Tomorrow, Huawei enters a new gloomy world

Tram Ho

After midnight on September 14, all non-US suppliers globally will have to stop shipping to Huawei if their products contain US technology. Under the August 17 export control regulation, they need to obtain a permit from the US Commerce Department if they want to maintain relations with Huawei.

All of the most important components to Huawei are affected: from the chip to the display, the camera lens, and the circuit board. The Chinese company began stockpiling every chip in late 2018, but it’s unclear if it will do so with other parts such as screens or lenses. Wu Chia Chau, President of Nanya Technology, said: “Electronic devices are very complicated. Without any components, you cannot assemble the complete device: smartphone, laptop or base station ”.

Su Tze-yun, director of the National Taiwan Institute of Security and Defense Research, a supply chain expert, said that Huawei might find some low-end spare parts. However, that makes Huawei products much less attractive, even back 10 years ago.

Not only facing outside waves, Huawei is also full of storms inside. China’s largest technology company is at risk of severe brain drain. They have lost hundreds of talents to their opponents. A chip industry official revealed that Huawei’s chip development team, which has been working non-stop, is now suddenly easier to breathe. Many employees are waiting to be assigned the next responsibility from the company but also clearly see many uncertainties ahead.

Huawei’s fate is also a pivotal moment for the tech industry as a whole.

Suppliers must pre-adjust for the loss of a large customer. Big and small competitors – Apple, Samsung, Xiaomi, Oppo, Vivo, Ericsson and Nokia – are ready to grab market share. Meanwhile, companies buying 5G equipment from Huawei must also find alternatives. All of which shook the technology supply chain.

Ngày mai, Huawei bước vào thế giới u ám mới - Ảnh 1.

Why is the US chasing Huawei?

Its rapid growth and government contact worries the US for Huawei. Tensions escalated rapidly when US President Donald Trump took power, especially after the arrest of Huawei CFO Manh Van Chu, daughter of founder Ren Zhengfei, in Canada at the request of the United States. Ms. Manh was accused of violating US sanctions against Iran.

In May 2019, the US put Huawei on the Entity List commercial blacklist, limiting the ability to use US technology, requiring US suppliers to apply for a license to sell to Huawei. In May 2020, the US tightened the ban, this time banning non-US manufacturers like TSMC from developing products for Huawei and HiSilicon if using US equipment. In August 2020, the US dealt a fatal blow by banning all suppliers using US technology from selling to Huawei without a license.

Some companies have said they have applied for a license to continue selling to Huawei. When last year’s ban was enacted, most chipmakers halted deliveries, but with few exceptions, such as Qualcomm and Intel, which announced they had received licenses for some products.

MediaTek, Samsung Electronics, Samsung Display, SK Hynix … all said they had applied for a license. According to Harry Clark, partner of law firm Orrick, even a company that previously had a sales license for Huawei must apply for a new license or modify it according to new US regulations.

How do Huawei phones affect?

In the smartphone business, so far, Huawei has been flexible about the US ban. In the second quarter, Huawei even overtook Samsung as the world’s largest smartphone maker. However, the company’s problems also thickened.

The Kirin chip that Huawei develops by itself for high-end smartphones (flagship) is in danger of “extinction” because of the ban. This week, Huawei said it would start using Harmony 2.0 operating system on smartphones from next year, implying that it no longer hopes for the ability to restore ties with Google, and admits chip supply will impact sales. smartphone number.

Huawei felt the heat in the European market, where sales fell 16% in the second quarter while Samsung and Xiaomi enjoyed growth of 20% and 48% year-on-year in 2019. According to Canalys analyst, Samsung Quickly capitalize on Huawei’s difficulties, asserting its position as a stable alternative while negotiating with major retailers and carriers.

Donnie Teng, an analyst at Nomura Securities, said Huawei’s mobile segment faced great uncertainty. Huawei is wary of the Mate 40, its most important flagship model. Teng also predicted that Huawei would start to lose market share at home after September 15.

Jeff Pu, an analyst at GF Securities, forecasts Huawei smartphone sales next year could drop to 50 million from 195 million this year and 240 million in 2019 if the US does not loosen the ban.

The remaining businesses?

