Huawei built up a year's worth of chip inventory expecting a ban

Huawei built up a year's worth of chip inventory expecting a ban
Preparing for a day when it would no longer be able to count on sourcing U.S. parts and components, Huawei starting stocking up about a year's worth of certain components. This turned out to be the right thing to do in light of the Trump administration's decision to place the company on the Commerce Department's Entity List. After the current three-month temporary license expires, Huawei will need U.S. government approval to acquire supplies from the states. And already chip-related companies like Qualcomm, Intel, Xilinx, Qorvo and ARM Holdings have announced that they have cut ties with the Chinese manufacturer.

According to a report from CLSA (via Yahoo), Huawei's decision to stock up on components helped create "fake demand" for semiconductors. CLSA analyst Sebastian Hou computed that Huawei's buying added 8% to revenue growth in the chip industry during the first quarter. Hou says that in the current quarter, Huawei's removal from the market will result in a 4% decline in chip revenue. That's because Huawei (not including the purchases made to build up inventory) normally accounts for 8% to 9% of the chip market, and half the quarter is over.

The analyst says that the impact of Huawei's absence from the chip market will be harder to estimate after this quarter. That is because the company could find itself doing business as usual if the U.S. and China agree to a new trade pact; just the other day, President Donald Trump said that the U.S. might use Huawei as a bargaining chip to extract better terms from China during future trade negotiations. This means that any projection made about Huawei needs to be taken with a grain of salt. As bad as things look now for Huawei, the situation could change 180 degrees in a heartbeat.

Huawei could ship only 157 million handsets this year versus a target of 250 million units

What Huawei has to be concerned with is what it will do in the future after using up all of the components it has stockpiled. Hou says that Huawei could be in big trouble before year end. "Before the end of this year, they will use up all the critical components," the analyst noted. "If the ban is not lifted by then, they will be in trouble." The company spent $11 billion to purchase U.S. parts last year and is obviously more reliant on American suppliers than many thought. CLSA estimates that the company is responsible for the development of one-third of the components and parts that it uses in its smartphones. Previously, Huawei has said that it would like to get that number up to 90%. Hou also wonders about Huawei's in-house replacement for Android, expected to debut this fall. He asks, "If they are ready, why aren’t they using it now. Why are they waiting for things to happen?" The new OS could be launched with the Huawei Mate 30 series, due out later this year.

Huawei was on its way toward becoming the largest smartphone manufacturer in the world next year after finishing the first quarter of this year in second place behind Samsung. Fubon Research and Strategy Analytics expect the company's smartphone shipments to decline anywhere between 4% and 24% in 2019. Considering that last year the company delivered approximately 206 million handsets, the worst-case scenario as laid out by the two research firms would put Huawei's shipments at 157 million units this year, slightly above the 2017 total of 153 million units. The company had hoped to ship 250 million handsets this year. Huawei is also the global leader in providing networking equipment. Several countries, including the U.S., Australia, Japan, and New Zealand have banned wireless providers in their country from using Huawei's gear.



1. basher

Posts: 108; Member since: Sep 20, 2015

They can start calling Samsung for their exynos chips.

2. Subie

Posts: 2365; Member since: Aug 01, 2015

Exynos designs are based on ARM architecture. If ARM feels barred from selling/licensing it's designs to Huawei because it contains "US based" designs then Samsung could also be under the same restriction as their Exynos chips would also contain those same "US based" designs...

4. oldskool50

Posts: 1578; Member since: Mar 29, 2019

Huawei had a license to make it's own chips off ARM technology. Samsung yes does use ARM, but they are not a US company. Trump cant stop Huawei from buying chips from Samsung. But that doesnt mean Trump can ban Samsung foe getting involved. And yes Samsung does use ARM tech, but ARM also is not a US company. It was ARM UK that pulled Huawei from their list. But Huawei is gonna be hurting. The only option other than bending to Trump, is getting the Chinese govt to ban all esports to the US. This would hurt all companies iOS like Apple, Microsoft and AOL many more. On e the. If guns start losing money, all of them will band together and jump on Trump to stop his BS. If not then on e Trump is out of office, because he will likely not be reelected whoever gets into office can put things back very quickly.

7. iloveapps

Posts: 855; Member since: Mar 21, 2019

Idiot, if they ban apple in china, what do you think will happen to those who manufacture to iphones? Also, apple started to manufacture in india and vietnam.

