Huawei Says Supply of Flagship Chipsets to End Under US Sanctions

Had just overtaken Samsung as the world's biggest smartphone manufacturer for the first time, but this is now in question


Editor’s note: The obstacle is that Uncle Sam has threatened to sanction Taiwan’s contractual chip-maker TSMC on the basis its chip-printing machines were made by US companies and can therefore no longer be used to fulfill Huawei orders.

What this will mean in practice is that US-made chip-printing machines will become less valuable than that of the competition which can be used to fulfill any orders, including by the Chinese giant, so in due time the US will lose its last remaining place in the chip-making supply lines.

Huawei Technologies Co. Ltd. confirmed that supplies of its self-developed flagship chipset will stop after Sept. 15 under U.S. sanctions barring major chipmaking partners to work with the Chinese telecom giant.

That means Huawei’s new high-end Mate40 handsets debuting this fall will be the last smartphones featuring the company’s most advanced processor, Yu Chengdong, CEO of Huawei’s consumer business, said at a technology innovation event in Shenzhen Friday. He called it a “huge loss” to the company.

Powered by Huawei’s Kirin 9000 processor, the devices will have more-powerful 5G and AI processing capabilities, Yu said.

The U.S. in May toughened a trade ban on Huawei that prevents companies using U.S. equipment from selling to Huawei without a special license. The rule takes effect Sept. 15.

The Kirin9000 chipsets have been produced by Taiwan Semiconductor Manufacturing Co. (TSMC) with U.S. equipment. In July, the Taiwan contract chipmaker said it stopped taking new orders from Huawei in May.

Yu said Huawei’s smartphone shipments this year will be less than last year’s 240 million units reflecting the chip shortage caused by the U.S. trade ban.

Huawei’s global shipments in the second quarter totaled 55.8 million phones, surpassing Samsung for the first time to become the world’s largest mobile phone vendor.

However, facing disruptions in its supply chain, Yu said he regretted that Huawei had only invested in developing chips, not in manufacturing them. “After Sept. 15, we will neither be able to produce our flagship chipsets, nor our chips with AI processing capabilities — this is a huge loss to us,” he told the event.

He said Huawei is determined to solve the problems by making breakthroughs in technology innovations on operation systems, chips, data and cloud services. He also called on China’s chip industry to make advancements on chip manufacturing and new generation semiconductors.

In the first-half of the year, Huawei’s consumer business garnered 255.8 billion yuan in sales revenue and sold more than 105 million smartphones.

However, it could be challenging for Huawei to keep the title as world’s top vendor of smartphones. The U.S. sanctions that strip the firm’s access to Google services for its phones have forced it to pivot towards the Chinese market.

In the second quarter, over 70% of its device shipments were in China, where the Covid-19 pandemic and associated lock-downs is thought to have contributed to boosting sales by 8%. Its shipments in markets outside China, however, dropped 27%.

“Strength in China alone will not be enough to sustain Huawei at the top once the global economy starts to recover,” said Mo Jia an analyst at Canalys. “Its major channel partners in key regions, such as Europe, are increasingly wary of ranging Huawei devices, taking on fewer models, and bringing in new brands to reduce risk.”

Source: Caixin

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