China's Huawei has been heavily sanctioned by the United States, and its development has encountered bottlenecks.

(Reuters)

The U.S. ban shackles Huawei's zero growth in revenue last year

[Reporter Li Qiwen/Comprehensive Report] In its heyday, Chinese communications equipment giant Huawei (Huawei) surpassed Apple (Apple) to become the world's second largest mobile phone manufacturer after South Korea's Samsung (Samsung). In terms of telecommunications equipment, it is also a global base station However, after being included in the trade blacklist by the United States in 2019, Huawei's access to high-end technology was hindered, making it gradually lose its leading position.

Huawei recently announced that its annual revenue in 2022 will be RMB 636.9 billion, slightly higher than the RMB 636.8 billion in 2021. Strictly speaking, it is in a state of zero growth.

In recent years, the United States has continued to expand sanctions, impacting Huawei's mobile phone and 5G base station business. Now it is also considering restricting all contacts between US suppliers and Huawei. All these actions not only affect Huawei, but also deal a big blow to Huawei and its supply chain in China.

Please read on...

The US ban and sanctions hindered the development of Huawei's mobile phone and 5G base station business.

(Bloomberg)

Huawei is sanctioned and several suppliers go bankrupt

Last year, Huawei only launched the Mate 50 Pro mobile phone that does not support 5G networks. It can be seen that the U.S. sanctions have dealt a big blow to Huawei’s mobile phone business, and suppliers are of course not immune. Dongguan Jinsheng Precision replaced Huawei in the production of mobile phones after Samsung withdrew from China. The shell maintained its revenue, but was later cut by Huawei. In 2018, employees were allowed to take unpaid leave for up to 5 months, and then acquired and changed its name to Genesis through a backdoor, integrating the business to maintain operations; Dongguan Xingxing Precision, a subsidiary of Jinsheng Not so lucky, Huawei canceled the order in 2019, lost the aura of the supplier, plus arrears of wages and arrears, and finally declared bankruptcy in 2021.

Shenzhen Changdongxin, which supplies Huawei's mobile phone circuit boards (PCBs), announced its closure and dismissal of all employees in November 2022 due to reduced orders; there was also Flex, the world's second largest electronics foundry after Foxconn, In 2019, in line with the U.S. policy, the supply to Huawei was cut off, and the factories in China were suspended and a large number of layoffs were laid off; as one of Huawei's suppliers, Jiahe Smart, a headphone foundry, will have limited production capacity, declining shipments, and poor performance due to the epidemic in 2020. Losses and other reasons once fell into a crisis of bankruptcy.

Dongguan Xingxing Precision, which owes wages and owes money, will go bankrupt in 2021 after losing its qualification as a Huawei supplier.

(Picture/taken from the Internet)

Advanced Chip Inventory Exhausted, HiSilicon Shipments Return to Zero

As Huawei is limited by the US ban and cannot obtain TSMC and Samsung chips, the Kirin chip shipments of its chip design factory HiSilicon Semiconductor approached zero in Q3 last year, indicating that Huawei has used up the remaining HiSilicon chip inventory.

The lack of access to TSMC chips and the immaturity of SMIC’s technology have prevented HiSilicon from self-developing chips, and its operations have come to a standstill. Revenue has dropped from US$8.2 billion (approximately NT$246 billion) in 2020 to US$1.5 billion in 2021 ( About NT$45 billion), a sharp drop of 81%. Although HiSilicon did not lay off employees because of this, it is still rumored that some engineers and senior executives chose to quit, which made Huawei face the dilemma of brain drain and technology suppression.

Huawei's chip design factory Hisilicon's Kirin chip shipments in Q3 last year approached zero.

(Picture/taken from HiSilicon official website)

Try hard to beautify!

Huawei organizes its own supply chain in China

Before being sanctioned by the United States, Huawei’s purchases from global semiconductor factories reached US$70 billion (approximately NT$2 trillion) in 2018, including TSMC, Samsung, Intel, etc., were among its suppliers. As Sino-US relations gradually deteriorated According to a survey by Fomalhaut Techno Solutions, a Japanese dismantling organization, only 1% of the American parts in Huawei's 5G small base station are left, and they are replaced by Chinese parts, accounting for more than 50%.

At present, the establishment of China's local semiconductor supply chain has become Huawei's only way out, including Jinhua Integrated Circuits (JHICC), which was previously sanctioned by the United States. It is reported that the chip factory in Fujian has quietly resumed work; Under the control of US companies, Huawei joined hands with Quliang Electronics, a packaging and testing factory in Fujian, to design and put its advanced chip packaging into production. To this end, Quliang is actively expanding the production capacity of the Quanzhou plant.

In addition to Fujian, Huawei's independent supply chain can be seen from Beijing, Shandong, Hubei to Guangdong. According to people familiar with the matter, Shenzhen, a semiconductor start-up company established in Shenzhen in 2021, will become an important production base for Huawei. In addition, Pengxinxu Technology and SwaySure Technology, funded by the Shenzhen government, also plan to expand their semiconductor factories to supply Huawei with the required components.

In order to reduce the impact of US sanctions on business, Huawei is actively building a local supply chain in China.

(Reuters)

Expand the ban!

US plans to ban companies from supplying Huawei

Even so, under the premise of lacking advanced technology and equipment, there are still many obstacles to China's development, and its self-research capabilities will be greatly reduced. Moreover, the United States has recently stopped issuing licenses to American companies to export to Huawei on the grounds of national security threats. , including prohibiting Intel and Qualcomm from supplying Huawei, in order to maintain the operation and production capacity of chip factories under severe US sanctions, it has been reported that Chinese companies including Huawei are actively purchasing second-hand semiconductor equipment from manufacturers.

At the same time, the United States has reached an agreement with the Dutch chip equipment manufacturer ASML, Japan's Nikon and Tokyo Power Technology (TEL) to prohibit the export of advanced semiconductor manufacturing equipment to China. Due to ASML's DUV and EUV equipment is the most difficult equipment for China to find alternatives in terms of semiconductor production. With the cooperation of the world's three major semiconductor giants, China's semiconductor industry may enter a cold winter.

The market believes that although the U.S. move can effectively curb China’s semiconductor development in the short term, it will still depend on whether China is capable of self-reliance in the future. Due to the suppression of US sanctions, the semiconductor industry will stagnate or even decline, but what is certain is that the US sanctions against Huawei have obviously taken effect.

The U.S. has stopped approving licenses for U.S. companies to export products and technologies to Huawei, and has teamed up with the Netherlands and Japan to encircle China.

(Bloomberg)

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