September 14 will mark a special milestone for Huawei: the ban announced by the US president in August will officially take effect. After this date, all outsourcing or chip suppliers to Huawei will have to seek permission from the Trump administration before selling products to the Chinese smartphone giant. As the US-China trade war has yet to show signs of cooling, and as the US presidential election approaches, Huawei will certainly not be able to buy chips from TSMC, MediaTek or any other semiconductor company. in the period from now to the end of the year.
As the CEO, founder Ren Zhengfei made a statement last year – after Huawei lost Google’s Android rights, Huawei is now in a “survival” mode. Sources from the chip manufacturing industry say the Chinese smartphone giant is doing its best to hoard as many chips as possible – from 5G chips, Wi-Fi, radio chips to chips that control the display. Huawei even buys “chunks” of chips (both made from silicon, not peeled off) to maximize the amount of stockpiles before losing the right to buy the semiconductor.
Huawei is so desperate that it has to buy chips that are “on the tray”, which is just manufactured and has not been tested.
Ming Chi-Kuo, one of the most famous names of market analysts, recently stated that Huawei may have to stop the smartphone business. And considering the “thousand pounds hanging hair” situation at the moment, it is true that Huawei should kill off the smartphone segment as soon as possible.
The price of the first person
According to data from Counterpoint, in the second quarter of the past, Huawei officially surpassed Samsung to take the number 1 position in the world. The direct reason for this toppling was due to the changing correlation between the Chinese market and the rest of the world: shortly after it became a target of the US administration last year, Huawei quickly rose. Crushing competitors at home market. This dominant position was maintained until the second quarter, when China was one of the first economies to recover from Covid-19. During the same quarter, major Samsung markets such as the US, Europe and India were all hit hard. Galaxy smartphone output declined by nearly 30% Covid-19 while Huawei / Honor smartphones were sustained thanks to the recovery of the Chinese economy.
But Huawei’s No. 1 position doesn’t just come from Chinese patriotism. According to a Nikkei report, Huawei has taken many drastic measures to defeat both Apple and its “countrymen”. Retail stores are willing to buy phones from any other brand in exchange for Huawei. Promotions for Huawei phones are sometimes worth hundreds of dollars. As a result, last quarter 2, Huawei accounted for nearly half of the Chinese market (47%).
Huawei had to take many aggressive promotions to retain market share.
Increasingly, maintaining these promotional measures will become even more difficult: Huawei is having to spend money hoarding chips and is also investing in efforts to reduce reliance on US technology (HMS instead Google on Android, Harmony operating system, own chip technologies…). Sooner or later, promotions will be forced to downsize, and that will affect phone sales.
Trying to do?
More importantly, Huawei doesn’t really have many reasons to try to stay in the smartphone market. The company is so desperate to buy the chip chip has many potential quality risks. Kirin chips have also frequently lagged in performance compared to Snapdragon or Exynos – the current desperate situation will make the gap between Huawei smartphones or Samsung smartphones, Xiaomi increasingly widening.
According to the company’s leaders, Huawei has only enough Kirin output to use for the upcoming Mate 40. If you try to launch the P50 next year, the Chinese giant has to switch to using MediaTek chips or SMIC chips is almost inevitable. At the same time, the Galaxy S21 or Mi 11 will still be equipped with Snapdragon 875, which will still be produced on the most advanced lines. The gap will be too great, and Huawei will essentially head into a race to secure the loss. The inevitable scenario is that international markets, which only account for 29% of Huawei’s sales, will be even narrower.
No longer having the right to use chips or lines with US technology, sooner or later Huawei smartphones will also be outstripped by their fellow “compatriots” in performance.
Of course, Huawei still has the Chinese market, which contributed 71% of its sales in the second quarter. But even the home battle will become even more difficult, as Xiaomi, OPPO and Vivo will still have access to the latest, most powerful chips from the United States. As long as the US ban is not lifted, Huawei’s war in China will have the same essence as its war in Europe or Southeast Asia: failure is only a matter of time. When the gap between Huawei and its compatriots / competitors exceeds the limits of users, Huawei / Honor sales will gradually evaporate.
There is still 5G
The only way to survive now belongs to the rest of Huawei’s business, which is also the one that put the Chinese giant on the world map. While many countries have moved to remove Huawei from 5G infrastructure, China and some of its allies will still choose US network equipment for the new generation of connectivity. Since the chip requirements on network devices are not as strict as those on smartphones, the business is still viable, while Huawei and Chinese manufacturers seek to create their own chips.
Huawei: why don’t you just give up and try to delay failure?
In contrast, the mobile business does not have that opportunity. Losing access to the latest American chips and even losing the right to use advanced silicon chains in the world, Huawei smartphones will sooner or later be outstripped by their Chinese compatriots. At that time, Chinese users, no matter how loyal they are, will have to give up Huawei only.