Huawei could use local chips after US ban

By GT staff reporters Source: Global Times Published: 2020/9/2 17:57:02

Chinese tech company faces difficult time as more chipmakers could cut supply in the next half month

Integrated circuit Illustration: VCG

China's homegrown memory chip manufactures will be able to fill the gap left by US-based memory chip producer Micron in the supplies to Huawei to a certain extent, but such replacement - coming against the backdrop of a chip ban drawing near - could mean that the Chinese tech giant will have a more difficult time ahead, in particular in its smartphone business, industry analysts said.

The comments come after an executive of Micron said publicly that the firm will not be able to continue to supply Huawei after September 14, the date when the "grace period" on the chip ban to Huawei ends and the shipment ban formally comes into effect. 

Micron is the world's third-largest memory chip maker after Samsung and Hynix in terms of global market share. Huawei has been one of Micron's major customers, with its chip purchase accounting for 10 percent of the latter's revenue.

As the deadline draws near, analysts predicted that more chip makers may also announce to cut supply to Huawei. Micron is the second global firm to publicly state that it won't supply Huawei anymore from mid-September, after TSMC fired the first shot in July. 

The Taiwan-based chip manufacturer said that it stopped processing new orders from Huawei back on May 15. It also confirmed that it does not plan to ship any wafers to Huawei after September 14. 

"Huawei has been scaling up stockpiles of memory chips as deadlines approach. Luckily, in terms of memory chips, it can find substitutes both at home and abroad, such as Tsinghua Unigroup and Samsung," Ma Jihua, a veteran industry analyst, told the Global Times on Wednesday.

Ma, nevertheless, noted that Huawei may be put in a disadvantageous position in price bargaining when talking to new suppliers.

"It also remains unclear whether the new supplier could fill the huge gap in a very short time," Ma added. "But on the positive side, the issue will be addressed sooner or later as China's memory chip industry has been developing fast and we could meet demand in most areas."   

Waning mobile phone business 

However, in terms of high-end smartphone chips - orders that Huawei placed on TSMC and other foreign manufactures, industry insiders have painted a much gloomier picture. 

Analysts said the Chinese telecommunications firm will have "no way out" after chips in stock are used up.

"For the US chip ban [as a whole], there's no indication that Huawei has found a solution and coping strategy as yet," Jiang Junmu, chief writer at telecom industry news website, told the Global Times on Wednesday. 

Richard Yu Chengdong, head of Huawei's consumer business, said last week that "it's still mulling a coping strategy in the face of the US chip ban."

The US has now blocked almost all the channels for Huawei to obtain chips from the outside, and Huawei's current stocks should support it until next year. In terms of personal computer (PC) business, it could still get access to PC chips from US firms like Intel, Jiang said.

For mobile phone business, the chips could only last by year-end, Xiang Ligang, a veteran industry insider and close follower of Huawei, told the Global Times on Wednesday.

Huawei's mobile phone business is expected to suffer the most, not only because of the supply of chips, but also the supply of software services such as Google's GMS system. 

In fact, in overseas market, its Chinese competitor Xiaomi has already been quietly replacing Huawei, said Jiang.

"Huawei is now working hard to promote several other types of terminal equipment other than smartphones, and even making bags and other sideline products now. It is probably also a response and way to rescue itself," Jiang said.

On August 18, Huawei launched a new laptop, the MateBook X Pro, in Shanghai, quickly stepping into the global laptop market as its mobile business sustains a major blow from the US chip ban. 

Some interpret the launch as a signal that the laptop segment could be another battleground where Huawei will increase its investment.

Huge blow to global chip industry

The robust demand from Huawei as well as other Chinese tech firms has sustained the growth of US and other chipmakers, enabling them to reduce costs by achieving economies of scale and making further investment in research and development. 

After cutting off supply to Huawei, Micron is estimated to lose 10 percent of its revenue, or $2 billion, every year, according to media reports. The Chinese market also accounts for 65 percent of US chipmaker Qualcomm's revenue.

"Some US companies may sink afterwards, becoming the victims of US government's relentless move," Ma noted.

SEMI, the industry association serving the global electronics design and manufacturing supply chain, released a statement last week, warning the US Commerce Department's decision to significantly expand unilateral restrictions will likely lead to more lost sales, eroding the customer base for US-origin items. 

"The new restrictions will also fuel a perception that the supply of US technology is unreliable and lead non-US customers to call for the design-out of US technology. Meanwhile, these actions further incentivize efforts to supplant these US technologies," reads the statement.

Xiang said that profits of the entire global semiconductor industry will feel the pinch due to US' move, since a large customer like Huawei has its customized production lines. 

"Even if chip suppliers turn to other customers to fill Huawei's gap, changing to other customers will inflate their costs," Xiang said.


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