Yu Chengdong: We have invested hundreds of millions in Hongmeng, and we will reflect on the lessons learned in the face of difficulties

Huawei Consumer Business CEO Richard Yu recently talked about Huawei's current situation. He said that since the Entity List, the US chips and technology cannot be used, and Huawei has been preparing for nearly ten years to develop its own chips, software, and supplies. The first round of sanctions did not cause a crisis for Huawei, but only had a greater impact on the part it is responsible for. However, the Google ecosystem in overseas markets cannot be used, which is disastrous for Android users.

Build an ecosystem and invest in Hongmeng

Yu Chengdong said that they have begun to build their own ecosystem and continue to improve it. Today, hundreds of millions of yuan have been invested in the Hongmeng system, and the experience has been improving. Although it has now reached 70-80% of the level of Android, it is improving every day, every week, and every month.

He said: "If there is a ban in the future that prevents all Chinese companies from using the Google ecosystem, we can sell our ecosystem globally and build an alternative to Google's ecosystem."

He also revealed that after the sanctions last year, Huawei even developed its own instruments and EDA tools and software. However, Huawei could not even make instruments, so it transferred the technology to Chinese instrument factories, which also led to a number of Chinese companies replacing American companies.

"Huawei has always believed in global division of labor. One company cannot do everything. A real estate company cannot make cement mortar by itself. Now we even make the machines for making cement mortar by ourselves. The significance of Huawei is not only for itself, but most importantly for driving a group of Chinese companies to transform from low-end manufacturing to high-end manufacturing. We must drive Chinese companies to do this together. A country's development needs some large companies and companies with core capabilities to drive it forward."

He believes that "if China adopts the sanctions of the United States, it can stop the production of electronic products all over the world, and stop all American airplanes and cars. For example, China accounts for more than 90% of the market share of handsets and microphones on mobile phones, and more than 80% of batteries... Everyone looks down on small components, but in today's globalized world, China absolutely has a say in many fields, but China has not done so."

When talking about business, he said that the carrier business fell by 60% at first, and then recovered to 40%. It had been growing rapidly before the sanctions. If there were no sanctions, Huawei would not only be the first, but also the first by a large margin. Last year, if there were no sanctions, the shipment volume was estimated to be 300-350 million units. After the sanctions, it only shipped 240 million units, 60-70 million less, and the market share was second.

Yu Chengdong stressed that the current situation does not represent the future. We are now far ahead in 5G. We are more than one and a half years ahead of Ericsson, and Ericsson is five years ahead of Nokia.

Talking about chips, reflecting on the lessons learned

As for the hotly discussed chips recently, according to the annual convention, the IFA conference will release the latest Kirin chips. However, at the IFA2020 conference held on September 3, Huawei did not release the Kirin 9000. Yu Chengdong recently made it clear that the Kirin 9000 chip can only be produced until September 15, and although it will be available on the market, the quantity is limited.

Because there is no Chinese chip manufacturing industry to support it, Huawei is facing the problem of no chips available. Yu Chengdong said frankly that the only problem now is production, and Huawei has no way to produce. Chinese companies have only done design in the process of globalization, which is also a lesson.

How to solve the chip problem? Yu Chengdong said that on the one hand, the chip industry should speed up, including semiconductor manufacturing technology, and enterprises should work together. On the other hand, they should also find ways to deal with it. They can also build an ecosystem and do other things that can be done, such as screens, smart TVs, computers, etc., which are relatively large in size and have low requirements.

Earlier, Huawei's rotating chairman Guo Ping said in a discussion with new employees that he would continue to invest in HiSilicon and help front-end partners improve and build their own capabilities. I believe that in a few years we will have a stronger HiSilicon.

Guo Ping further stated that the suppression of Kirin chips will cause certain difficulties for our terminal business, especially high-end mobile phone business, but I believe we can solve it.

Current status of semiconductor industry

Semiconductor products are mainly divided into four categories, including optoelectronic devices, semiconductor sensors, discrete devices and integrated circuits. About 80% of semiconductor products are integrated circuits. The production of semiconductors is mainly divided into three processes: design, manufacturing and packaging and testing.

In fact, any industry cannot be separated from the collaborative efforts among upstream, midstream and downstream companies. However, the semiconductor process is complex, and the more advanced the technology, the more manufacturers are involved.

In terms of the integrated circuit industry structure, the integrated circuit industry structure consists of three types of industries: design, manufacturing, and packaging and testing. After several years of development, the structure of my country's integrated circuit industry chain has been further optimized; in addition, the industrial structure is becoming more and more reasonable, and the sales share of the three industries of design, manufacturing, and packaging and testing is basically formed, which is basically close to the industrial structure of developed countries, and the structure is becoming more and more reasonable.

As we all know, it is dangerous for any link in the industrial chain to be controlled by others, and software has always been a weak point. Recently, more and more topics are pointing to domestic operating systems. Although we have many RTOS with different characteristics, all of which are purely domestic, most of the general operating systems belong to the Linux system. Although Linux has long stated that it will not be affected, a purely domestic general operating system is still imminent.

In fact, the field of semiconductor instrumentation is also an important and gap-filled link, but it has rarely been mentioned. At present, the real scientific instruments are mainly several instrument factory conversion companies under the Chinese Academy of Sciences, as well as some start-up companies. It is worth mentioning that the demand for testing of semiconductors or integrated circuits is increasing as the density of semiconductor crystal chips continues to rise. The cost of a single tape-out is as high as millions, and any tiny parameter of the test instrument affects the result.

From what Yu Chengdong said, it is not difficult to find that Huawei's focus is not only on the operating system, but also on EDA software and instrumentation, and in fact it has in-depth thinking about the ecosystem.

Semiconductor is an industry that requires huge R&D expenditure. Only by continuously increasing R&D investment can we enter the era of innovation. Application demand is the source of innovation, and long-term persistence is the key to success. I believe that with continuous efforts and reflection, China's chips will eventually break free from the shackles.