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On May 7, the Financial Times and other media reported that the Biden administration further tightened export restrictions on Huawei on the same day, revoking the licenses of American chip companies Qualcomm and Intel Corp. to sell semiconductors to Huawei.
Source: Wang Xinxi
Republican Congressman Michael McCaul, chairman of the Foreign Affairs Committee of the U.S. House of Representatives, confirmed the news on the same day, saying that this is a key move to prevent China from developing advanced artificial intelligence. McCaul also said the move blocked Intel and Qualcomm from selling any chips to Huawei, after "we have been concerned that the two companies are too close to China."
According to Reuters, in the past 2023, the Biden administration has rarely approved new license applications for Huawei. Bloomberg also said that Huawei is neither on Intel's top customer list nor among Qualcomm's top 10 customers.
Before the official revocation of the export license, Qualcomm had said that it did not expect to have chip sales revenue from Huawei in 2025, because Huawei no longer needed to buy 4G chips from Qualcomm. Its business with Huawei is already limited and will soon shrink to zero.
Huawei's mobile phone chips have achieved import substitution
Although the U.S. decision will directly affect the chip supply of Huawei's smartphones and laptops, especially the MateBook X Pro, the first laptop with artificial intelligence support that was launched in April (equipped with Intel's new Core Ultra 9 processor), Huawei seems to have expected that Qualcomm chips will no longer be used in mobile phone CPUs.
In the field of chips, Huawei is trying to achieve independent control of the global chip market through projects such as Hongmeng chips. At the beginning of 2024, Huawei made a major breakthrough in the supply of Kirin chips, bringing the highly anticipated Mate 60 series phones back to a state where demand outstrips supply.
In the field of mobile phones, it launched products equipped with its own HarmonyOS operating system, trying to get rid of its dependence on Google services. Huawei's mobile phone sales will return to the first place in 2024, according to Counterpoint Research data, in the first two weeks of 2024, Huawei surpassed Apple by a clear advantage to become the first in China.
On May 2, 2024, Huawei Pura 70 and Pura 70 Pro+ models will go on sale in Malaysia. Subsequently, this series ushered in the dismantling of Fomalhaut Techno Solutions, a Japanese research company. According to the report, only Huawei's Pura70 Ultra main camera uses Sony components, and the core processor, panel, chassis, battery, lens, heat dissipation, acoustic components and other components of the rest of the Pura70, Pura70 Pro, and Pura70 Pro+ models are almost fully localized.
This is the fifth year in a row that the company has disassembled Huawei phones. In the previous dismantling of the P30 Pro, the company concluded that 62% of the parts of the Huawei P30 Pro come from companies outside China.
In other words, the five-year sanctions imposed by the United States on Huawei not only failed to limit Huawei's development, but also pulled up the entire supply chain of smartphones, and also increased Huawei's brand premium and technological influence in the high-end market.
At present, the two cash flows of Huawei's terminal business are mobile phones and PCs. In 2020, Huawei's market share once reached 16.7% with only thin and light product lines. The United States once tightened sanctions and even sold less or no Intel chips, but despite this, Huawei's PC business still showed strong growth momentum.
According to the latest data released by Canalys, the shipment of PC (excluding tablets) in Chinese mainland will be 41.2 million units in 2023, a year-on-year decrease of 17%. Among them, Lenovo, HP, Dell, and Asus all declined to varying degrees, and among the TOP5 manufacturers, only Huawei performed outstandingly, with an annual growth of 11%.
Source: Wang Xinxi
Therefore, this round of sanctions, in the short term, may affect Huawei's notebook shipments, performance and market share. However, when the MateBook 16S was extremely tightly restricted, Huawei's domestic notebook business will still be in the second and third place in the quarters of 2023.
In addition, Huawei is also making efforts on the Kirin PC version of the processor, for example, it is using the Taishan V130 architecture to mass-produce a chip, and its multi-core performance will be close to M3. According to Fast Technology, there are leaks that the unnamed Huawei SoC is also equipped with a Mali-920 graphics processor, and its performance is close to Apple's M2 GPU.
After Intel's supply is cut off, Huawei may turn to the ARM ecosystem and build a set of software and hardware systems based on the ARM architecture from the processor and HarmonyOS system.
In the long run, it may force Huawei to accelerate the progress of Kirin + HarmonyOS PC. According to the analysis of industry insiders, Kirin 9010 large core * 4 + medium core * 4, re-stack GPU + NPU scale, frequency increase, can meet the light and thin market, if the Core core, process iteration, continue to pile scale, a Pro book is no problem. But it will take some time.
In the case that the Kirin 9000S has been mass-produced, it is expected that from 2024, Huawei will stop purchasing Qualcomm chips, and the new models will fully use the new Kirin processors of its own design. After the development of Xinchuang in recent years, the popular software of various architectures under the domestic PC ecological Linux basically has adaptation options.
