Huawei's 5G survival might depend on China threatening Apple
The U.S. Commerce Department's export rule change prohibits foundries like TSMC from shipping chips to Huawei that were made using American based technology. Next week, TSMC will no longer be allowed to ship to the Chinese manufacturer the cutting-edge 5nm chips that the company hoped to use to power the Mate 40 line; the latter would be the firm's most technologically advanced phones of the year. The chips are also used on 5G base stations sold by Huawei to its telecom customers for their 5G networks.
How fast would the U.S. back off Huawei if China threatened Apple?
TSMC has been running the line 24 hours a day in an attempt to help Huawei build up a supply of chips before it isn't allowed to buy any more. What will happen to Huawei once it runs out of these 5nm chips is uncertain. According to NotebookCheck, last week's IFA trade show in Berlin was the first to open its doors to real live attendees and companies ever since the beginning of the coronavirus pandemic. But Huawei failed to unveil its 5nm chip at the show as expected which could bode poorly for the company's future.
TSMC will have to stop delivering chips to Huawei beginning next week
Huawei, which normally plays a large role at IFA, had a much smaller presence than usual. The company, and its Honor second main brand, presented only wearables and notebooks at the expo indicating that the future for Huawei's smartphones is up in the air. Those members of the supply chain familiar with the situation said that Huawei determined last year that being banned from its U.S. supply chain could be just the beginning of U.S. attacks on the company; as a result, Huawei booked capacity from TSMC in advance as a precaution. It was a wise move as the company has been building up inventory of the chip, designed in-house by Huawei's HiSilicon unit.
While Huawei fans might be tempted to place the blame for this problem at TSMC's feet, the company has been accommodating to Huawei. The latter was the foundry's second-largest customer last year representing 15% to 18% of its 2019 revenue. Apple is TSMC's largest customer.
The U.S. export rule change also prevents Mediatek from shipping 5G chips to Huawei without obtaining permission from the U.S. and Qualcomm's Snapdragon chips also cannot be obtained by Huawei without permission. TSMC, after all, produces high-end chips from both designers. China's top foundry, SMIC, is a couple of process nodes behind TSMC and is not a viable candidate for Huawei to use as a replacement at this point.
Huawei will allegedly have enough chips for three to six months of use and has told its fan base that the Mate 40 series will definitely hit the market powered by the 5nm Kirin chipset. But what will the future hold for Huawei? With the U.S. government blaming China for the coronavirus outbreak, the current administration doesn't appear to be in any mood to hand out favors to any company based in the country. Still, you never know where salvation might come from. When fellow Chinese manufacturer ZTE (also considered a threat to U.S. national security) was banned from its U.S. supply chain in 2018, the company was having a tough time until President Trump disseminated a tweet saying that he was working with President Xi on "a way to get (ZTE) back into business, fast. Too many jobs in China lost." Eventually, the Commerce Department reached a deal with ZTE. But that was then and this is now.
If Huawei is unable to find a way around the chip ban, China could retaliate against the U.S. by making things difficult for U.S. firms that have their products assembled in the country, including Apple. How fast would the U.S. back off Huawei if China blocked Apple from exporting its devices out of China?
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