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Huawei’s smartphone business was at risk after the US cut access to advanced chips



All of that is now at risk following the latest US sanctions on the Chinese technology champion. Consumers around the world have abandoned the brand as the phone no longer ships with some of the popular US apps. Now, a blow to their hardware supply chains is making their advantage in the Chinese market wobble.

The company will lose supplies of cutting-edge, super-fast Kirin chipsets when it starts from next month, as they are manufactured by US technology contract manufacturers, Richard Yu, head of Huawei’s consumer business division, said at a conference last week.

“This is a huge loss for us,” Yu said on Friday, according to the AP news agency and various local media. Huawei declined to comment on the reports.
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7;s chip manufacturing subsidiary, HiSilicon, designs Kirin chips, then contracts with Taiwan Semiconductor Manufacturing Company (TSMC) to manufacture them. But earlier this year, the Trump administration banned any semiconductor maker from using US technology from supplying Huawei without prior authorization. That restriction applies to TSMC. The company did not immediately respond to a request for comment on whether it had applied for a license to sell the product to Huawei. During an earnings press conference last month, TSMC chairman Mark Liu said that the company is complying with US regulations and plans to stop shipping chips to Huawei after September 14.

Loss of selling point

Nicole Peng, an analyst at market research firm Canalys, said Huawei should have enough Kirin chipsets to make it through this year. After that, the company may switch to MediaTek, another Taiwanese chip maker. Will Wong, an analyst with IDC, said Huawei can still buy chipsets “sold by” that company.

But MediaTek’s use of standard chipset will undermine Huawei’s competitive advantage when it comes to hardware, analysts said. Peng said the loss of the Kirin chipset “will definitely affect the unique selling point” of Huawei smartphones.

Kirin chips are specifically designed to power Huawei’s more expensive devices. They are faster and more advanced than MediaTek’s chipset and have better artificial intelligence, imaging capabilities and 5G, according to Peng. That’s why Huawei uses them in flagship phones like the Mate and P models.

“Not being able to produce Kirin chips creates great uncertainty for.” [Huawei], especially for their high-end phones, “Wong said. However, Huawei still has a strong national brand image in China, which is a big driver “for the company.

Samsung's slump made Huawei the largest smartphone brand in the world for the first time, the report said

Home advantage

According to Canalys and IDC, Huawei outperformed every other brand in China last quarter, shipping about 40 million smartphones in China, an increase of more than 8 percent year-on-year.

Rapid sales in mainland China, coupled with the decline in rival Samsung, have also helped Huawei overtake the Korean company as the world’s top seller of smartphones.

Stores in China reopened earlier than in other countries still struggling with the Covid-19 pandemic, helped boost Huawei’s sales. However, analysts claim that Huawei is likely to fall behind again as stores reopen and sales continue in other global markets.

Huawei international The smartphone business was already in trouble after the United States imposed a separate restriction on the company last year that banned American companies such as Google (GOOGL) from providing technology and software to it. As a result, Huawei’s latest smartphones don’t have access to popular apps like Gmail, YouTube, and Google maps, making them much less appealing to buyers outside of China.
In the face of US restrictions, Huawei’s sales outside of China account for nearly half of all smartphones shipped. Now it sells more than 70% of its smartphones in China, according to Canalys.
And even at home, Huawei faces stiff competition from domestic rivals such as Vivo, Oppo, and Xiaomi, who have all established relationships with chipset makers like MediaTek and Qualcomm (QCOM)Peng said.

With the company forced to rely on less powerful chips that many of its domestic competitors also use, it could lose its home advantage.

“These suppliers will continue to expand strongly, while Huawei is weakening next year in China,” Peng said.


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