Huawei is de-Americanizing, and alternative suppliers are gradually emerging

As the US-China trade war remains unresolved, China's Huawei has announced that it is actively de-Americanizing key components of 5G mobile phones and base stations. 5G mobile phone processors and baseband modules are mainly designed by HiSilicon, and Taiwan's wafer foundry, packaging and testing, and passive component supply chains have indirectly benefited.

The US-China trade war remains unresolved. Although the US recently announced a postponement of the 10% tariff on some Chinese goods, the market continues to pay attention to the shipment status of communication equipment and mobile phones of Huawei, a major Chinese communication manufacturer, and whether the related supply chain is affected.

A foreign legal person report specifically pointed out that Huawei had suspended related purchases of 5G base station components in early August, with the original expected reduction in orders for printed circuit boards (PCBs) by 30% to 40%. However, there are now reports that purchases have resumed, but some orders for 5G base station components may be affected. Foreign investors expect that the business of printed circuit board supply chain manufacturers at Huawei will show a downward trend in the third quarter.

Observing the main reasons, analysts pointed out that in response to the uncertainties of the trade war, Huawei has actively de-USized the supply of key components and platforms for mobile phones and base stations. Huawei has proposed a plan B. If the relevant plan is implemented, Huawei's demand for printed circuit boards in the fourth quarter is expected to stabilize.

By observing the main components inside Huawei's recently launched first 5G smartphone, we can also see Huawei's design ambitions to de-Americanize and localize.

According to a European legal report, Huawei's 5G mobile phone uses the latest high-end Kirin 980 processor product from its chip design company HiSilicon, and the 5G multi-mode baseband chip module uses the Balong 5000 product designed by HiSilicon.

It is worth noting that Huawei's 5G mobile phone processors and multi-mode baseband chips are both made using TSMC's 7nm advanced wafer process, with back-end packaging and wafer testing services provided by Taiwan's ASE Technology Holding and King Yuan Electronics.

In terms of memory, Samsung and SK Hynix of South Korea and Toshiba of Japan provide it, while passive components are provided by Taiyo Yuden of Japan, Murata Manufacturing Co., Ltd. and Yageo of Taiwan.

In the power amplifier (PA) part, the legal person pointed out that in the past, the PA component suppliers of Huawei mobile phones were mainly American companies, but now they are replaced by Taiwanese companies to assist in production and manufacturing, and Japanese company Murata Manufacturing. In addition, the power management chip is supplied by SMIC, which is actively supported by China.

However, in terms of RF module components, Huawei's 5G mobile phones still use products from American manufacturers. Legal persons pointed out that the main suppliers include Skyworks and Qorvo in the United States, but the RF module packaging uses ASE Technology's system-in-package (SiP) technology.

The market also heard that Huawei is actively developing non-U.S. supply chains for RF components. For example, China Precision Testing has entered the RF component testing of Huawei's HiSilicon, and IC test board design company Yongzhi has also entered the supply chain of Huawei's 5G mobile communication RF chip test substrates.

European legal reports predict that Huawei's de-American strategy for key components of its products will continue, and it is estimated that the de-American characteristics of the next generation of products will be more obvious.

Allianz Taiwan Technology Fund Manager Liao Zhehong said that the second half of the year is the peak season for the electronics industry. Although there is still uncertainty about the tariff issue, in the long run, manufacturers have gradually adjusted their production bases and the impact of tariffs will gradually decrease.