China’s Huawei is poised to sidestep US ban with the return of 5G phones – research firms

SHENZHEN, China, July 12 (Reuters) – China’s Huawei Technologies is planning a return to the 5G smartphone industry later this year, according to research firms, signaling a return after a U.S. ban on device sales decimated their consumer electronics business.

Huawei will be able to purchase 5G chips domestically using its own advancements in semiconductor design tools along with chip production from Semiconductor Manufacturing International Co (SMIC), three technology research firms third party in charge of China’s smartphone sector told Reuters.

The companies, citing industry sources including Huawei suppliers, spoke on condition of anonymity because of confidentiality agreements with customers.

Huawei declined to comment. SMIC did not respond to a request for comment.

A return to the 5G phone market will mark a victory for the company that for nearly three years has said it is in «survival» mode. Huawei’s consumer business revenue peaked at 483 billion yuan ($67 billion) in 2020, before plummeting nearly 50% a year later.

The Shenzhen-based tech giant used to compete with Apple (AAPL.O) and Samsung (005930.KS) to become the world’s largest handset maker until restrictions imposed by the company. The United States began in 2019 cutting access to the chip-making tools needed to manufacture its most advanced models.

The US and European governments have deemed Huawei a security risk, an allegation the company denies. Since then, Huawei has only sold a limited number of 5G models using the spare chip.

Stuck in selling the latest generation of 4G handsets, Huawei fell off most charts around the world last year, when sales hit a low, even though it was on the rise. 10% market share in China in the first quarter, according to consulting firm Canalys.

5G FORECAST

One of the research firms said it expected Huawei to use SMIC’s N+1 manufacturing process, although with a forecast yield rate of less than 50% usable chips, batches 5G shipments will be limited to between 2 million and 4 million units. A second company estimated shipments could reach 10 million units without providing further details.

According to Canalys, Huawei shipped 240.6 million smartphones worldwide in 2019, its peak year, before selling the Honor division that accounted for nearly a fifth of shipments that year.

The state-backed China Securities Journal reported this month that Huawei had raised its target to ship mobile phones in 2023 to 40 million units from 30 million units at the start of the year, without mentioning a return. 5G phone.

Huawei could produce 5G versions of flagship models like rival iPhone P60 this year, with new products likely to launch as early as 2024, the three research firms said, adding that added that they base those predictions on information they received through testing with Huawei’s supply chain contacts and the company’s recent announcement.

However, US restrictions cut Huawei off from Google’s Android operating system and the developer service pack on which most Android apps are based, limiting the handset’s appeal. Huawei outside of China.

CHIP DESIGN TOOLS

The research firms noted that Huawei in March announced it had made breakthroughs in electronic design automation (EDA) tools for chips manufactured using 14 nanometer (nm) technology. ) above.

Chip design companies use EDA software to create blueprints for chips before they are mass-produced at the factory.

The research companies, citing their industry sources, believe that Huawei’s EDA software can be used with SMIC’s N+1 manufacturing process to create chips with a 7 nm process equivalent, Powerful semiconductors are commonly used in 5G phones.

Washington has banned SMIC from obtaining an advanced chip manufacturing tool called the EUV machine from Dutch company ASML (ASML.AS), which is crucial in the 7 nm chip manufacturing process.

But some analysts have found signs that SMIC can still produce 7 nm chips by adapting simpler DUVs, which they can still buy for free from ASML.

The second research firm said it found that Huawei has asked SMIC to manufacture chip components below 14 nm this year for 5G products.

Doug Fuller, who studies chips at the Copenhagen Business School, said a forecast yield rate of less than 50% means 5G chips «will be very expensive».

«I guess if Huawei wanted to eat the cost they could do this, but I don’t see such chips as competitively priced,» Fuller said.

($1 = 7.2023 Chinese Yuan)

Reporting by David Kirton; Editing by Jamie Freed

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