Huawei is running out of stock of smartphone chips due to US sanctions, and the company may have limited options to secure supply in the future.
The lack of access to smartphone chips threatens Huawei’s newly acquired position as the world’s No. 1 smartphone maker by shipments.
Its inability to obtain smartphone chips also threatens to wipe out billions of dollars from sales of the Chinese tech giant.
One analyst said For a network (CNBC): Huawei may survive the year 2020, but the next two years could be very difficult.
In May, the United States introduced a rule requiring foreign manufacturers that use US chipmaking equipment to obtain a license before they can sell smartphone chips to Huawei.
The Chinese company is designing smart phone chips through a subsidiary called HiSilicon, but its semiconductor brand, Kirin, is manufactured by Taiwanese chip maker (TSMC).
Washington’s sanctions cut Huawei off from TSMC, and to comply with the rule, any chips currently in production must be shipped to Huawei by September 15.
AndHe said Richard Yu, CEO of Huawei Consumer Business Group, at an industry conference in China: This is a very big loss for us.
“This year may witness the emergence of the latest generation of advanced (Huawei Kirin) chips,” he added, noting that the company does not have chips nor supplies.
Huawei is among the few companies, including Samsung and Apple, that design their own chips for their smartphones, which is one of the main reasons why the Chinese tech giant was able to distinguish between its competitors and grow.
Huawei’s options are implemented:
Huawei’s smart phone department lacks options for getting chips, and although the expectations are bleak, they can be saved, as there are 15 chip suppliers in the world that Huawei could work with, but there are only five reliable options:
- Continue to use Kirin processors and move their manufacturing to SMIC, the major chip maker in China, instead of TSMC.
- Outsourcing company (Unisoc) Chinese.
- Outsourcing is the Taiwanese company Mediatek.
- Outsourcing is the South Korean company Samsung.
- The removal of the US ban imposed on the US company Qualcomm.
All five options face major challenges, as SMIC uses US hardware to make chips, which means it will not be able to supply Huawei, and it lags far behind TSMC in terms of technology.
Meanwhile, the Chinese company (Unisoc) produces low-quality semiconductors that do not fit Huawei’s needs, and it will take years for (Unisoc) to ramp up the range and quality.
Samsung makes its own chipset, which is called (Exynos), and it may not want to share the chips with Huawei, as it is the fiercest competitor in smartphones, and South Korea usually stands by the United States on political issues.
The Wall Street Journal reported that the American company Qualcomm is pressing the US government to cancel the ban that prevents it from selling to Huawei, but with the approaching US election date, it is difficult to alleviate the hardening US position.
Given this, the ideal choice for Huawei in the short term would be Mediatek, a Taiwanese company that manufactures low and mid-range chips for mobile devices, but there are still some risks, including that it uses TSMC in some production.
The outcome of the US elections in November may be a major factor determining whether or not Huawei’s smartphone division survives, so that if the Democratic presidential candidate and former Vice President (Joe Biden) wins, the policy toward technology and China may change.
In the event that Trump wins, he may want to win the support of American companies and may ease the restrictions, and another possible solution after the elections may be to allow Qualcomm to supply Huawei with ready-made chips, but the Chinese company may be prevented from designing its own chips as it is currently doing.
Huawei could consider selling its own chipset design unit (HiSilicon), and the solutions may include merging with another company, such as MediaTek, while transferring knowledge and intellectual property to build exclusive chips for Huawei devices that will be optimized to work with its own operating system called HarmonyOS.
It seems that any move now will endanger billions of dollars in sales, and if Huawei continues to sell smartphones, it is expected that it has enough chips for 2020, but it may find it difficult to get chips in 2021 or 2022, and sales are likely to decline outside China, the smart phone division will shrink to a smaller size.