Why is Huawei using chips from US company Qualcomm?

We note that Qualcomm is in the process of applying for a license to supply Huawei to the United States, and Huawei is willing to use Qualcomm chips to manufacture phones if the U.S. government allows it." Perhaps for some people, it is difficult to accept the use of Qualcomm Snapdragon chips for domestic Guanghua mobile phones. After all, the core reason why Huawei mobile phones make some people proud is the use of self-developed Hesis chips. But at this juncture, for the current Huawei: "Huawei is now facing great difficulties. Continued pressure, to our business has brought a lot of pressure, survival is our main line." "Guo Ping said.

Why is Huawei using chips from US company Qualcomm?

In the 5G era, there are only a handful of companies capable of designing 5G mobile phone chips: Qualcomm (US), Hesse (Mainland China), Samsung (South Korea), Mediatek (Taiwan China) and Unigroup Zhanrui (mainland China). Among them, only Samsung has the capability of both chip design and chip manufacturing. The rest are pure chip design manufacturers who need to rely on chip foundries like Taiwan Semiconductor Manufacturing to produce designed chips. In addition to the chip design must use the American EDA design software (at present, the world's three major EDA companies Synopsys, cadence? And? mentor? Graphics has 80% of the market. All three companies are U.S. companies or U.S. incorporated companies), but they also have a lot of U.S. equipment involved in chip production. Applied Materials of the United States and Pan Forest Semiconductor of the United States have a large market share in semiconductor equipment.

According to the ban of the US Department of Commerce on Huawei, any company in any country that contains US technology must cut off supply to Huawei unless approved by the US Department of Commerce. Therefore, both Qualcomm Mediatek Unigolor, which only has design capability, and Samsung, which also has chip manufacturing capability, do not have chip design and manufacturing capability that "does not include US technology". Had to stop supplying Huawei until the U.S. Department of Commerce approved it. Of course, as a profit-oriented company, no mobile phone chip company would not want to make a lot of money at the same time as Huawei is unable to produce its own Kirin core.

Huawei sold more than 240 million smartphones in 2019. In the current mobile chip market, according to the latest data, Qualcomm and Mediatek's share of the bite is very dead. In the third quarter of 2020, Qualcomm shipped 130 million mobile chips, while Mediatek was about the same. In other words, Huawei will sell almost as many phones in 2019 as Qualcomm or Mediatek sell chips in half a year, even if global sales are hindered. Therefore, for the mobile phone chip market, whoever can win Huawei's order can establish the industry leader position at one stroke, and the latter is hard to overtake. In this context, Qualcomm and Mediatek will inevitably apply to the US Department of Commerce to supply Huawei. But at the current pace, only two companies have received approval from the US Department of Commerce to resume supplying Huawei since the ban went into effect on September 15: Intel and AMD. This is equivalent to the fact that Huawei's PC or server products can continue to be produced on the premise of using American chips.

So the US is not really trying to kill Huawei, but to keep it a place down the chain of core technologies it controls. So while it would be a hundred times better for Huawei to choose either Mediatek or Samsung (Unigolor currently only makes low-end chips) than to simply cut off its own supply from Qualcomm, the fact is that if the US Department of Commerce approves a company to supply Huawei with chips for its phones, Qualcomm is likely to be the only candidate. Moreover, Huawei should have foreseen that it might have to work with Qualcomm on its phone chips. In my previous article, why does Huawei pay royalties to Qualcomm in the 5G era? As I've written before, on July 29, Qualcomm signed a long-term patent licensing agreement with Huawei that gives Huawei access to Qualcomm's patented technology in exchange for $150 million per quarter.

The agreement puts an end to a long-running patent dispute between Huawei and Qualcomm, and will allow the two companies to talk a lot more about chips once they get along. For Huawei, on the one hand, the performance of Qualcomm chips is absolutely no problem. After all, the majority of domestic 5G phones are using Qualcomm's Snapdragon series chips. On the other hand, according to Huawei's 2019 financial report, its consumer business has accounted for 54.4% of its annual revenue, and the majority of the consumer business is the mobile phone business. If Huawei used to be a communications equipment company, now it is more like a mobile phone company.

Therefore, letting Huawei give up the mobile phone business because of the chip problem is tantamount to letting Huawei cut the most important link in its mature 5G industrial chain product line, giving away its 40% share of the domestic mobile phone market. Moreover, Huawei's current product strategy is called "1+8+N", in which "1" is smart phone. It can be said that in Huawei's consumer business strategy, 1, namely mobile phone, is the whole fulcrum.

If Qualcomm chips can be used, Huawei can at least keep the most strategic and profitable mobile phone business, keep the large number of jobs in the mobile phone business, keep the brand of Huawei mobile phone, and keep the HMS ecosystem of Huawei. At the same time, the money earned from the mobile phone business can be continuously invested in basic scientific research. Therefore, Huawei's purchase of Qualcomm's chips is a "win-win" choice in the current era. It not only makes Qualcomm a lot of money, but also gives Huawei the capital to accumulate courage and endure hardships. After all, only when there is green hill can there be no fear of firewood