Is the end drawing near for huawei? options are fast running out three weeks into a blanket ban on semiconductor sales to huawei. but hope may be found in unexpected places.
The chinese telecoms equipment company is expected to run out of its supply of chips early next year after it was blocked from sourcing those developed or produced using us technology from september 15.
Us chipmaker nvidiasacquisition ofchip designer arm used by 95 per cent of the locally designed chips may mean broader and longer lasting obstacles for huawei in securing its chip supplies.
That possibility, in turn, affects both of huaweis core businesses smartphones and network kit which together make up 90 per cent of its total revenues. when coupled with a previous ban on using googles android operating system, apps and services on its devices, huaweissmartphone business may never recover.
What if it moved on to an entirely new industry? huawei set up its smart vehicle business last year. so far, it has mostly produced communication gear for smart cars and electric car makers.
But recently the company has hired executives from the auto industry, including zheng gang from state-owned baic motor as huaweis chief strategic officer of its automotive solutions unit earlier this year. the company has changed tack on plans to make its own electric cars, from a flat out denial last year to a flashy appearance at the beijing international automotive exhibition 2020 last week.
Considering chinese property developer evergrandes foray into electric cars, the idea is not that far-fetched. it took the indebted property group only two years to put together an electric car business complete with six new models, batteries, charging stations and dealerships. it boldly aims to become the world's largest electric car maker in five years.
Unlike evergrande, without any competitive edge in high-tech research and development, huawei already has the technology and partnerships. it supplies byd, chinas largest electric car maker, with software for its vehicles. huawei is the only local maker of next-generation 5g equipment systems based on its own harmony operating system. the 5g system is a crucial component for smart cars.
Chip supply will remain an issue. but unlike the semiconductors that go into phones, most specialist automotive chipmakers are based in germany and japan, including toshiba, infineon, renesas and bosch. us makers account for a much smaller share of this market compared with those going into smartphones.
For those chips that must be made using us technologies, japanese producers are more likely to keep supplying. last year, japanese manufacturers sold about $10bn worth of components to huawei. some already seek us approval to resume chip sales to huawei less sophisticated automotive chips may have a chance, given less sensitivity to us sanctions.
It helps that chinas electric vehicle market is heavily subsidised. beijing has invested more than $50bn. the country has the highest ev sales in the world.
Autonomous driving, which is next on beijings list of goals, is another area full of companies seeking funding to develop and mass-produce the technology. most struggle to cover expenses. huawei at least has a head start with several autonomous vehicle-related patents and partnerships with 18 car companies on 5g-connected cars. it has a better chance than most.
Mergers and acquisitions due to bankruptcies in this crowded industry offer huawei an opportunity. even if it does go down that path, it will be some time before it can achieve the scale of its local rivals. but at least these new opportunities give huawei some chance to get on to the road to recovery.
Have a good rest of the week.
June yoonlex writer