Huawei's supply chain squeeze tightens, as SK Hynix and Samsung set to stop selling chips to the Chinese bogeyman as of next week
(2020/09/09)
- Reference: 1599662232
- News link: https://www.theregister.co.uk/2020/09/09/huaweis_supply_chain/
- Source link:
Huawei’s rotten year looks to be getting worse amid reports in [1]South Korean paper Chosun Ibo that Samsung and SK Hynix will turn off the component tap to the firm from next week, due to pressure from the US government.
The two South Korean businesses - along with many others - will reportedly cease selling certain parts to Huawei, including chipsets and displays, on September 15, [2]when stricter rules against Huawei, announced back in May , come into force. The May edict from the Trump Administration - which becomes active 120 days after it was announced - prohibits foreign companies from selling bits and pieces that were developed with US technology to Huawei unless they obtain a specific permit from the American government, cutting Huawei off from major parts of the global tech supply chain, including from bulk suppliers of [3]storage and semiconductors.
Almost all global chipsets are currently developed using at least one US technology or patent or another.
Chosun Ibo quoted an official in South Korea's semiconductor industry as saying: "After the announcement, there was confusion because the range of semiconductors using US technology was not specified. It was concluded that all semiconductors, including memory semiconductors, could not be supplied."
SK Hynix is one of the largest makers of DRAM and storage chips in the world. According to a [4]January report from tech analyst Gartner , it was the third-largest semiconductor company in 2019, behind Intel and Samsung, but ahead of Qualcomm, Broadcom, and Micron. It’s also a long-time Huawei customer, with its components appearing in flagship devices like the P30 Pro, as [5]evidenced by subsequent iFixit teardowns .
When it was pressed by an analyst on its most recent earnings call - for Q2 2020 - about what it would do to offset the risks posed by the upcoming Huawei components ban, SK's CFO Cha Jin-seok [6]told investors that "for the second half of this year, we will be operating a product mix that is well related to the launch of new products by the major customers and also make sure that we remain flexible in supply."
And while fellow Korean company Samsung is arguably best known for its own consumer tech, particularly in the mobile sphere, it also performs a brisk trade in components to other manufacturers, including Huawei and long-time archrival Apple. In fact memory accounts for the lion share of Samsung's profits.
Ultimately, both component makers will suffer because of these new rules. Huawei is the strongest vendor in Mainland China, holding onto its crown despite pressure from the US government, and the ascent of cheaper manufacturers like Xiaomi. It operates at a huge scale, pumping vast volumes of devices into the market.
Huawei set to exit server, storage and networking business in the UK [7]READ MORE
But the biggest loser will undoubtedly be Huawei. The US government has attacked its mobile business at almost every part of the supply chain. On the chipset level, Huawei is unable to license new designs from Arm, or outsource production of its Kirin silicon to the two most advanced fabricators: TSMC and Samsung, which both tout 7nm processes, and will soon move to 5nm.
One option is to shift production to China’s biggest domestic chipmaker, SMIC. That would represent a major technological setback, however. SMIC’s fabrication processes [8]lag far behind those used by its rivals on the Korean Peninsula, or across the Formosa Strait. It’s also worth noting that the US government has [9]mooted imposing sanctions against SMIC , which would hamstring its effort to catch up with competitors.
This attack on Huawei’s supply chain has rippled out into other vital parts of its business, including its lucrative carrier unit. Huawei’s tenuous supply of components was one of the reasons cited in the decision to excise the vendor from the UK’s 5G network.
Separately, Huawei has massively scaled down the activities of its enterprise business group in the UK, [10]withdrawing entire categories of products and handing out P45s .
In the short-term, Huawei faces huge disruption to its mobile business, as it shifts its supply chains to domestic manufacturers. The consequences of this may manifest in a vastly reduced menu of phones released by the firm, compounded by delays and lower production volumes. In the long term, it also risks falling behind, especially if its new supply-chain partners aren’t as advanced as its erstwhile component vendors.
The Register has contacted SK Hynix, Samsung, and Huawei for comment and at the time of writing none of them had replied.
Get our [11]Tech Resources
[1] https://biz.chosun.com/site/data/html_dir/2020/09/08/2020090803275.html
[2] https://www.theregister.com/2020/05/16/huawei_chip_ban_latest/
[3] https://www.theregister.com/2019/09/27/micron_q4_2019/
[4] https://www.gartner.com/en/newsroom/press-releases/2020-01-14-gartner-says-worldwide-semiconductor-revenue-declined-11-point-9-percent-in-2019
[5] https://www.ifixit.com/Teardown/Huawei+P30+Pro+Teardown/122028#s234963
[6] https://seekingalpha.com/article/4360103-sk-hynix-inc-hxscf-on-q2-2020-results-earnings-call-transcript?part=single
[7] https://www.theregister.com/2020/09/08/huawei_set_to_exit_server/
[8] https://www.theregister.com/2020/07/16/chinas_homegrown_chip_foundary_smic/
[9] https://www.theregister.com/2020/09/07/us_ponders_ban_on_smic/
[10] https://www.theregister.com/2020/09/08/huawei_set_to_exit_server/
[11] https://whitepapers.theregister.com/
The two South Korean businesses - along with many others - will reportedly cease selling certain parts to Huawei, including chipsets and displays, on September 15, [2]when stricter rules against Huawei, announced back in May , come into force. The May edict from the Trump Administration - which becomes active 120 days after it was announced - prohibits foreign companies from selling bits and pieces that were developed with US technology to Huawei unless they obtain a specific permit from the American government, cutting Huawei off from major parts of the global tech supply chain, including from bulk suppliers of [3]storage and semiconductors.
