Huawei is reportedly all out of its homegrown chips but a new patent could be a gamechanger

Back in May 2019, Huawei was placed on the U.S. entity list which it still is on today. The U.S. cited security as the reason why it put the company on the list which prevents it from accessing its U.S. supply chain, including Google. Exactly one year later, the U.S. changed its export rules preventing foundries using American technology to produce chips from sending cutting-edge silicon to Huawei. 

As a result, Huawei can't even obtain its own Kirin chips designed by its HiSilicon unit. At one time, Huawei was TSMC's second-largest customer after Apple. For its last two flagship series, the photography-focused (no pun intended...or was it?) P50 line released in 2021 and this year's Mate 50 line (except for the low-priced Mate 50e), Huawei received permission to use Qualcomm's top-of-the-line SoCs designed not to work with 5G.

A new report released by analytical firm Counterpoint Research (via the English-language South China Morning Post) says that based on its computations, Huawei has used up all of its own homegrown chips. In the report on smartphone application processor (AP) market share, Counterpoint said, "Based on our checks and sell-through data, Huawei has finished its inventory of HiSilicon chipsets."

During the third quarter of this year, HiSilicon's share of the smartphone AP market was zero percent. That was down sequentially from the .4% share it had last quarter and the 3% share it had during the third quarter last year. The top designers of AP chips for smartphones include MediaTek, Qualcomm, and Apple.

In October, The Financial Times reported that Huawei is looking to redesign its phones to work with less advanced chips produced by Chinese foundries. China's largest foundry is SMIC and while it was able to produce chips using its 7nm process node, those chips were for cryptocurrency mining and not complex enough to drive a smartphone. SMIC and other Chinese foundries are producing 14nm chips at best, far from the cutting-edge 3nm chips that TSMC and Samsung Foundry are shipping next year.

This means that while Huawei will be able to offer 5G connectivity on its new phones if it uses silicon made in China, its phones will not be as fast as the competition. That's because the higher the process node, the lower the transistor count in those chips. And sporting fewer transistors, the chips will be less powerful and energy-efficient. The last time the iPhone had a 14nm chipset was when the Samsung version of the A9 chip was used in some iPhone 6s and iPhone 6s Plus models back in 2015.

Huawei has done an amazing job designing its own HarmonyOS operating system (now on its third version) and it replaced the Google Mobile Services ecosystem with its own Huawei Mobile Services. But since Huawei won't be able to find a foundry able to produce cutting-edge chips without using U.S. technology, the export rule change is Huawei's biggest issue at this point.

And the U.S. has also worked with the Netherlands to prevent the export to China of important Extreme Ultraviolet Lithography (EUV) machines. Mostly made by a Dutch company called ASML, these are school bus-sized machines that cost $150 million each and are used to etch circuitry patterns thinner than a human hair on silicon wafers. These patterns have to be extremely thin so that billions of transistors can be placed inside a chip.

Last month, a senior Dutch official said that the Netherlands will have to defend its economic interests. In other words, it might soon have to allow ASML to export EUV machines to China instead of passing up on the economic impact of allowing these machines to be shipped to China. Once this happens, we could see Chinese foundries like SMIC make a push to develop cutting-edge AP chips for smartphones.

But Huawei might not have to rely on ASML. Last month the company obtained a patent allowing it to create its own EUV machine that can be used to manufacture chips using a 7nm process node and lower. If Huawei can make an EUV machine without using U.S. patents, it will have a strong shot at bringing back its Kirin chips.