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Huawei will be a shadow of its former self if US doesn't ease restrictions by next year: report

By Anam Hamid

Published: Aug 27, 2020, 7:21 PM

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Huawei

Huawei, which became the number one smartphone seller by sales in the second quarter, could sink into oblivion by next year if the US doesn't lift restrictions.

Nikkei Asian Review reports that the company's suppliers are scrambling to deliver orders before the US mandated deadline expires.

Previously, a ban had dealt a death blow to the embattled Chinese company's chip arm HiSilicon. As a result, Taiwan Semiconductor Manufacturing Company (TSMC) and other chip manufacturers that use US tech can no longer make chips for the tech giant. Huawei has already confirmed that the upcoming Mate 40 would be the last phone to feature an in-house SoC.

The company was apparently considering buying off the rack solutions for future smartphones from chip makers like Qualcomm and MediaTek. A new restriction means it could no longer purchase chips from manufacturers who use US-origin technology.

Its suppliers are allowed to honor previous orders, but they must be shipped by midnight on September 14. This means the deadline is just three weeks away.

Huawei is in a chaotic state right now

Per the new report, the company is currently in survival mode and is trying to stockpile crucial components such as 5G mobile processors, Wifi, and display driver chips from companies including MediaTek, Novatek, RichWave, and Realtek.

Memory chip makers such as Samsung and SK Hynix and camera lens suppliers like Largan Precision and Sunny Optical Technology also hope to ship products to Huawei by September 14.

All of these companies use American technologies and software to manufacture products and thus, they must comply with the ban.

To meet the deadline, some suppliers might even deliver half-finished products that have not been tested or assembled.

One person who is privy to the matter said:

It's not unusual for Huawei to call suppliers at 4 a.m. or have conference calls at midnight recently. Huawei is in a chaotic survival mode now, and changing its own plans constantly recently.

Once Huawei runs out of these components, its smartphone shipments could fall as much as 75 percent. The company is currently desperate to secure high-end 5G-enabled chips. Its stockpile is expected to run out by Q1 2021.

Thanks to its inventories, the company could ship around 195 million smartphones this year, according to GF Securities' analyst Jeff Pu. If the US doesn't soften its stance against the manufacturer, sales could fall to 50 million units in 2021.

Previously, the company was hoping to sell 130 million 5G smartphones in 2021, according to the semiconductor research company Isaiah Research.

Its supply chain partners will also suffer, as detailed by Digitimes. The publication claims the restrictions placed on Huawei by the US will impact the overall sales of 5G mobile APs to the Chinese market in Q4 2020.

Huawei will lose its competitiveness without Kirin chips

The ban is also expected to change the landscape of China's smartphone market next year.

Huawei currently dominates the domestic market, but it is expected to lose 30 percent of its share to local rivals like Oppo, Vivo, and Xiaomi next year. Globally, Samsung and Apple will probably be the biggest beneficiaries.

Chinese chipmaker Unisoc Technologies could scoop up HiSilicon's share in the long run.

Oppo is also reportedly ramping up efforts to make custom SoCs. It will reportedly make chips for AIoT applications first before developing smartphone chips.

As for Huawei, it will have to think of a long term plan to survive without US technology.

In the near future, we will likely see the company reorganize and scale down operations to stay profitable. Side by side, US companies like Qualcomm will probably continue to lobby against the restrictions.

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Anam Hamid is a computer scientist turned tech journalist who has a keen interest in the tech world, with a particular focus on smartphones and tablets. She has previously written for Android Headlines and has also been a ghostwriter for several tech and car publications. Anam is not a tech hoarder and believes in using her gadgets for as long as possible. She is concerned about smartphone addiction and its impact on future generations, but she also appreciates the convenience that phones have brought into our lives. Anam is excited about technological advancements like folding screens and under-display sensors, and she often wonders about the future of technology. She values the overall experience of a device more than its individual specs and admires companies that deliver durable, high-quality products. In her free time, Anam enjoys reading, scrolling through Reddit and Instagram, and occasionally refreshing her programming skills through tutorials.