unchanged from 2021.
A commentary published by the Beijing Daily said on Wednesday that Huawei had managed to survive and maintain operations over the past three years despite US sanctions. The author said such a result could have angered the United States very much, so Washington tried to step up its actions.
Another writer said that while Huawei may not buy more 4G chips from US companies, the ongoing mass production of its new P60 and Mate X3 series is unlikely to be affected. He said Huawei could then buy 4G chips from Taiwan’s MediaTek, but needed to find new long-term sources.
Read: US sanctions bite as Huawei runs out of phone chipsets
Follow Jeff Pao on Twitter at @jeffpao3
