US sanctions squeezing out high-end chips for battered Huawei

Business | 12 Aug 2020 11:03 am

Huawei is reportedly running out of its own high-end chips for smartphones due to U.S. sanctions — and the company may have limited options to secure future supply, CNBC reports.

The inability to obtain cutting-edge chips will threaten Huawei’s newly-acquired status as number one smartphone maker in the world. It could also wipe out billions of dollars of sales for the Chinese technology company.

Huawei may survive 2020, but the next two years could be very difficult, one analyst told CNBC. 

In May, the U.S. introduced a rule which requires foreign manufacturers using American chipmaking equipment to get a license before they’re able to sell semiconductors to Huawei. 

The Chinese firm designs its own chips via a subsidiary called HiSilicon. But those semiconductors, which go by the Kirin brand name, are actually manufactured by Taiwanese contract chipmaker Taiwan Semiconductor Manufacturing Company. Washington’s rule has effectively cut Huawei off from TSMC.

To comply with the rule, any chips currently in production must be shipped to Huawei by September 15. 

“This is a very big loss for us,” Richard Yu, chief executive of Huawei’s consumer business, said Friday at an industry conference in China, according to the Associated Press. 

“This year may be the last generation of Huawei Kirin high-end chips,” he added, saying the company has “no chips and no supply.”

Huawei did not respond to a request for comment when contacted by CNBC. 

“Huawei’s smartphone division is running out of options for sourcing chipsets. The outlook is bleak, but salvageable,” Neil Mawston, executive director of wireless device strategies at Strategy Analytics, told CNBC by email.

He said there are 15 chipset suppliers in the world Huawei could work with but only five were “credible” options. They are:

Continue with the Kirin line of processors and eventually move to manufacture with SMIC, China’s biggest contract chipmaker, instead of TSMC.

Outsource to Unisoc in China

Outsource to Taiwan’s MediaTek

Outsource to South Korean chip and phone maker, Samsung

Get the Qualcomm ban lifted by the U.S. government (Qualcomm is not allowed to supply to Huawei because the Chinese firm sits on a U.S. blacklist known as the “Entity List.”) 

Mawston notes, however, that “all five options face major challenges.” 

 

 

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