“Survival is Huawei’s theme now. On May 18th Guo Ping, Huawei’s rotating chairman, told global media and analysts. It comes just three days after the U.S. Commerce Department upgraded sanctions against China’s chip supply chain. While optimistic that a solution can be found, Mr Guo has to admit that Huawei’s business will inevitably be severely impacted.
Huawei has suffered heavy losses from the 516 entity list event in 2019, but it has still achieved good growth thanks to spare spouts such as Heath, Harmony and HMS, and this year’s 515 sanctions upgrade will give Huawei’s key spare tire, Hess, to face a severe test, and can Huawei survive the crisis again?
Entity list leaves Huawei without meet 2019 performance targets
On May 16, 2019, the U.S. Department of Commerce added Huawei to its list of entities, meaning that U.S. companies will not be able to supply Huawei without the U.S. Department of Commerce’s permission.
Physical inventory events hit China’s supply chain hard, such as in consumer business, Huawei’s PCs will not be able to use Microsoft’s Windows and Intel’s CPU, and Huawei phones will not be able to use Google’s Android (GMS) and Qualcomm’s chips. This is a devastating blow to the consumer business, which has become Huawei’s number one source of revenue.
Under the severe situation, Huawei’s tire preparation plan was officially announced.
On the chip side, Huawei HiSilicon has stepped up its self-study efforts, including the breadth and depth of its product line. For example, in mobile phone chips, Huawei has significantly accelerated the pace of self-research 5G mobile phone chips, has launched the Kirin 990, Kirin 985, Kirin 820 three 5G chips;
In terms of operating systems, Huawei has developed its own Harmony system, claiming to be able to access a range of products such as PCs, mobile phones, Televisions and tablets. But it’s not easy to completely re-establish an operating system ecosystem, and Huawei first used harmony to TV products that are less dependent on the application ecology. On mobile phones, Huawei continues to use the open source version of Android and build its own HMS service to replace Google’s GMS service. The number of registered developers at Huawei’s HMS Eco-Registered Has increased by 150% year-on-year to 1.4 million, according to Wang Yanxuan, president of Huawei’s consumer business BG Global Ecological Development.
With multiple spares, Huawei has somewhat resisted U.S. pressure to block it.
Huawei HiSilicon became the first chinese semiconductor company to make the top 10 in the first quarter of 2020, according to research firm ICInsights. In this ranking, Heith Semiconductor’s ranking is up five places from 2019, with first-quarter sales of nearly $2.7 billion, up 54% from a year earlier. As you can see, the list of entities in the United States has contributed to the rapid growth of Huawei HiSilicon.
However, in the overall revenue level of the consumer business, the situation is still not optimistic. Huawei lost many overseas subscribers in the second half of 2019 due to a lack of Google GMS services. Xu Zhijun, Huawei’s rotating chairman, said at least $10 billion in 2019 in the company’s consumer business overseas.
At the analyst conference, Guo Ping, Huawei’s rotating chairman, also revealed that while Huawei’s revenue and profits remained growing in 2019, it had not actually fulfilled its original business plan. “It’s probably $12 billion worse than our original plan. Growth in each quarter of last year has also been declining. Every contract Huawei gets is more difficult than ever. “
Sanctions escalation Huawei’s spare hatch will be tested
On May 15th, the first anniversary of the physical inventory incident, the U.S. Department of Commerce again introduced new export control rules. Foreign companies that require the use of U.S. chip technology and equipment must obtain U.S. permission before they can supply the chips to Huawei and its affiliates.
That’s bad news for Huawei Heath, which has just become the world’s top 10 semiconductor maker.
Guo Ping, Chairman-in-Chief of Huawei, admitted that Huawei, as an ICT equipment and terminal company, can design its products and integrates, but many capabilities beyond these are not available.
In fact, the chip industry chain is a global highly divided and collaborative industry. Huawei’s chip design capabilities are just one of them, and chip foundry manufacturing will rely on TSMC, SMIC, Samsung and others.
After news of the escalation of sanctions broke,media reported that TSMC had stopped accepting new orders from Huawei to fully comply with the latest export control rules. TSMC later responded that it was purely a market rumor, but said it could not disclose the details of its customers’ orders and said it was assessing the impact of the new export control measures.
In response to the analyst conference, Guo Ping, Huawei’s rotating chairman, said huawei’s business would inevitably be severely impacted but was confident it could find a solution. But he did not say what the specific solution was.
According tomedia analysis, if TSMC’s contract workers are affected, Huawei may turn orders to SMIC Production, a Chinese-backed background, and use domestic equipment to complete some chip orders. However, SMIC in the process compared with TSMC still has a large gap, such as the current high-end mobile phone chips commonly used 7nm process, as well as the next generation of 5nm process, or in the hands of TSMC. SMIC can only make up for some low- and middle-end chip orders for 14nm and 12nm processes.
In fact, Xu Zhijun, Huawei’s rotating chairman, had previously made a pre-judgment on the situation. He said at the time that Huawei could buy chips from Samsung in South Korea, MediaTek in Taiwan and China’s Showtime to make mobile phones even if chip factory sepsis such as TSMC were cut off. But judging by the new U.S. export control rules, it is unclear whether this third party’s way of buying chips will work.
It is foreseeable that huawei’s mobile phones will be the biggest victims and the entire Huawei consumer business will suffer unpredictable losses if its self-developing chip capabilities are hit.
Will China fight back? Global chip supply chain faces challenges
According to the Global Times, a source said that if the U.S. finally implements the China-based sanctions escalation plan, China will vigorously fight back to safeguard its legitimate rights and interests.
The report said that the specific counter-measures available to the Chinese side include the following: the inclusion of U.S.-related enterprises in China’s “unreliable entity list”, in accordance with the Cybersecurity Review Measures and anti-monopoly law and other laws and regulations to Limit or investigate Qualcomm, Cisco, Apple and other U.S. companies, suspension of procurement of Boeing aircraft.
In fact, U.S. sanctions on Huawei’s chip supply chain will ultimately affect more than just Huawei. Under this rule, the expansion, maintenance and continued operation of hundreds of billions of dollars of networks built by Huawei products in more than 170 countries will be affected, and information and communication for more than 3 billion people using Huawei’s products and services will also be affected, Huawei said in an official statement on the matter.
The statement further pointed out that the sanctions affect not only Huawei, but also the global related industries will have a serious impact. In the long run, the trust base of global cooperation in industries such as chips will be destroyed, and conflicts and losses within the industry will be further exacerbated. The United States to use its own technological advantages to suppress other countries’ enterprises, will certainly weaken the confidence of other countries’ enterprises in the use of U.S. technology elements, and ultimately harm the United States’ own interests.
Guo Ping, Huawei’s rotating chairman, said Huawei had purchased $18.7 billion from U.S. companies in 2019 and would continue to do so if the U.S. allowed it, and that the U.S. list of entities made some countries and companies aware of the risks of a single supply system. More companies, like Huawei, will adopt diversified supply strategies to maintain business stability. And that, in turn, would hurt American companies themselves.
But Mr Guo stressed that while the US continues to block Huawei, it will not move towards closure and isolationism and will adhere to a strategy of globalisation and pluralism. He also called on industry to work together to maintain market equity and ensure a globally consistent system of standards and a global supply chain system for division of labor.
“Looking at tomorrow today, the ICT industry remains hopeful about the future. Guo Ping said. His speech ended with a picture of a World War II plane that had become almost a spiritual totem inside Huawei, which was riddled with bulletholes but still insisted on flying. The text of the drawing is: “Look back, rugged and bumpy; “
Sina Technology Zhang Jun