A Chinese company kidnapped by Qualcomm Intel
At the 2023 China Automotive Industry Development (TEDA) International Forum, Dong Yang, a Chinese chip expert, made a controversial point of view when talking about US sanctions: "Everyone knows that Huawei has been treated unfairly by the United States, and its business has been greatly affected. What is the biggest impact of Huawei phones? The biggest impact is not the chip, it is that Huawei mobile phones are expelled from the Android ecosystem in the rest of the world, and Huawei mobile phones cannot be sold in the world. ”
For Huawei, it is not untrue that it has been severely affected by the US sanctions, and Huawei is working to address the shortages that may arise from the sanctions. But from another point of view, Chinese technology companies that use Intel and Qualcomm chips may face a situation of cutting off supply or taking it away at any time, such as Lenovo and Asus in the PC field; OPPO, VIVO, etc. in the field of mobile phones; NIO, Ideal, Xpeng, etc. in the field of smart cars.
From the perspective of supply chain risk, in the context of the current technology war, companies that still use Qualcomm or Intel chips as selling points are either bad or stupid, especially some Chinese technology companies that are still vying for the first right to launch Intel or Qualcomm's latest chips, are even more stupid.
In the field of smart cars, we see that there are also some new smart cars that use Qualcomm 8155 chips to flaunt their technological advancement, such as Chery's Xingtu series and a new energy vehicle that has just been released. However, in the PC and mobile phone fields, there are more technology companies using Intel and Qualcomm chips, and the specific shipments in the first quarter of 2024 are as follows (data from Canalys):
According to a report released by Canalys, in the global PC market in the first quarter of 2024 shipments, Lenovo led the PC market with a 24% market share, achieving strong growth of 8%, and notebook and desktop shipments reached 13.7 million units. HP came in second with 12 million units shipped. Dell was firmly in third place, but shipments were down 2% year-over-year. Acer rounded out the top five with 3.7 million units shipped.
Smartphones. Xiaomi ranks third with a market share of 14% due to the competitive advantage of the new high-volume model Redmi A3. OPPO is in the top five with an 8% market share.
In the context of Qualcomm and Intel have been restricted from selling chips to Huawei, other manufacturers have no choice but to be obedient, but based on the consistent capricious characteristics of the United States, the above-mentioned technology companies using the chips of the two companies may have supply chain risks.
Fu Suixin, an assistant researcher at the Institute of American Studies, said that the United States' suppression of China's semiconductor industry has seriously undermined the security of the global industrial chain and supply chain. Semiconductors are the key foundation of today's manufacturing industry, and the global semiconductor industry has been divided into more than 300 links, more than 80% of which are completed by enterprises in many countries and regions. As the U.S. crackdown on China escalates, geopolitics is becoming the dominant force shaping the semiconductor supply chain, forcing it to split and reorganize around China and the United States. This will increase uncertainty and costs in the industry and hinder innovation in semiconductor technology.
Ma Tao, a researcher at the National Global Strategy Think Tank of the Chinese Academy of Social Sciences, said: The US sanctions are intended to contain and suppress China, a major producer and consumer in the semiconductor industry chain, in an attempt to squeeze China out of the semiconductor industry chain in East Asia and even the world. Taking the upstream and downstream relationship of the semiconductor industry as an example, nearly 55% of South Korean chips are exported to China, and its upstream depends on China's supply chain, and the downstream is inseparable from the Chinese market. If chip companies such as Japan and South Korea impose chip export controls on China, it will cause the rupture of the regional industrial chain, and in the end, it will hurt the Japanese and South Korean companies themselves.
At the same time, Ma Tao believes that a series of sanctions by the United States, including the previously introduced "Chips and Science Act", are intended to increase the domestic chip manufacturing capacity in the United States with a large number of financial subsidies and tax exemptions, while trying to limit the development of China's chip manufacturing industry, but such non-market behavior is bound to destroy the existing global chip industry chain and supply chain, and is likely to lead to global chip (especially advanced process chips) overcapacity.
China's independent industrial chain is on the rise
Due to uncontrollable geopolitical risks, China is gradually forming its own industrial chain under the leadership of operators.
Since 2020, China Telecom, China Unicom, China Mobile, and China Radio and Television have conducted a total of eight public centralized procurement bids for 5G wireless main equipment and several single-source procurements. According to the six public bidding shares that have been announced, Huawei has the largest share of winning bids, followed by ZTE, Ericsson, Datang Mobile and Nokia in three to five places.
