Huawei Might Exit Smartphone Business Following U.S. Sanctions Believes Analyst
Trade tensions between the United States and China, compounded by the former's sanctions on Huawei Technolgies Inc. have increased over the past few months. The latest development in the arena came when the United States Department of Commerce tightened its noose around the company's ability to secure semiconductors manufactured using software and equipment originating inside the U.S. and added dozens of Huawei's affiliates located all over the globe to its infamous Entity List.
These ensure that any hope that Huawei has for securing
access to leading-edge semiconductors that are vital for the company to keep up
with its peers in the smartphone world is based on whether the Commerce
Department chooses to grant third-party suppliers with licenses. With Taiwanese
company MediaTek already having applied for this permission, analyst Ming-Chi
Kuo is back today with his comments about the entire affair – and Kuo's take
isn't for the light-hearted.
In his analysts, Kuo highlights two scenarios that Huawei
should face in the aftermath of the U.S. government's latest sanctions.
According to him, regardless of the company's ability to secure chips for its
smartphones after September 15th, when the sanctions take effect, Huawei has
two scenarios ahead of it.
In the best case, the company will end up losing market
share, especially in China to its competitors who are able to provide consumers
with the latest processors in their smartphones. In the worst case, Kuo
believes that Huawei might be forced to exit the smartphone world altogether as
it struggles to procure advanced components for its devices.
In the first case, Kuo believes that a transfer of market
share, especially in China, from Huawei to its competitors will also slow down
the trend of technological upgrades in the country's smartphone market.
This will be due to the fact that since Huawei will be unable
to equip its phones with the latest hardware, its competitors will find little
incentive to keep up with the trend of upgrades in the smartphone world
believes the analyst. However, it's a line of argument that makes little sense
especially since Cupertino tech giant Apple Inc's iPhones and processors and
modems manufactured by Qualcomm Incorporated also have a presence in the
Chinese market.
Qualcomm's processors, which are also manufactured through
the same 'nodes' as Huawei's chips are, have often outperformed the latter's
products in benchmarks - which are tests designed to evaluate a gadget's performance.
In the wake of the latest American sanctions, MediaTek has been reported to be
the strongest candidate for providing Huawei with the critical components, yet
even if the company does secure access to the Helio processor lineup, it is
still likely to struggle when competing with Qualcomm's Snapdragon processors.
In addition to Apple's iPhone, smartphones from most
companies owned by the BBK Group (Oppo, Realme, OnePlus and Vivo) use
Qualcomm's processors and are available for purchase in China. MediaTek also
sells its devices in the country, and should the company secure approval for
providing Huawei with its processors, then Huawei will have to ensure that its
smartphones have other key differentiating factors that make them a worthy
purchase over similarly spec'd MediaTek smartphones.
As part of its efforts to develop in-house chip
manufacturing, Huawei has been rumored to be looking into plans for setting up
its own fabrication lines – rumors which company officials have denied. It has
also stepped up efforts to recruit Chinese university graduates to beef up its
research and development as it looks to operate at multiple fronts for
mitigating the impact on its operations from the sanctions.
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