According to Reuters a few days ago, Huawei, a Chinese technology giant that is unable to purchase advanced chips and key software due to US sanctions, is striving to break through technical difficulties and plans to start producing P60 flagship phones equipped with self-developed 5G chips by the end of 2023, and launch new products in early 2024 to return to the 5G smartphone market strongly. The report quoted Huawei's supply chain news and recent company announcements as saying that Huawei will take advantage of its own progress in semiconductor design tools and entrust SMIC foundry to achieve domestic localization of 5G chip production.
Huawei was once one of the leaders in the global smartphone market, going hand in hand with Samsung and Apple. But since May 2019, when it was added to the U.S. Department of Commerce on the list of export-restricted entities, Huawei has been forced to sell its sub-brand Honor and can only sell 4G mobile phone products, trying to survive in a difficult environment.
Huawei announced in March that it had made an important technological breakthrough in electronic design automation (EDA) tools for chip manufacturing up to 14nm. EDA is mainly used for blueprint production before mass production, and it is reported that Huawei's EDA software can use SMIC's N+1 process technology to manufacture chips roughly equivalent to 7nm process technology. Since the United States banned SMIC from obtaining ASML's advanced EUV chip manufacturing equipment, the EUV lithography machine, it was previously reported that SMIC has successfully produced 7nm chips in a simpler DUV lithography machine through technical adjustments.
However, some analysts believe that SMIC's yield of 7nm chips produced by DUV may be less than 50%, so it is expected that Huawei's 5G mobile phone shipments will be limited to about 200~4 million units; However, another research institute estimates that Huawei can ship 10 million 5G mobile phones, but did not disclose further details. In fact, a few days ago, it was reported that Huawei has increased the forecast of mobile phone shipments in 2023 from 30 million units at the beginning of the year to 40 million units, but did not mention 5G mobile phone related news. In contrast, research institute Canalys previous data showed that 2019 was the brightest year for Huawei's mobile phone business, with a total shipment of 240 million units that year; but it also included shipments of the Honor brand, accounting for about one-fifth of the total.
Even if Huawei successfully independently develops and produces 5G chips by SMIC, due to the US restrictions on Huawei's access to software such as Android operating system and Google Mobile Services (GMS), Huawei mobile phones will still be largely limited to the domestic market. There are also cost challenges. In view of the low chip yield, if Huawei still insists on production, it will inevitably bear the risk of increased costs. However, the analysis believes that in this way, it is more difficult to be more competitive in price.
At present, on the domestic Internet, some netizens are more willing to believe the rumor that Huawei will return to the 5G mobile phone market. For example, some netizens gave such a statement, Sai Microelectronics recently issued an announcement that the company completed the small batch trial production of a series of BAW filters manufactured by a customer in the MEMS process, and signed a purchase agreement with the customer on July 15. The netizen believes that a customer mentioned by Sai Microelectronics is most likely Huawei. Because the United States does its best to suppress and restrict Huawei, Huawei can no longer purchase 5G filters containing American technology, and can only purchase 5G filters without American technology.
For example, another netizen said that Huawei's Mate series and P series have new opportunities for 5G old versions, and began to reserve production capacity, but the price should not be cheap. The 5G supply agreement has been obtained, and the chip manufactured by SMIC is a stacking technology solution transmitted by the network, but not a Kirin chip. The netizen believes that in any case, using Qualcomm chips plus domestic 5G RF is also a good solution, which can solve the embarrassment of Huawei's lack of 5G in mobile phones. The return of Huawei's 5G mobile phone marks the gradual improvement of Huawei's mobile phone business.
A brief look back at history. Since Yu Chengdong took over Huawei's consumer business unit in 2011, Huawei's smartphone shipments in the market have become higher and higher year by year, and it has gradually stabilized the mid- and high-end mobile phone market. To a large extent, it is precisely because of this that Huawei's revenue growth space has been unprecedentedly widened. From 2011 to 2020, Huawei shipped 20 million mobile phones, 32 million units, 52 million units, 75 million units, 108 million units, 139 million units, 153 million units, 206 million units, 240 million units, and 189 million units. As for how much Huawei mobile phone shipments will be in 2021 and 2022, it seems that only Omdia has disclosed the exact number - in 2021, Huawei mobile phone shipments will be 35 million units, with a global market share of 3%; In 2022, Huawei shipped 28 million mobile phones, with a global market share of 2%. Combined with the aforementioned above, Huawei has adjusted its mobile phone shipments in 2023 from 30 million units to 40 million units. As a result, it can be seen that for three consecutive years from 2021 to 2023, Huawei's mobile phone business is in a very low period, but Huawei just does not give up and does not admit defeat - this is very admirable.
After losing the supply support of key components, including chips, Huawei's mobile phone shipments have indeed plummeted, and a large number of users and market share have been quickly divided by several other mobile phone brands. At this stage, Huawei still relies on 4G chips provided by third-party manufacturers such as Qualcomm and MediaTek to maintain the mobile phone business - 5G mobile phones have become the first choice for consumers to buy, but Huawei mobile phones cannot be equipped with 5G chips.