Telecommunication equipment has been the backbone of Huawei for decades, playing a big role in helping Chinese carriers build 5G infrastructure. Huawei has prepared enough components for at least 1 year. However, the speed of 5G installation in China has slowed down as Huawei races to redesign and remove as much US technology as possible from its products. Overseas, many places like the UK have decided to limit the use of Huawei equipment.

Huawei currently holds about 28% of the telecom equipment market. If the supply cannot be long-term, the beneficiaries will be Samsung, Ericsson, Nokia as well as some Japanese companies such as NEC, Fujitsu. According to Stephane Teral, veteran telecommunications expert at LightCounting Market Research, Samsung – a very active newcomer in the networking equipment and telecommunications markets – could hit the most because they have gained market share in those markets. key points such as Japan and the US, receiving attention in many other markets. The recent $ 6.7 billion deal with Verizon brought Samsung to “top” with Ericsson, Huawei and Nokia.

Opportunities for opponents

Samsung, Huawei’s biggest rival in the smartphone market, is aggressively launching new products. The second-generation folding smartphone is selling in many countries, while similar Huawei products are only sold in China. Xiaomi, Oppo and Realme are busy expanding their market share in Europe.

According to Chiu Shih Fang, an analyst with the Taiwan Institute of Economic Research, Xiaomi is extremely urgent abroad because its home market is already dominated by Huawei. However, Xiaomi may regain Chinese market share if Huawei cannot launch as many new smartphones as before.

Apple also did not miss the opportunity. Although production of 5G iPhones has been delayed, the US company plans to launch a new product line this year and asks partners to prepare enough components for up to 80 million 5G iPhones, showing great prospects. optimistic.

Nomura’s Teng expert said that by 2021, all of Huawei’s competitors – Samsung, Oppo, Vivo, Xiaomi and Apple – each hope to grab between 20 and 30 million Huawei customers.

What does it mean for suppliers?

Many suppliers sprinted to deliver goods to Huawei before the ban took effect, leading to an extremely active August. MediaTek’s August sales increased 42% year-on-year. Novatek, a supplier of Display Driver IC, recorded revenue increased by more than 30%, while TSMC increased 16%. Taiwan’s electronic component exports to China increased by about 30% in June, July, and August.

The market for DRAM chips – essential components in all types of electronic devices – is also heating up. According to research by Nikkei, the price of DDR4 8-gigabyte chips last week was about 2.95 USD, up 7% MoM. According to sources from Japanese semiconductor trading company, Huawei is buying until the last minute.

However, the supplier will see a shock drop in revenue once it fails to sell to Huawei. They will need time to balance their client portfolio. TSMC, where Huawei is the second largest customer by contributing nearly 20% of revenue, quickly filled some vacancies thanks to other firms like Apple, Nvidia, AMD.

However, not all suppliers have as diverse customer base as TSMC. The economic deceleration increases their burden. ASE Technology Holding, the world’s largest chip testing and packaging company, has warned that a ban on Huawei will cause revenue to drop sharply in 2020.

Korean memory chip manufacturers like Samsung, SK Hynix also forecast a negative impact, while the entire market has to readjust after the Huawei ban. Huawei is Samsung’s second largest customer after Apple, accounting for 3.2% of company sales. With SK Hynix, Huawei contributes 11.4% of sales.

Some suppliers believe that demand for 5G will still increase and the market will stabilize in the long term after some turmoil.

Huawei and US Presidential election

Regardless of who wins the US presidential election on November 3, many believe that tensions between the US and China have not disappeared as the two largest economies in the world are competing for technology hegemony.

Joe Biden, President Trump’s rival, has also been tough on China. His campaign highlights policies that curb China’s power and economic influence, and enhance U.S. competitiveness in technology areas like 5G and artificial intelligence. Yet, he also openly criticized Trump’s trade war for the ruined US economy. If he wins the election, he said he would work more closely with his allies to put pressure on China on many issues, and open up with Beijing to deal with global challenges.

Many observers and experts believe that under Biden’s leadership, the US has more opportunities for dialogue with China, and there is a possibility that Washington eases its ban on consumer electronic products that don’t have much connection. national security and important areas such as 5G core network, artificial intelligence.

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Source : Genk