19. oldskool50

Posts: 1578; Member since: Mar 29, 2019

You got nerve to. All someone names. Apple doesnt manufacture all their stuff where you claim. Yes banning Apple will hurt China too. But it would hurt US more. Their is always loses in a wars no matter which side. But China can replace iPhone manufacturing with other things. The iPhone assembly brings some jobs. So let's say Foxconn has 5 factories with 20,000 workers. All 20,000 will simply do the same job making something else. Who will be hurt then? After all with Huawei being banned, look how many people will lose their jobs. But you dont give a ctap about them. So why should I. Re about Apple? That's right...I don't. Apple is part of this problem.

8. vincelongman

Posts: 5695; Member since: Feb 10, 2013

We'll have to see how ARM handle this ARM is owned by a Japanese company, but the ARM's Cortex A76 was designed by their Austin (Texus, US) design centre (likely the A77 too and maybe even the Mali GPUs) Samsung can't sell their Exynos to Huawei if ARM doesn't approve it, unless Samsung wants to risk losing their license too (same for MediaTek or other ARM SoC vendors) TSMC claim they will still be making Huawei's N7+ Kirin 985 So Huawei might be able to use that IF ARM allow them For 2020+ Huawei probably will have to switch to Exynos (if ARM allow them which we don't know yet)

9. Dr.Phil

Posts: 2379; Member since: Feb 14, 2011

Even if Samsung is allowed to sell their Exynos chipsets to Huawei they won’t. They barely produce enough yields for their Samsung devices, they couldn’t handle the manufacturing load that Huawei would require. They do have Motorola as a customer but Motorola doesn’t sell that many devices. Also, Samsung chipsets are not as powerful as Qualcomm.

16. Vyshak75

Posts: 79; Member since: Mar 03, 2016

If they can make enough chips for qualcomm, they can make for Huawei too... Think of it...

18. Dr.Phil

Posts: 2379; Member since: Feb 14, 2011

They made enough chipsets for Qualcomm because Samsung uses Qualcomm in their products. Samsung always prioritizes their handsets first before other manufacturers. Huawei would need a manufacturer that prioritizes their devices or else they’ll be constantly behind. Which they still would be because Samsung lags behind TSMC in manufacturing process.

20. oldskool50

Posts: 1578; Member since: Mar 29, 2019

You are wrong. Samsung has made chips, for themselves, Qualcomm and Apple at the same time. Their isnt an OEM in the world that makes lore.produxts than Samsung. Not even TSMC. TsMC mostly only makes chips. Samsung makes all types of components and not all.of them are chips. Samsung would simply tool up other factories to provide an option for Huawei. You have absolutely no idea what you're talking about. First off ,Qualcomm right now is using TSMC to make the SD855, not Samsung. So Samsung could easily make chips foe Huawei.

15. Shubham412302

Posts: 579; Member since: Nov 09, 2011

they cant make arm based chips they have no license but they can buy from samsung.

6. iloveapps

Posts: 855; Member since: Mar 21, 2019

Inferior chip! Not gonna happen.

3. tiz_meh

Posts: 77; Member since: Aug 11, 2017

Basically Hauwei is crippled unless Chinese government sit down with Trump for trade talk.

5. Vyshak75

Posts: 79; Member since: Mar 03, 2016

They don't even have the Bluetooth license now. So, no chips, no android, no Bluetooth... What will they do now...

10. tangbunna

Posts: 480; Member since: Sep 29, 2016

"if they have the OS ready, Why they do not use it now?" answer is : "river flow".

12. rossy

Posts: 41; Member since: Aug 23, 2013

That OS is vaporware. If it were so easy to create new ecosystem, Microsoft would have done it with Windows Mobile and Samsung would have done it with Tizen. Besides, how many customers outside of China would want to use OS made in China. China should get off its high horse and negotiate fair deal

14. dimas

Posts: 3368; Member since: Jul 22, 2014

They always love their high horse that's why they keep plunging hard when they tripped. Just look at their culture: movies, tv shows, everything. America is always bad to their eyes.

11. sgodsell

Posts: 7376; Member since: Mar 16, 2013

If Huawei built up a year's worth of chips. Then clearly they knew they were doing shady things.

13. dimas

Posts: 3368; Member since: Jul 22, 2014

Indeed. Hoarding is already a sign that they want to go bananas with something.

17. Popop971

Posts: 45; Member since: Nov 24, 2013

Or, they were already in trouble with the US, and they knew things could get worse with Trump shady behavior.

21. QuantumRazer

Posts: 138; Member since: Apr 27, 2019

US would've banned them no matter how clean/dirty Huawei is as a company so that they could include it in the trade deal with China, and it was pretty obvious that the ban was unavoidable... Huawei made a logical choice here. Also please learn how to form a sentence properly.

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