In mid-2022, Datasource Technology launched a 5G communication shell - to realize the second change of 4G mobile phones into 5G mobile phones, and has won the support of the three major domestic operators. At that time, there was a voice on the Internet that believed that the 5G communication shell was expected to become the salvation of Huawei's mobile phone business. But as expected, 5G communication shells are not willing to pay because of the price, importance, eSIM card and other issues. The first is the question of price. The 5G communication case costs 799 yuan, which is 10-20 times that of ordinary mobile phone cases. If the price of the adapted model is only two or three thousand yuan, then the user's willingness to buy a 5G mobile phone case may be lower. The second is the issue of weight. The 5G phone case weighs 52g and is 3.2mm thick. After a mobile phone plus a 5G mobile phone case, the entire mobile phone will be heavier and thicker. Then there's the eSIM problem. At that time, the "5G communication shell" first supported China Unicom's eSIM service, and it will be prioritized for consumer sales on Unicom's channels. This means that users need to open China Unicom's eSIM card service to use the 5G network. For users who do not have a Unicom number, an additional mobile card plan fee will be charged every month.
Although Huawei's mobile phone shipments and market share have been greatly reduced. But it must also be noted that Huawei still has a place in China's high-end mobile phone market. For example, in the folding screen mobile phone market, according to data released by IDC, in 2022, China's folding screen mobile phone market shipped nearly 3.3 million units, a year-on-year increase of 118%. Among them, Huawei's folding screen mobile phone shipments were about 1.56 million units, accounting for 47.4% of the market, ranking first, and the second to sixth places were Samsung, OPPO, vivo, honor, and Xiaomi. In the first quarter of 2023, China's folding screen mobile phone shipments were 1.02 million units, and the first to sixth manufacturers were OPPO, Huawei, Samsung, Honor, and vivo, with market shares corresponding to 35.0%, 24.9%, 18.4%, 10.5%, 5.6%, and 4.5%.
In addition, the 2022 global tablet market report released by Canalys shows that the overall shipment reached 150 million units. Among them, Huawei has shipped 6.28 million tablets, ranking fifth in the world in terms of market share and second in China - in the Chinese tablet market, Huawei accounts for a quarter of the share, and Apple, which ranks first, accounts for about a third of the share. According to data released by IDC, in the first quarter of 2023, China's tablet market shipped about 6.69 million units, with the first place Apple accounting for 34.9% and the second place Huawei accounting for 25.7%.
Moreover, according to the data released by Canalys, for 8 consecutive quarters from 2021 to 2022, China's PC (desktop + laptop) shipments exceeded 10 million units per quarter. In the first quarter of 2023, China's PC shipments were less than 9 million units, while Huawei PCs bucked the trend. In the third and fourth quarters of 2022, Huawei's PC shipments reached 1.026 million units and 1.002 million units, respectively, exceeding the 1 million unit mark for two consecutive quarters. In the first quarter of 2023, despite the decline in market demand, Huawei PC shipments reached 952,000 units, surpassing HP and Dell for the first time and becoming the second largest PC manufacturer in China.
In 2020, Huawei achieved sales revenue of CNY 302.6 billion for carrier business, CNY 100.3 billion for enterprise business, and CNY 482.9 billion for terminal business. In 2021, Huawei's carrier business achieved sales revenue of CNY 281.5 billion. The sales revenue of the enterprise business reached 102.4 billion yuan, and the sales revenue of the terminal business reached 243.4 billion yuan. In 2022, Huawei's carrier business achieved sales revenue of CNY 284 billion, Huawei Enterprise Business achieved sales revenue of CNY 133.2 billion, and terminal business revenue of CNY 214.5 billion. In the first quarter of 2023, Huawei achieved sales revenue of RMB132.1 billion, a slight increase of 0.8% year-on-year. From 2020 to 2022, Huawei's consumer terminal business revenue declined for three consecutive years, from 482.9 billion yuan to 243.4 billion yuan, and then continued to fall to 214.5 billion yuan.
There is no doubt that smartphones can be said to be the biggest pillar and confidence supporting Huawei's consumer terminal business. If Huawei's mobile phone business has not been hit, then the outside world has every reason to believe that Huawei's huge mobile phone sales will greatly drive the purchase of terminal products such as tablets, computers, watches, headphones, speakers, and smart screens, so that Apple and Samsung feel great market competition pressure. From another perspective, if Huawei's mobile phone business can return to growth, it will not only drive Huawei's revenue back to growth, but also help Huawei's Hongmeng operating system and domestic independent supply chain system to develop better.
Conclusion: Regardless of how Huawei will return to the 5G mobile phone market, perhaps from 2024, Huawei's smartphone business can gradually come out of the trough.
(I'm sorting for tech maniacs)