US Sanction Finally Bottlenecks Huawei’s Advanced Chip Production

According to a just-released Counterpoint report, Huawei’s inventory of smartphone chips designed by in-house semiconductor unit HiSilicon reached zero in Q3 

Chinese tech company Huawei has reportedly run out of in-house-designed semiconductors for its smartphones. Huawei has struggled to get new in-house-designed integrated circuits (ICs) manufactured by any external major chip foundries, after facing tightened trade restrictions in August 2020 imposed by the US, barring the firm’s access to semiconductors developed or produced using US technology, from anywhere in the world.

Huawei’s chip design arm HiSilicon was also added to the US government’s trade blacklist back in 2019. At the time, Huawei reportedly had been stockpiling critical US components for almost a year to delay the inevitable. Fast forward to Q3 2022, and Counterpoint’s latest report on global smartphone application processor market share now indicates that Huawei, based on Counterpoint’s checks and sell-through data, have exhausted its inventory of HiSilicon chipsets.

Bleak foreshadowing for all Chinese Tech

The lagged effect of the US restrictions enacted on Huawei in 2019/20 potentially foreshadow more troubles ahead for a broader swath of Chinese companies, which were recently subjected to newer export controls against China. The goal of those sanctions appears to be to limit China’s supercomputer and semiconductor manufacturing advancements.

As for where Huawei is now without advanced chips from its HiSilicon division, The Financial Times reported in early October that Huawei is redesigning its Android handsets to use the less advanced chips fabricated by Chinese companies, which would help the firm sidestep US trade restrictions. These re-worked chip designs will apparently include 5G connectivity, but they will likely be slower than chipsets made by foreign competitors who aren’t held back by US sanctions. 

Expanding domestic semiconductor capabilities

The U.S.’s front against Chinese technology that’s allegedly  enabling China’s military modernization and surveillance operations shows no signs of easing. Regardless of the trade restrictions, the Chinese government is likely to continue its massive funding campaign to expand its domestic semiconductor capabilities, which at this time is noticeably behind global industry leaders, such as Taiwan, South Korea, Japan.

China was until very recently the largest buyer of semiconductors, consuming 35% of global semiconductors in 2021, but producing only 7% domestically. Pushing Chinese companies to diversify away from U.S. suppliers, Huawei may come to rely on suppliers in Japan, South Korea and Europe in the short term, and at the same time fast-track development for their own semiconductor industry domestically in an effort to find alternatives to US chip tech. 

About The Author