Huawei confirms ‘huge loss’ for smartphone users, blames Trump ban – News Block

In May, the Trump administration tightened its blacklist restrictions on Huawei, denying the company access to custom “Kirin” chips designed by its HiSilicon subsidiary but manufactured by outside vendors. At the time, there were varying reports about how well prepared Huawei was for the switch, how many chips it had managed to amass, how long the company would have to spend to switch from in-house designs to off-the-shelf alternatives, or find a design for the manufacturing process without any US technology.

Fast forward three months and that impact seems to have come much faster than anticipated. This has been in the headlines over the weekend, after Huawei’s rather sovereign consumer boss Ricard Yu admitted that the impending Mate 40 flagship would likely be the last to sport a Kirin chip. Actually, there is little surprise here. Absent a US change, the Mate 40 would always be the last flagship to carry an existing custom chip. After this, Huawei’s next flagship typically doesn’t expire until next spring, 12 months after the new rules.

More worrisome for Huawei, however, Yu also seemed to suggest that there may not be enough chips to meet full demand for the Mate 40. Huawei’s suppliers rejected new orders after May 15, those production runs ending around September 15. If it is true that supplies have been depleted so quickly, it would be new and unexpected. “This is a very big loss for us,” Yu said at the China Information Technology Conference Summit 2020 on Aug. 7.

The three months since May have been strange, even more than Huawei’s usual rollercoaster as it fends off Washington’s might, rowing to avoid being sucked into the maelstrom of US-China politics. In the second quarter, which ended on June 30, Huawei finally achieved its long-set goal of surpassing Samsung to lead the world’s smartphone makers.

As celebrated as it has been, it is likely to be short-lived. What will happen after the Mate 40 remains to be seen. The latest twist is America’s Qualcomm lobbying the US government for permission to supply Huawei. With its own chips on hold for now, Huawei needs to turn to outsiders. Qualcomm’s argument is that this business should go to America Inc., rather than anywhere else.

This is all timely for another reason, of course. In this well-written drama we’re all watching, just as Yu was admitting the drastic impact of Trump’s new entity list restrictions, the world was digesting the likely impact similar sanctions will have on TikTok and WeChat. A wide range of interesting parallels here, including the latest twist that a move by HiSilicon and TSMC to an American provider (Qualcomm), if it happened, would signal a similar move to force a sale of China’s ByteDance to America’s Microsoft or Twitter or whoever.

US sanctions against Huawei are already in their second year. But the next three to six months will probably be the most revealing in terms of the impact they will have. So far, Huawei has maintained its share of the smartphone market by replacing international sales softened by the loss of Google, with blistering growth in China. Another flagship without Google will further soften exports, while there is a clear risk that a chip shortfall could allow domestic rivals to reverse their decline at the hands of Huawei in recent months.

Meanwhile, the small matter of Huawei’s 5G business is also hit hard by the new sanctions – the UK used this as a reason to reverse the decision to allow Huawei into its new networks, claiming that new security vulnerabilities could be introduced. Huawei knew that this year would be difficult, and that was before these new restrictions and the context of the coronavirus affected markets around the world. A hard few months loom large now, before the year is out.