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China’s Huawei prepares to circumvent US ban by returning 5G phones

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  • The giant under US sanctions should produce 5G chips locally
  • Chips should use Huawei EDA tools and SMIC production
  • Semiconductors can have a relatively low efficiency rate of 50%

SHENZHEN, China, July 12 (Reuters) – China’s Huawei Technologies plans to return to the 5G smartphone industry by the end of this year, according to research firms, signaling a comeback after a U.S. ban on sales equipment decimated its consumer electronics business.

Three third-party technology research firms covering China’s smartphone sector told Reuters that Huawei should be able to purchase 5G chips in the country using its own semiconductor design tool developments as well as manufacturing. chips from Semiconductor Manufacturing International Corporation (SMIC).

The companies, citing industry sources including Huawei suppliers, spoke on condition of anonymity due to confidentiality agreements with customers.

Huawei declined to comment. SMIC did not respond to a request for comment.

A return to the 5G telephony market would mark a victory for the company, which has been in “survival” mode for almost three years. Revenue from Huawei’s consumer business peaked at 483 billion yuan ($67 billion) in 2020, before falling nearly 50% a year later.

The Shenzhen-based tech giant rivaled Apple (AAPL.O) and Samsung (005930.KS) to be the world’s biggest phone maker until a round of US restrictions from 2019 cut it off. access to the essential chip-making tools to produce its most advanced. models. .

Both the US and EU governments have branded Huawei a security risk, a charge the company denies. Since then, Huawei has only sold limited batches of 5G models with in-stock chips.

After halting sales of the latest 4G phones, Huawei fell from most global rankings last year when sales hit a low point, despite hitting 10% market share in China in the first quarter. , according to the consulting firm Canalys. .

5G forecast

A research firm said it expects Huawei to use SMIC’s N+1 manufacturing process, although the expected yield rate of usable chips will be less than 50%, and 5G deliveries will be limited to about 2 to 4 million units. A second company estimated shipments could reach 10 million units, without providing further details.

Huawei shipped 240.6 million smartphones worldwide in 2019, a record year, according to Canalys, before selling off its Honor unit which accounted for almost a fifth of shipments that year.

The state-backed China Securities Journal reported this month that Huawei raised its mobile phone shipment target for 2023 to 40 million units from 30 million at the start of the year, without mentioning a back to 5G phones.

The three research companies said that Huawei could produce 5G versions of flagship models like the iPhone rival P60 this year, with a relaunch likely in early 2024, adding that they base the predictions on information they received through contact checks in their supply chain. and recent company announcements.

However, US restrictions have cut off Huawei from Google’s Android operating system and suite of developer services on which most Android apps are based, limiting the appeal of Huawei phones outside of China.

Chip design tools

The research firms noted that Huawei announced in March that it had made breakthroughs in electronic design automation (EDA) tools for chips produced using 14nm technology and above.

Chip design companies use EDA software to produce schematics of chips before they are mass-produced in the factory.

The research firms, citing their own industry sources, believe that Huawei’s EDA software with SMIC’s N+1 manufacturing process can be used to make chips equivalent to 7nm, the powerful semiconductors typically used in phones. 5G.

Washington blocked SMIC from acquiring an advanced chip-making tool called the EUV machine from Dutch company ASML (ASML.AS) that is crucial to the 7-nanometer chip manufacturing process.

But some analysts have found signs that SMIC has nevertheless managed to produce 7nm chips by modifying simpler DUV machines that it can still buy freely from ASML.

The second research company said it noted that Huawei requested SMIC to produce sub-14nm chip components for 5G products this year.

An expected rate of return of less than 50% means 5G chips “will be expensive”, said Doug Fuller, who studies chips at Copenhagen Business School.

“I think if Huawei wants to cut costs, they can do that, but I don’t see these chips being priced competitively,” Fuller said.

($1 = 7.2023 Chinese Yuan)

(Reporting by David Kirton). Editing by Jimmy Freed

Our standards: Thomson Reuters Trust Principles.

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