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After the US further tightened restrictions on Huawei Technologies’ access to semiconductors on Monday, analysts had only one word to describe the situation faced by China’s telecoms champion: Impossible.
The new rules, designed to prohibit Huawei from bypassing earlier sanctionsby sourcing products via third party buyers, will essentially choke off the company’s ability to acquire semiconductors developed or produced using US technology.
“It’s hard to imagine how Huawei can turn the tables now,” said Yang Guang, director of service provider research at Strategy Analytics. “All the power of one company cannot build the entire industrial chain by itself. It is impossible.”
The latest move from the Trump administration further complicates the battleground in the US-China tech war, which has widened from semiconductors and next-generation 5G wireless networks to apps and cloud services in recent weeks.
With its avenues for sourcing critical semiconductors to power its 5G base stations, smartphones and now its cloud computing business shut off, analysts said there were very few options left.
Unless US suppliers can obtain license approvals to resume selling to the Chinese company, “the new restrictions have critically damaged Huawei's supply chain, especially chipsets for its smartphone and cloud business, as well as its innovation lab operations worldwide,” according to Charlie Dai, principal analyst at Forrester.
Ironically, Huawei’s best hope might now be pressure from US chip suppliers like Qualcomm, which once counted Huawei as a major customer before the Chinese company began producing its own chips for smartphones.
Qualcomm has been lobbying the US government for permission to sell its chips to Huawei, including high end devices for 5G smartphones, according to The Wall Street Journal.
“One possible solution for Huawei is to buy chips from Qualcomm and Taiwan-based fabless semiconductor company MediaTek, if [they] manage to apply for a license from the US … allowing them to continue to sell chips to Huawei,” said Xia Yizhe, a Shanghai-based semiconductor analyst at EqualOcean.
Qualcomm, which earns the bulk of its profit from licensing patents for modern phone systems, announced last month a new licensing deal with Huawei after the Chinese company agreed to a lump-sum payment to settle years-long licensing disputes between the two parties.
“US suppliers to Huawei are no doubt going to lobby against this [new rule] or fight for a license [so they will] be exempt again,” said Art Dicker, director at R&P China Lawyers, a Shanghai-based law firm.
The latest ruling does not mean the US government will “100 per cent cut off Huawei’s chip supply”, according to Jia Mo, an analyst from research agency Canalys. “Its main purpose is to take control; it’s up to the US government whether Huawei can or cannot buy the chips and who can sell the chips to Huawei,” he said.
In any case the alternative - Huawei building its own wafer foundry free of US core technology - invokes the “i” word again. “It’s impossible for Huawei to circumvent US bans or build a foundry completely free of US equipment or technology,” said Sheng Linghai, a semiconductor analyst at research firm Gartner.
Gu Wenjun, chief analyst at Shanghai-based semiconductor research firm ICwise, said Huawei’s only long term option was to build a complete semiconductor supply chain itself but agreed that it would be “mission impossible to build a semiconductor foundry without using any US technology”.
Huawei did not immediately reply to a request for comment.
The latest ruling by the US Commerce Department builds on similar restrictions issued in May when it refined its regulations to include chips that were the direct product of semiconductor manufacturing equipment located outside the US. That meant Huawei’s major wafer foundry supplier, Taiwan Semiconductor Manufacturing Co, needed to apply for a license to supply chips to Huawei.
China lags the US in advanced semiconductor technologies, from the chip design software and semiconductor manufacturing equipment to the foundry process technologies, which all require a huge investment in time and money to develop.
In early August, Richard Yu Chengdong, chief executive of Huawei’s consumer business group publicly admitted that the company may not be able to ship handsets with its high-end Kirin chips after this year owing to US trade sanctions.
“We are in a difficult situation … Huawei’s smartphones have no chip supply,” Yu said at the China Info 100 conference. “This year may be the last generation of Huawei Kirin high-end chips … This is a big loss for us.”
Yang at Strategy Analytics said Huawei might need to find new growth opportunities in businesses that are not so reliant on semiconductors that use advanced process nodes, such as personal computers, smart displays and cloud services.
“But whether these segments can make up the losses from its core businesses, it remains to be seen,” he said.
However, Yang said based on the current state of US-China tech tensions, cloud services were no less sensitive than 5G telecoms gear, which was what got Huawei targeted in the first place.
Some are not so pessimistic about Huawei’s long term prospects. “More restrictions on Huawei do not spell the end for the company,” said Gary Yang, a founding partner at Beijing-based venture capital firm Sky Saga Capital, who recently met Huawei’s senior executives in Shenzhen. “It will only make it more difficult for Huawei to trade with US suppliers for their technology and chips.”
On Monday the US Commerce Department added another 38 Huawei affiliates to its Entity List, banning them from purchasing US products. The affiliates, in 21 different countries, included Huawei Cloud Computing Technology and Huawei Cloud Beijing.
In a separate “Clean Network” campaign launched early this month, the US aimed to prevent sensitive personal information of US citizens and intellectual property of businesses – including Covid-19 vaccine research – from being stored and processed on cloud computing platforms run by Chinese companies like Alibaba Group Holding, China Mobile, China Telecom, Baidu and Tencent.
https://www.scmp.com/tech/big-tech/...-challenge-after-latest-us-tech-sanctions-say
The new rules, designed to prohibit Huawei from bypassing earlier sanctionsby sourcing products via third party buyers, will essentially choke off the company’s ability to acquire semiconductors developed or produced using US technology.
