Huawei storm expands, hitting semiconductor chain hard, IC design implicated

Reuters reported that the new restrictions imposed by the United States on Huawei last Friday were found to have loopholes, and the United States did not rule out further adjustments. Some officials have proposed that those who sell chips to Huawei and benefit from it should also be included in the restrictions. The industry is worried that if the US ban on Huawei continues to expand, it may severely damage the development of Taiwan's IC design industry.

This move will hit the four major Taiwanese IC design companies MediaTek, Realtek, Novatek and Richtek hard. The market's original expectation that MediaTek would receive a transfer order effect may also be dashed. Regarding business dealings with Huawei and the various restrictions imposed by the United States on Huawei, MediaTek, Realtek, Novatek and Richtek declined to comment yesterday (21).

The industry believes that if the US tightens its control over Huawei again, and even regulates companies that sell chips to Huawei, this move will make it impossible for Huawei to obtain key chips. The US's approach will also change from "banning Huawei" to "cutting off Huawei", in an effort to completely cut off Huawei's way out.

MediaTek, Realtek, Novatek and Richtek all have business dealings with Huawei. Among them, MediaTek supplies Huawei with mid- and low-end mobile phone chips, Realtek provides Huawei with consumer network communication products, Novatek ships Huawei AMOLED driver ICs, OLED driver ICs and other products, and Richtek is Huawei's network communication supply chain, shipping WiFi 5 and WiFi 6 front-end module products.

In particular, these IC design companies are also major customers of TSMC, UMC, and ASE semiconductor manufacturing and packaging and testing companies. If their orders are affected, it will also drag down industry development.

According to statistics, the output value of Taiwan's IC industry reached NT$2.66 trillion in 2019, of which the output value of the IC design industry was NT$692.8 billion, an increase of about 8% over 2018. MediaTek, Novatek, and Realtek ranked fourth, eighth, and ninth respectively in the global IC design industry rankings, demonstrating their great influence. The combined revenue of these three companies alone reached NT$370 billion last year, accounting for more than 53% of Taiwan's IC design revenue. Their influence is evident.

According to analysis by Credit Suisse and legal reports, Novatek and Realtek's revenue from supplying Huawei accounts for more than 10%, and Richtek's revenue from Huawei accounts for more than 50%. If they are unable to ship to Huawei, they will suffer considerable damage.

Although MediaTek's main business is Chinese mobile phone brands such as OPPO and vivo, and its revenue from Huawei accounts for only about 5%, due to its large revenue scale and the market's original expectation of an order transfer effect, if Huawei's business is hindered, the absolute amount affected will not be low.