China’s Huawei prepares to beat US ban by returning 5G phones – research firms

SHENZHEN, China, July 12 (Reuters) – China’s Huawei Technologies plans to return to the 5G smartphone industry by the end of this year, according to research firms, marking a comeback after a US ban on sales of equipment that has decimated its electronics business. consumerism.

Three third-party technology research firms covering China’s smartphone sector told Reuters that Huawei should be able to buy 5G chips domestically using its own developments in semiconductor design tools along with making chips from Semiconductor Manufacturing International Corporation (SMIC).

The companies, citing industry sources including Huawei suppliers, spoke on condition of anonymity due to confidentiality agreements with customers.

Huawei declined to comment. SMIC did not respond to a request for comment.

A return to the 5G phone market would mark a victory for the company that has said for nearly three years that it is in “survival” mode. Revenue from Huawei’s consumer business peaked at 483 billion yuan ($67 billion) in 2020, before dropping nearly 50% a year later.

The Shenzhen-based tech giant vied with Apple (AAPL.O) and Samsung (005930.KS) to be the world’s largest phone maker until rounds of US restrictions starting in 2019 cut off its access to essential chipmaking tools. to produce its most advanced models. .

The US and European governments have called Huawei a security risk, a charge the company denies. Since then, Huawei has only sold limited batches of 5G models with stock chips.

After the last generation of fourth-generation phones were discontinued, Huawei fell from most rankings worldwide last year, when sales reached a low point, although they rose to 10% of market share in China in the first quarter, according to consulting firm Canalys.

5G forecast

A research firm said it expects Huawei to use SMIC’s N+1 manufacturing process, although the expected yield rate of usable chips is less than 50%, and 5G shipments will be limited to about 2 million to 4 million units. A second company estimated shipments could reach 10 million units, without providing further details.

Huawei shipped 240.6 million smartphones worldwide in 2019, a peak year, according to Canalys, before selling out its Honor unit which accounted for nearly a fifth of shipments that year.

The state-backed China Securities Journal reported this month that Huawei raised its 2023 mobile shipment target to 40 million units from 30 million at the start of the year, without mentioning a return to 5G phones.

The three research firms said Huawei could produce 5G versions of flagship models like the iPhone P60 rival this year, with a new launch likely in early 2024, adding that they base these predictions on information they received via checks of contacts in their supply chain. Huawei and the company’s recent announcements.

However, US restrictions cut Huawei off from Google’s Android operating system and the suite of developer services on which most Android apps are based, limiting the appeal of Huawei phones outside of China.

Chip design tools

Research firms noted that Huawei announced in March that it had achieved breakthroughs in electronic design automation (EDA) tools for chips produced using 14nm technology and above.

Chip design companies use EDA software to produce schematics for chips before they are mass-manufactured in the factory.

The research firms, citing their own industry sources, believe Huawei’s EDA software with SMIC’s N+1 manufacturing process can be used to make chips equivalent to 7nm, the powerful semiconductors typically used in 5G phones.

Washington blocked SMIC from acquiring an advanced chip-making tool called the EUV machine from Dutch company ASML (ASML.AS) that is crucial to the 7-nanometer chip-making process.

But some analysts have found signs that SMIC has nevertheless managed to produce 7nm chips by modifying simpler DUV machines that it can still freely purchase from ASML.

The second research firm said it noted that Huawei has asked SMIC to produce sub-14nm chip components this year for 5G products.

An expected rate of return of less than 50% means 5G chips “will be expensive,” said Doug Fuller, who researches chips at Copenhagen Business School.

“I think if Huawei wants to eat cost, they can do it, but I don’t see such chips as competitively priced,” Fuller said.

($1 = 7.2023 Chinese yuan)

(Reporting by David Kirton). Editing by Jimmy Freed

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