If Huawei is forced to stop producing chips, the entire industry will suffer
Latest update time：2021-08-31 09:41
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Source: The content is compiled by Semiconductor Industry Watch (ICBank) from "Android Central", thank you.
You probably have a phone with a Qualcomm chip inside, and if it's a high-end model, you're probably happy with its performance. That's because Qualcomm makes a very good mobile chipset, the Snapdragon, which combines the CPU, GPU, and wireless communications into a single, seamless whole.
Qualcomm knows there are two other companies that would love to be where it is now — or at least it used to be. Samsung has decided to stop developing custom Exynos CPU cores and intends to try something different for the foreseeable future. This leaves Huawei as the only player left to compete with Qualcomm, and the US government wants to stop Huawei's development in this field through sanctions, which may force Huawei to stop the production of HiSilicon Kirin chipsets.
Without competition, Qualcomm chips would probably be uninteresting, and no one would buy a high-end phone that costs more than $1,000. That doesn't mean it's a good thing. Part of the reason behind this argument is how competition drives every industry, and having companies work harder for every penny we spend is a win for consumers.
Qualcomm will still have competition, but not when it comes to high-end custom 5G devices. MediaTek might be able to make a very cost-effective chip, but it won’t be able to compete with Qualcomm’s Snapdragon 800 series or 700 series.
Samsung will still make Exynos processors for phones and other devices, but the existing ARM core configuration and off-the-shelf Mali GPU can't compete with Qualcomm's billions of dollars in R&D (the devices will prove it). No one knows exactly how Samsung plans to handle its new partnership with AMD, which will take a few years to verify. In these places, Huawei's HiSilcon chips are shining.
Huawei does produce chips that rival those in high-end Snapdragon phones. Custom core configurations and a GPU, plus a very comprehensive AI co-processor, mean Huawei's phones can match or even surpass flagships from every other manufacturer. This is no accident, as Huawei is very willing to spend the time and money to make the best chips it can.
But that's not the only thing about Qualcomm's monopoly in the flagship phone sector that's bad for the industry. Qualcomm makes very good devices, but it's a bit of a pain in the ass in other areas. The 2019 back-and-forth between Qualcomm and Apple made this very public, but it's nothing new - Qualcomm uses its position as leverage to get manufacturers to buy its Snapdragon chips.
It sounds innocent enough -- Qualcomm owns the patents that phones need to work well with North American telecom networks. It's willing to license those patents, but until those fees are paid, it's cheaper to go with Snapdragon and its integrated radio solution first.
This does two very bad things - it raises the price of the phone itself, and it could drive downstream companies out of the industry entirely. Nvidia made the Sheild TV and supported the product for far longer than Google supported its own Android devices. But we never saw an Nvidia phone because Qualcomm priced it too high. This sucks.
We may never see any devices using Kirin chips in the West, but it's sickening to see a company that has innovated so much and so hard be driven out of the market for making something that is illegal under U.S. trade law. It's bad for everyone, and we deserve better.
It is also a blow to China and Taiwan
According to international media reports, the Trump administration may take new measures to restrict the global supply of chips to Huawei. This new regulation requires foreign companies that use US chip manufacturing equipment to obtain US permission before they can supply specific chips to Huawei. It is generally believed that the main purpose of the new US measures is to restrict TSMC from supplying Huawei. It is not clear whether Trump will agree to this adjustment, but the move has attracted global attention due to its wide-ranging implications.
In fact, since 2018, the Trump administration has actively lobbied telecom operators and friendly countries to abandon Huawei products, citing cybersecurity and national security risks. However, due to the low cost and mature technology of Huawei equipment, as well as the fear of changes in business cooperation relations between countries and mainland China, most markets have remained open to Huawei.
In this situation, the U.S. Department of Commerce included Huawei in the Entity List of Controlled Exports in May 2019, directly stipulating that technologies and products with a U.S. technology content of more than 25% cannot be supplied to Huawei, attempting to start from the source. However, many U.S. companies dilute the U.S. technology content through overseas outsourcing and other means to circumvent the restrictions of the Entity List. Seeing that the ban is ineffective, recent market rumors have said that the U.S. government will plan two more radical measures: first, to reduce the U.S. technology content standard from 25% to 10%; second, to cite the "Foreign Direct Product Rule" in the Export Control Regulations, and regard products produced "using U.S.-made equipment" as "direct products" produced using U.S. technology, and must first obtain U.S. permission before the products can be supplied to Huawei.
If the first method is adopted and the US technology content is reduced to 10%, there are market rumors that TSMC has assessed that it can still supply Huawei. If this is true, it means that current chip shipments will remain roughly normal, and the expansion of this ban may not have much impact on Huawei's operations.
