Huawei Has No Significant Alternatives to US Sanctions... Dependence on SMIC Expected to Increase

[Image source=Reuters Yonhap News]

[Asia Economy Beijing=Special Correspondent Sunmi Park] Huawei has sufficiently stockpiled 5G base station chips that can last until the first half of next year, but there is criticism that aside from filling the supply chain gaps caused by U.S. sanctions with technologically inferior domestic companies, there is no clear alternative.

On the 25th, Hong Kong's South China Morning Post (SCMP) cited Eric Cheng, CEO of Taiwan-based semiconductor research firm Isaiah Capital Research, saying, "There is evidence that Huawei has stockpiled enough 5G base station chips to last until the first half of next year in response to the U.S. Department of Commerce's 'semiconductor embargo' measures," and added, "Huawei's short-term plan is to shift semiconductor supplies from Taiwan's TSMC to Shanghai's SMIC."

He explained, "However, it is unlikely that Chinese semiconductor companies will provide meaningful help to Huawei regarding premium smartphones and 5G chips before 2023." Another semiconductor industry economist, who requested anonymity, also said, "It will be difficult for Huawei to find semiconductor supply partners in the short term," and explained, "Advancement in the semiconductor field requires not only money but also engineers and scientists who have gone through multiple generations."

It is also not easy for Huawei to seek alternatives outside China. SCMP recently reported that Huawei requested Samsung Electronics to undertake contract manufacturing of non-memory semiconductors for smartphones but was reportedly rejected.

The world's largest foundry company, Taiwan's TSMC, has supplied semiconductors to Huawei, but as TSMC plans to build a cutting-edge chip production plant in Arizona, USA, it has become difficult to continue supplying products to Huawei. The U.S. has prohibited not only American companies but also foreign companies using American technology or software from supplying semiconductors to Huawei without U.S. authorization. It is effectively a sanction measure that blocks semiconductor supply to Huawei.

Accordingly, China is pouring government-level support to achieve semiconductor self-sufficiency. Although there is a significant technological gap with TSMC, the most promising Chinese companies are considered to be SMIC, China's largest foundry company, and UniSOC, a subsidiary of Tsinghua Unigroup. SMIC recently received a $2.2 billion investment from Chinese state investors and announced plans last month to raise $2.8 billion through an initial public offering on the Shanghai Stock Exchange. The Shanghai Stock Exchange gave ultra-fast approval for SMIC's listing application in just 18 days, accelerating SMIC's fundraising pace.

Forrester analyst Thomas Hurson said, "In the current situation, Huawei has no choice but to speed up its own chip development and redesign numerous products," adding, "There are almost no alternatives to replace TSMC. Dependence on SMIC and UniSOC will increasingly deepen."

Meanwhile, SCMP assessed that Huawei's crisis could bring a windfall to another Chinese telecommunications equipment company, ZTE. It explained, "ZTE could benefit from U.S. sanctions on Huawei in 5G orders," because "most of Huawei's domestic orders in China could shift to ZTE." The newspaper recalled that although ZTE faced similar U.S. technology embargo measures related to U.S. sanctions on Iran, the sanctions were lifted after three months by paying fines and restructuring management.

This content was produced with the assistance of AI translation services.