Back in May 2019, Huaweiwas bannedfrom the US, being put on a list that prohibits American companies from selling products or services to Huawei without a license. These restrictions have made things very hard for the company, and for the last three years, it’s been in crisis mode, trying to stop a downturn in profits as well as get past the sanctions. As it turns out, Huawei may have found a way to raise profits despite sanctions.
As originally reported byReuters, Huawei has partnered with Semiconductor Manufacturing International Co (SMIC) to produce 5G chips in China. The move is Huawei’s way to overcome the US sanctions that have crippled its chip supply chain and move back into the 5G smartphone market. The US government had banned the use of Huawei equipment in its 5G networks because of concerns that the company could use its equipment to spy on the US government and its citizens.
In the absence of former partners like Qualcomm and Motorola, Huawei has been working on its own 5G chip designs for several years, but it has struggled to produce these chips at scale. The partnership with SMIC would give Huawei access to the manufacturing capacity it needs to produce its own 5G chips using the N+1 manufacturing process. Huawei is alsoreportedlydeveloping its own electronic design automation (EDA) tools, which would allow the company to design chips that are more compatible with its own hardware.
Huawei may hope to produce 5G chips that are cost-competitive with others, but the yield rate for these chips is expected to be below 50%, so they would likely be more expensive than sourcing existing 5G chips. It is also unclear whether Huawei would be able to obtain the necessary software and hardware from the US to produce these chips. However, this is a risk Huawei likely needs to take after the ban caused it to fall from its position as the world’s second-largest smartphone maker in 2019 — the company’s market share fell from 17.5% to 10.8% 2020 alone.
Despite the challenges, Huawei is still a major player in the global smartphone market. The company has a strong research and development team, and it is investing heavily in new technologies, such asfoldable smartphonesand 5G. The partnership with SMIC is a major step forward for Huawei, and it could help the company to regain its lost market share. However, it is still too early to say whether the partnership might be successful.