In the eight centralized procurements, the four major operators collected a total of 2231521 5G base stations, of which Huawei won 748955 bids based on the calculation of publicly available shares, with a winning share of about 58%; ZTE won a total of 400012 base stations, with a share of about 31%; Ericsson won a total of 73,488 bids for base stations, with a share of about 6%; Datang Mobile won a total of 44,987 bids for base stations, with a share of about 3%; Nokia won a total of 24,077 base stations, with a share of about 2%. (Excludes single-source and partially open purchases with undisclosed shares)
Source: Communication Industry Network
Judging from the winning bids, Huawei, ZTE and Datang Mobile have a total share of 92%, and Ericsson and Nokia have a total of 8%. In China's 5G main equipment market, the characteristics of domestic dominance and global cooperation are obvious.
Source: Communication Industry Network
In addition, among the bidding results of part of the 2024 PC server product centralized procurement project announced by China Mobile, 12 winning bids, including Hongxin, Kunlun, Yangtze River Computing, ZTE, and Inspur.
Source: C114 communication network
Previously, in China Mobile's 2021-2022 PC server centralized procurement project, Arm and x86 servers used localized CPU configurations. Among the localized CPU servers, the x86 solution currently includes Haiguang, Zhaoxin, and Montage, and Haiguang is the main solution. ARM solutions include Huawei Kunpeng and Feiteng. In this centralized procurement project, 59,982 servers using Haiguang chips, accounting for 20.90%, 58,901 servers using Kunpeng chips, accounting for 20.53%, and the number of Kunpeng (Arm) and Haiguang (x86) server tenders is close to 1:1, and the overall domestic servers account for 41.43%.
Not only China Mobile, but also the number of domestic servers purchased in China Telecom's AI computing power server (2023-2024) centralized procurement project also accounted for 47.5%. In terms of amount, of the total procurement of more than 8 billion yuan, Kunpeng servers account for about 2.8 billion yuan.
Compared with the previous large-scale centralized procurement projects in the telecommunications industry, domestic servers may account for the majority of tenders in the past two years, and the localization rate of centralized procurement has been further improved. It is not difficult to see that operators are gradually cultivating an independent and controllable industrial chain.
At present, the mainland's independent and controllable industrial chain can be roughly divided into three categories: basic software (operating system, database, middleware), basic hardware (CPU, server, storage, network equipment), and application software (enterprise services). The server of China Mobile's centralized procurement belongs to one of them, and it can be applied in the live network, which is a big step to achieve autonomy and control.
At the same time, in 2024, China Mobile announced that the world's first 400G all-optical inter-provincial backbone network independently developed by China Mobile was officially commercialized, which promoted the domestic industrial chain to comprehensively break through the core technologies of eight key devices, realized the end-to-end independent and controllable capabilities of chips, boards, and devices, and also marked a significant improvement in China Mobile's construction of a technology-independent, secure and stable supply system.
Since 2021, China has made a breakthrough in 28nm process technology, which has been widely used in the production of low-end 5G chips. In addition, domestic chip manufacturers such as Loongson and Feiteng have been able to produce 14nm chips that meet the needs of the domestic PC market. These developments show that domestic chips are gradually improving their competitiveness in the global market.
At the policy level, China is also encouraging the use of domestic advanced technology, especially in key industries such as electric vehicles, and is encouraging the use of domestic chips to reduce dependence on external supply chains.
Although there is still a gap with foreign advanced technology, the rapid development of domestic chips shows China's independent innovation ability and potential to cope with external pressure in the field of strategic technology. These efforts show that in the event of further sanctions or pressures that may be encountered in the future, domestic chips can provide some alternatives, although it will still take time to verify and improve their competitiveness in the high-end market.
ASML CEO Peter Wennink has said that there is no hope for completely isolating China. If we don't share the technology, they will do it themselves. "There are 1.4 billion people in China, and there are a lot of smart people who can think of solutions that we didn't think of. We're forcing them to innovate. They work harder, more focused, and faster. And we are too self-righteous. ”
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(1) Over 7 billion orders! China Mobile PC Server Centralized Procurement: The Spring of Xinchuang Products is Coming.c114Communication Network.2024-03-14.
(2) Blockbuster: China Telecom's largest 5G centralized procurement results this year have been released. Communication Industry Network.2023-11-09.
(3) "Too close to China", the United States revoked their export license to Huawei. Global Times.2024-05-08.
(4) Intel confirmed that the United States has attacked Huawei again: it will not let Huawei use Intel and Qualcomm chips again. Fast Technology.2024-05-10.
(5) The first overseas dismantling of Pura 70 is coming: Japanese media dismantled Huawei mobile phones for 5 years and came to a conclusion. Sanshu Technology Says.2024-04-29.
(6) Global PC sales are rising! HP Dell ranks in the top three, and it is the boss?.lei technology.2024-01-18.
(7) In-depth attention丨"Decoupling and breaking the chain" is unjust and helpless. China Discipline Inspection and Supervision Daily.2023-09-05.
(8) Chinese chip expert: The biggest impact of US sanctions on Huawei is not chips. CNMO Mobile China.2023-09-02.