In a surprising turn of events, Chinese telecommunications giant Huawei Technologies is strategizing a remarkable comeback to the highly competitive 5G smartphone market by the end of this year.
This revelation, reported by research firms, signifies a significant triumph for Huawei, which experienced a crippling blow to its consumer electronics business due to a ban imposed by the United States on equipment sales.
According to three independent technology research firms specializing in China’s smartphone sector, Huawei’s resurgence is expected to be fueled by its ability to domestically procure 5G chips.
Leveraging their advancements in semiconductor design tools and collaborating with Semiconductor Manufacturing International Co (SMIC), Huawei is poised to regain its prominence in the smartphone industry.
These findings, obtained from sources within the industry, including Huawei suppliers, were disclosed on the condition of anonymity due to confidentiality agreements with clients.
While Huawei declined to comment on this development, SMIC did not respond to requests for clarification.
Nevertheless, this prospective return to the 5G phone market would undoubtedly represent a triumphant achievement for the embattled company, which spent nearly three years navigating the turbulent waters of a “survival” mode.
In 2020, Huawei’s consumer business revenue peaked at a staggering 483 billion yuan ($67 billion). However, the subsequent year witnessed a drastic decline of nearly 50%, leaving the company in a state of uncertainty.
Once a fierce competitor to the likes of Apple and Samsung, Huawei’s aspirations of becoming the world’s leading handset manufacturer were curtailed by a series of U.S. restrictions initiated in 2019.
These restrictions severely limited Huawei’s access to crucial chipmaking tools required for the production of its most advanced smartphone models.
The concerns expressed by the U.S. and European governments regarding Huawei’s alleged security risks have had a profoundly detrimental impact on the company’s global standing.
Consequently, Huawei’s sales plummeted, and it was forced to sell off its Honor unit, which accounted for a significant portion of its shipments.
Although Huawei faced a challenging year with reduced global rankings, the company managed to secure a 10% market share in China during the first quarter, as reported by the consultancy firm Canalys.
Looking ahead, the research firms anticipate that Huawei’s partnership with SMIC will enable them to employ the N+1 manufacturing process, albeit with a projected yield rate of usable chips below 50%.
This limitation would result in 5G shipments ranging from 2 million to 4 million units, according to one of the research firms. Alternatively, another firm estimated that shipments could potentially reach 10 million units, but no further details were provided.
It is worth noting that Huawei achieved remarkable success in 2019 when it shipped a remarkable 240.6 million smartphones worldwide, marking its peak performance. However, subsequent circumstances, coupled with the sale of its Honor unit, have altered Huawei’s landscape.
Nevertheless, the state-backed China Securities Journal recently reported that Huawei has revised its mobile shipment target for 2023, raising it to 40 million units from the initial goal of 30 million units set at the beginning of the year.
Although the report did not explicitly reference a resurgence in 5G phones, it undoubtedly hints at Huawei’s ambitious plans for the future.
The three research firms predict that Huawei may introduce 5G versions of its flagship models, such as the P60, throughout this year. Furthermore, they anticipate that Huawei will launch new smartphone models in early 2024.
These projections are based on information obtained through close scrutiny of Huawei’s supply chain and recent company announcements.
However, it is important to recognize that Huawei’s appeal beyond the Chinese market has been considerably hampered by the U.S. restrictions, which severed its ties with Google’s Android operating system and the accompanying suite of developer services that underpin the vast majority of Android applications.
Consequently, Huawei’s potential to recapture its global market share may be limited.
In a bid to surmount these challenges, Huawei made a noteworthy announcement in March regarding its breakthroughs in electronic design automation (EDA) tools for chip production utilizing technology at or above 14 nanometers (nm).
EDA software plays a pivotal role in chip design companies, serving as the foundation for creating chip blueprints that are later mass-produced at fabrication facilities.
The research firms, drawing from their own industry sources, believe that Huawei’s EDA software could be seamlessly integrated with SMIC’s N+1 manufacturing process, facilitating the production of chips equivalent to 7 nm semiconductors typically found in 5G phones.
While Washington’s restrictions prohibited SMIC from acquiring the advanced chipmaking tool known as an extreme ultraviolet (EUV) machine from Dutch firm ASML, which is crucial for manufacturing 7 nm chips, analysts have identified indications that SMIC may have managed to produce 7 nm chips through adaptations made to the existing deep ultraviolet (DUV) machines, which can still be acquired from ASML without hindrance.
The second research firm observed Huawei’s request for SMIC to manufacture chip components below 14 nm specifically for 5G products.
Nonetheless, the projected yield rate of less than 50% for 5G chips raises concerns about the potentially exorbitant costs associated with their production.
Doug Fuller, a chip researcher at the Copenhagen Business School, expressed skepticism about the price competitiveness of these chips, suggesting that Huawei may need to absorb the costs if it wishes to proceed with this ambitious endeavor.
In conclusion, Huawei’s imminent return to the 5G smartphone industry showcases the company’s unwavering determination and resilience in the face of formidable challenges.
While this endeavor presents an opportunity for Huawei to reclaim its position as a prominent player in the market, the company will need to navigate the complexities of international restrictions and address the potential cost implications associated with producing 5G chips.
Only time will tell whether Huawei can overcome these hurdles and once again establish itself as a global powerhouse in the smartphone industry.