Almost all global chipsets are currently developed using at least one US technology or patent or another.
Chosun Ibo quoted an official in South Korea's semiconductor industry as saying: "After the announcement, there was confusion because the range of semiconductors using US technology was not specified. It was concluded that all semiconductors, including memory semiconductors, could not be supplied."
SK Hynix is one of the largest makers of DRAM and storage chips in the world. According to a [4]January report from tech analyst Gartner , it was the third-largest semiconductor company in 2019, behind Intel and Samsung, but ahead of Qualcomm, Broadcom, and Micron. It’s also a long-time Huawei customer, with its components appearing in flagship devices like the P30 Pro, as [5]evidenced by subsequent iFixit teardowns .
When it was pressed by an analyst on its most recent earnings call - for Q2 2020 - about what it would do to offset the risks posed by the upcoming Huawei components ban, SK's CFO Cha Jin-seok [6]told investors that "for the second half of this year, we will be operating a product mix that is well related to the launch of new products by the major customers and also make sure that we remain flexible in supply."
And while fellow Korean company Samsung is arguably best known for its own consumer tech, particularly in the mobile sphere, it also performs a brisk trade in components to other manufacturers, including Huawei and long-time archrival Apple. In fact memory accounts for the lion share of Samsung's profits.
Ultimately, both component makers will suffer because of these new rules. Huawei is the strongest vendor in Mainland China, holding onto its crown despite pressure from the US government, and the ascent of cheaper manufacturers like Xiaomi. It operates at a huge scale, pumping vast volumes of devices into the market.
Huawei set to exit server, storage and networking business in the UK [7]READ MORE
But the biggest loser will undoubtedly be Huawei. The US government has attacked its mobile business at almost every part of the supply chain. On the chipset level, Huawei is unable to license new designs from Arm, or outsource production of its Kirin silicon to the two most advanced fabricators: TSMC and Samsung, which both tout 7nm processes, and will soon move to 5nm.
One option is to shift production to China’s biggest domestic chipmaker, SMIC. That would represent a major technological setback, however. SMIC’s fabrication processes [8]lag far behind those used by its rivals on the Korean Peninsula, or across the Formosa Strait. It’s also worth noting that the US government has [9]mooted imposing sanctions against SMIC , which would hamstring its effort to catch up with competitors.
This attack on Huawei’s supply chain has rippled out into other vital parts of its business, including its lucrative carrier unit. Huawei’s tenuous supply of components was one of the reasons cited in the decision to excise the vendor from the UK’s 5G network.
Separately, Huawei has massively scaled down the activities of its enterprise business group in the UK, [10]withdrawing entire categories of products and handing out P45s .
In the short-term, Huawei faces huge disruption to its mobile business, as it shifts its supply chains to domestic manufacturers. The consequences of this may manifest in a vastly reduced menu of phones released by the firm, compounded by delays and lower production volumes. In the long term, it also risks falling behind, especially if its new supply-chain partners aren’t as advanced as its erstwhile component vendors.
The Register has contacted SK Hynix, Samsung, and Huawei for comment and at the time of writing none of them had replied.
Get our [11]Tech Resources
[1] https://biz.chosun.com/site/data/html_dir/2020/09/08/2020090803275.html
[2] https://www.theregister.com/2020/05/16/huawei_chip_ban_latest/
[3] https://www.theregister.com/2019/09/27/micron_q4_2019/
[4] https://www.gartner.com/en/newsroom/press-releases/2020-01-14-gartner-says-worldwide-semiconductor-revenue-declined-11-point-9-percent-in-2019
[5] https://www.ifixit.com/Teardown/Huawei+P30+Pro+Teardown/122028#s234963
[6] https://seekingalpha.com/article/4360103-sk-hynix-inc-hxscf-on-q2-2020-results-earnings-call-transcript?part=single
[7] https://www.theregister.com/2020/09/08/huawei_set_to_exit_server/
[8] https://www.theregister.com/2020/07/16/chinas_homegrown_chip_foundary_smic/
[9] https://www.theregister.com/2020/09/07/us_ponders_ban_on_smic/
[10] https://www.theregister.com/2020/09/08/huawei_set_to_exit_server/
[11] https://whitepapers.theregister.com/
Uh oh ...
Flywheel
I really hope this doesn't result in Taiwan being "liberated" by China and therefore becoming part of China's domesticity!
Re: Uh oh ...
alain williams
The real question is: If China does invade Taiwan what will anybody do about it ?
iron
I'd be interested to hear how many UK jobs have been lost because Boris cowtowed to Donnie and his orange crusade against Huawei.
Anonymous Coward
These manufacturers could just tell the Trump administration to go fuck themselves if they wanted.
What are they going to do, put them on the entities list and tell everyone they cant buy/sell components from/to Samsung, SK Hynix, and TSMC?
Oh there goes over half the worlds supply of electronics. Not like any of the remaining companies could replace them in the next 5 years.
Counterproductive
Anonymous Coward
For a short term hit to Huawei, this will give a fillip to the Chinese domestic chipmakers to up their game drastically and flood other world markets. It will hurt Koreans the most in the long run when China becomes self sufficuent. UK 5G dreams will remain just that, dreams.
Meantime, whats stopping other chinese buyers uptaking the extra stock and passing on to Huawei ? ( Sanctions busting). Happens all the time.
And consumers will be the poorer for the shenanigans.
Trump loads pistol, aims at both feet and..... BANG !
To paraphrase Henry II; Who will rid us of this meddling pest?
This idiot in his alleged pursuit of MAGA is damaging jobs and businesses all over the place due to fallout from his targetting China, Chinese businesses and many others all over the planet.