“It’s hard to imagine how Huawei can turn the tables now,” said Yang Guang, director of service provider research at Strategy Analytics. “All the power of one company cannot build the entire industrial chain by itself. It is impossible.”
The latest move from the Trump administration further complicates the battleground in the US-China tech war, which has widened from semiconductors and next-generation 5G wireless networks to apps and cloud services in recent weeks.
With its avenues for sourcing critical semiconductors to power its 5G base stations, smartphones and now its cloud computing business shut off, analysts said there were very few options left.
Unless US suppliers can obtain license approvals to resume selling to the Chinese company, “the new restrictions have critically damaged Huawei's supply chain, especially chipsets for its smartphone and cloud business, as well as its innovation lab operations worldwide,” according to Charlie Dai, principal analyst at Forrester.
Ironically, Huawei’s best hope might now be pressure from US chip suppliers like Qualcomm, which once counted Huawei as a major customer before the Chinese company began producing its own chips for smartphones.
Qualcomm has been lobbying the US government for permission to sell its chips to Huawei, including high end devices for 5G smartphones, according to The Wall Street Journal.
“One possible solution for Huawei is to buy chips from Qualcomm and Taiwan-based fabless semiconductor company MediaTek, if [they] manage to apply for a license from the US … allowing them to continue to sell chips to Huawei,” said Xia Yizhe, a Shanghai-based semiconductor analyst at EqualOcean.
Qualcomm, which earns the bulk of its profit from licensing patents for modern phone systems, announced last month a new licensing deal with Huawei after the Chinese company agreed to a lump-sum payment to settle years-long licensing disputes between the two parties.
“US suppliers to Huawei are no doubt going to lobby against this [new rule] or fight for a license [so they will] be exempt again,” said Art Dicker, director at R&P China Lawyers, a Shanghai-based law firm.
The latest ruling does not mean the US government will “100 per cent cut off Huawei’s chip supply”, according to Jia Mo, an analyst from research agency Canalys. “Its main purpose is to take control; it’s up to the US government whether Huawei can or cannot buy the chips and who can sell the chips to Huawei,” he said.
In any case the alternative - Huawei building its own wafer foundry free of US core technology - invokes the “i” word again. “It’s impossible for Huawei to circumvent US bans or build a foundry completely free of US equipment or technology,” said Sheng Linghai, a semiconductor analyst at research firm Gartner.
Gu Wenjun, chief analyst at Shanghai-based semiconductor research firm ICwise, said Huawei’s only long term option was to build a complete semiconductor supply chain itself but agreed that it would be “mission impossible to build a semiconductor foundry without using any US technology”.
Huawei did not immediately reply to a request for comment.
The latest ruling by the US Commerce Department builds on similar restrictions issued in May when it refined its regulations to include chips that were the direct product of semiconductor manufacturing equipment located outside the US. That meant Huawei’s major wafer foundry supplier, Taiwan Semiconductor Manufacturing Co, needed to apply for a license to supply chips to Huawei.
China lags the US in advanced semiconductor technologies, from the chip design software and semiconductor manufacturing equipment to the foundry process technologies, which all require a huge investment in time and money to develop.
In early August, Richard Yu Chengdong, chief executive of Huawei’s consumer business group publicly admitted that the company may not be able to ship handsets with its high-end Kirin chips after this year owing to US trade sanctions.
“We are in a difficult situation … Huawei’s smartphones have no chip supply,” Yu said at the China Info 100 conference. “This year may be the last generation of Huawei Kirin high-end chips … This is a big loss for us.”
Yang at Strategy Analytics said Huawei might need to find new growth opportunities in businesses that are not so reliant on semiconductors that use advanced process nodes, such as personal computers, smart displays and cloud services.
“But whether these segments can make up the losses from its core businesses, it remains to be seen,” he said.
However, Yang said based on the current state of US-China tech tensions, cloud services were no less sensitive than 5G telecoms gear, which was what got Huawei targeted in the first place.
Some are not so pessimistic about Huawei’s long term prospects. “More restrictions on Huawei do not spell the end for the company,” said Gary Yang, a founding partner at Beijing-based venture capital firm Sky Saga Capital, who recently met Huawei’s senior executives in Shenzhen. “It will only make it more difficult for Huawei to trade with US suppliers for their technology and chips.”
On Monday the US Commerce Department added another 38 Huawei affiliates to its Entity List, banning them from purchasing US products. The affiliates, in 21 different countries, included Huawei Cloud Computing Technology and Huawei Cloud Beijing.
In a separate “Clean Network” campaign launched early this month, the US aimed to prevent sensitive personal information of US citizens and intellectual property of businesses – including Covid-19 vaccine research – from being stored and processed on cloud computing platforms run by Chinese companies like Alibaba Group Holding, China Mobile, China Telecom, Baidu and Tencent.
https://www.scmp.com/tech/big-tech/...-challenge-after-latest-us-tech-sanctions-say
