Huawei denies it's exiting the smartphone business

Facing US sanctions and chip shortages, Huawei reportedly enters talks to sell its upmarket smartphone brands, soon after exiting the budget market.

Pádraig Belton, Contributor, Light Reading

January 25, 2021

4 Min Read
Huawei denies it's exiting the smartphone business

Huawei has been in early-stage talks to sell its premium smartphone brands Pro and Mate and exit the high-end smartphone business, according to press reports.

A final decision has not been made on the sale, which follows Huawei's decision in November to exit the budget smartphone market, by selling its lower-end brand Honor to a consortium of 30 dealers. The sale would give Huawei a path forward if the new administration of US President Joseph Biden ends up not canceling the supply chain restrictions his predecessor Donald Trump placed on the Shenzhen company in May 2019.

Huawei's new high-end smartphones, like the P40 Pro and the Folding Mate X, have impressed consumers and analysts alike. But US restrictions have made it more difficult for Huawei to obtain their high-end Kirin chipset, and have cut off their smartphones from using Google's Mobile Services.

If Western users won't be able to access Alphabet's Gmail and Google Maps with them, then $2,400, for the Folding Mate, might be a lot to pay.

Huawei: 'Fully committed' to smartphones

In an email to Light Reading, though, Huawei denied what it called these "unsubstantiated rumors circulating regarding the possible sale of our flagship smartphone brands. There is no merit to these rumors whatsoever. Huawei has no such plan," says the Huawei spokesperson. "We remain fully committed to our smartphone business, and will continue to deliver world-leading products and experiences for consumers around the world," the spokesperson adds.

For a fleeting few bright moments from April through June 2020, Huawei had broken through as the world's largest smartphone maker, shipping 55.8 million smartphones.

Meanwhile the perennial champion, South Korea's Samsung, slipped to an unaccustomed second, shipping 53.7 million units in the second quarter, by Canalys's count.

But then the US-China tech trade war came, and Shenzhen's swan song ended.

A Huawei forward

Honor's sale met its intended purpose, with the company forming partnerships with Intel and Qualcomm. The Honor sale reportedly fetched $15.5 billion.

Huawei's HiSilicon division uses US technology to design its chips, and outsources their production to Taiwan Semiconductor Manufacturing Co (TSMC), which uses US-provided equipment. Cadence Design Systems and Synopsys provide some of Huawei's chip design software.

In mid-May 2020, the Trump administration announced companies, be they anywhere in the world, would need to receive U.S. government licenses before selling Huawei any product made using US equipment or software.

This was fighting talk, and faced with losing access to the lucrative US market, chipmakers like Taiwan's TSMC quickly folded.

Off to the new chippie

Chipmakers' annual sales of their wares come to $450 billion. China imports over $300 billion a year, since it currently lacks manufacturing capacity to meet its needs, especially at the higher levels. But the US is falling behind in manufacturing too, with East Asia's Samsung and TSMC plunging ahead, and China seeking to catch up and become self-sufficient.

China has unleashed a multibillion-dollar plan, called Made in China 2025, to reach self-sufficiency in semiconductors and other critical technologies by 2025. Silicon is big business. The market capitalization of the world's listed semiconductor firms exceeds $4 trillion, four times the amount five years ago.

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And it's a quickly shifting industry. It is seeing new outsiders drawn into design, with Apple and Amazon developing their own optimized chips for others to make for their iPhones and data centers.

But foundries are where the eye-popping sums are. TSMC's 3 nm factory, which it finished last year in southern Taiwan, cost it $19.5 billion. (Intel, meanwhile, stays stuck at 10 nm by comparison: part of why the company edged out its former chief executive Bob Swan in favor of Pat Gelsinger.)

Two decades ago, a top-flight foundry would have cost $1 billion. As costs continue to soar, it might eventually be just TSMC standing. Meaning the high politics of providing chips to the world is unlikely to go away soon.

A decade ago, in the heyday of the oil economy, the Straits of Hormuz was the world's choke point. In the Cold War, it was the Fulda Gap. In the coming years, the world's great dispute seems set to be over silicon.

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Pádraig Belton, contributing editor special to Light Reading

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Pádraig Belton

Contributor, Light Reading

Contributor, Light Reading

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