MediaTek seeks U.S. permission to supply cutting-edge 5G chips to Huawei

In May of last year, the U.S. Commerce Department put Huawei on the Entity List over fears that the company's close ties with the Communist Chinese government would result in information about U.S. consumers and corporations getting sent to servers in Beijing. Thanks to its placement on the Entity List, Huawei found itself banned from the U.S. supply chain that it spent $18 billion on two years before. This forced Huawei to scramble to find replacement suppliers for certain components and the company replaced the Google ecosystem with its own Huawei Mobile Services.

In May of this year, almost exactly 365 days after being placed on the Entity List, the U.S. announced an export rule change that would require any foundry using U.S. technology to manufacture chips, to seek permission from the U.S. before shipping components designed by Huawei to the company. The scope of the rule change was recently widened to include all chips; in other words, a foundry like TSMC where Huawei is its second-largest customer after Apple, cannot ship Huawei's 5nm Kirin chipset-or any chipset- to Huawei after the middle of next month without U.S. permission. Without cutting-edge chips to power up high-end phones like its Mate 40 line and its 5G base stations, Huawei is going to be in a world of pain.

Huawei has already come to the conclusion that it won't be able to use its own chips designed in-house and on Friday Reuters reported that Taiwan-based chip designer MediaTek has requested U.S. permission to supply Huawei with chips once the new export rules go into effect in the middle of next month. In a statement, the company said, "MediaTek reiterates its respect for following relevant orders and rules on global trade, and has already applied for permission with the U.S. side in accordance with the rules." The outfit designs chipsets for mobile devices including smartphones. Last year it unveiled its Dimensity line of SoCs that feature an integrated 5G modem. It also relies on TSMC to manufacture its chips.

Huawei had sought to do business with SMIC, China's largest foundry. However, the company is at least a couple of process nodes behind TSMC. The latter had hoped to ship to Huawei Kirin chips made using the 5nm process this year, each chip containing 171.3 million transistors per square mm. The best SMIC can deliver at the moment are chips made using the 14nm process with a transistor density of 43 million transistors per square mm. SMIC used this node to help build the Kirin 710A chipset announced in May. This IC be used to power mid-range devices like the Honor Play 4T handset.

With Huawei considered to be a national security threat in the states, there is no question that the U.S. would prefer to reject MediaTek's request for permission to manufacture cutting-edge chips for Huawei. The Chinese manufacturer was the top phone manufacturer in the world during the month of May and was second to Samsung during the second quarter of the year. It also was the largest networking equipment supplier in the world during Q2. Next month, the firms' most technologically advanced handset line, the Mate 40, could start undergoing mass-production. Huawei produces two major flagship phone series each year. In the spring it unveils its photography oriented P series with the P50 model set to be released next April. That will be followed by next fall's Mate 50 line.

If MediaTek can get permission from the U.S. to ship chips to Huawei-certainly no sure thing in the current environment, it will take plenty of pressure off of Huawei.