If the second method is adopted, the foreign direct product rule is used to prohibit it, because many of TSMC's overall process equipment comes from American manufacturers, such as Applied Materials, Lam Research, and KLA-Tencor, and these companies even have an absolute market position in some processes and cannot be replaced by other countries such as the Dutch ASML. It is estimated that TSMC may not be able to produce the chips needed by Huawei. And because the vast majority of chips required for Huawei's production are supplied by TSMC and there is no alternative source, the US government can achieve the goal of completely hindering Huawei's development.
If this ban is implemented, Huawei will be the world's leading manufacturer of network communication products. In 2019, its mobile phone shipments reached 240 million units, accounting for about 18% of the market, its base station equipment market share was about 30%, and its optical communication equipment market share was about 35%. Once all companies that use American semiconductor equipment to produce chips, such as TSMC and Samsung, need to obtain a license to supply Huawei, the reduction in demand from Huawei will inevitably cause these companies to reduce their orders to American semiconductor equipment manufacturers, which will ultimately harm the interests of the United States.
Theoretically, if other competitors can successfully fill the gap left by Huawei, the impact on the global supply chain may be greatly reduced. For example, in the case of mobile phones, it is expected that Apple, Samsung (in overseas markets) and other Chinese brands (in the Chinese domestic market) will soon take over, but the upstream supply chain will be reshuffled.
However, in terms of base station equipment, although there are still other options in the market such as Nokia, Ericsson and Samsung, due to compatibility issues and the fact that Huawei's equipment is much cheaper than its competitors, the United States' tightening ban is likely to delay the global 5G network deployment process in the short and medium term, and will also drag down the development of the originally promising 5G business opportunities, which of course includes the market that was originally available to American chip manufacturers.
As for the impact on Taiwan's industrial chain, Huawei's annual procurement amount from local companies is estimated to be more than US$16 billion, and most of the purchased items are high-end products with better profits. Other competitors may not be able to provide the same level of quantity and value. If Samsung, which has always purchased components from South Korea, takes over the market, the situation will be even less optimistic.
The US government's ban on Huawei is still under discussion and may be adjusted dynamically at any time. Before the situation becomes clear, Taiwanese companies must be particularly cautious in their response strategies. In addition to closely observing the development of the incident, they should prepare as early as possible to ensure that the technical content and manufacturing processes meet the specifications. If Huawei suffers order losses due to the impact, it must also think about how to respond in advance. In the long run, the Huawei case also reminds us that the establishment of independent technology is the fundamental way for the healthy development of the industry.
The U.S.-China "Huawei dispute" will not end because of the epidemic
A new wave of tensions between the U.S. and China over communications equipment giant Huawei Technologies Co. has emerged, and global chipmakers may be the losers in the dispute.
The conference call on Tuesday to discuss the private Chinese company's financial results also foreshadowed a potential geopolitical tug-of-war. When asked about the Trump administration's potential imposition of further restrictions on its supply chain, Huawei's rotating chairman, Eric Xu, said he believed that "the Chinese government will not let Huawei be at the mercy of others." He added that if this Pandora's box is opened, the global supply chain will be catastrophically disrupted.
The U.S. government is planning new restrictions that could prevent Taiwan Semiconductor Manufacturing Co. (2330.TW, TSM, TSMC) from selling semiconductors to Huawei's own chip design company HiSilicon.
The war of words between the U.S. and China took its toll on Huawei last year: Its revenue grew 19% in 2019 from 2018, but almost all of that growth came from its home market, which grew 36%. Huawei’s smartphone sales in China grew 35% last year, even as overall sales there shrank 7%, according to Canalys. Huawei phones are already banned from using Google’s most popular apps after the U.S. government blacklisted the company in May, hurting its appeal abroad. In response, Huawei has invested heavily in its own technology: Its research and development costs soared 30% last year to $18.6 billion, surpassing the research and development spending of Apple Inc. and Intel Co.
The fight over Huawei is likely to intensify as countries begin to roll out 5G services. 5G wireless networks are at the center of the U.S.-China dispute, especially as China remains committed to developing 5G. China Mobile (CHL), the country’s largest carrier, just announced the results of a bidding process for base station contracts that Goldman Sachs estimates total $5.3 billion. The Chinese government may see building wireless infrastructure as a means of economic stimulus after the economic damage caused by the coronavirus outbreak.
Washington’s offensive against Huawei is likely to continue to hamper the company’s growth overseas while spurring it to become self-sufficient. That’s particularly bad news for U.S. chipmakers like Qorvo Inc. and Skyworks Solutions Inc., but the impact could extend to other companies like TSMC. In addition, the looming global recession triggered by the coronavirus pandemic will also affect demand for 5G phones, which was supposed to be another potential growth point for semiconductor companies this year.
The Huawei saga was the tech story of 2019. Despite all the changes brought about by Covid-19, there is no reason to think that the US-China “Huawei dispute” will end this year because of the pandemic.
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