Would US sanctions results in Huawei to exit the smartphone market?
Chinese giant Huawei could exit the smartphone market if the conditions for the company worsens. The sanctions put on the company by the United States has been severely affecting the company’s business. We will remind, two weeks earlier, the US Department of Commerce began to suppress possible ways to bypass the sanctions for the Chinese tech giant.
TSMC, the contact manufacturer of Huawei for the HiSilicon Kirin chipsets, stopped taking new orders from the company. Given that Qualcomm is based in the United States, it is also out of the question. MediaTek has already applied for a special license to do business with Huawei, but it’s unlikely to get it.
Planning by US & TSMC!
The US sanctions are increasingly making it difficult for Huawei to make smartphones for the global market. Huawei was TSMC’s biggest customer with a 23% share in revenue in 2019. Huawei reportedly has pre-empted the sanctions and has worked to set up 5nm and 7nm manufacturing plants for SoCs in China itself, working with Shanghai-based SMIC foundries.
Previous progress card of Huawei
Huawei Investment Holdings Co., Ltd. recently released its first half-year financial report in the inter-bank market. In the first half of 2020 (H1 2020), Huawei achieved an operating income of 450.7 billion yuan ($65.6 billion). This is a year-on-year increase of 13.67%. Within the same period, its net profit is 43.1 billion yuan ($6.2 billion), a year-on-year increase of 23.49%. This means that Huawei made about $35 million in profit every day throughout H1 2020.
Huawei’s operating results for the first half of 2020 show that in the first half of 2020, the company achieved sales revenue of 454 billion yuan ($66 billion). This is a year-on-year increase of 13.1% and a net profit margin of 9.2%.
Both scenarios considered by the expert cannot be called positive for Huawei, but nevertheless, a significant reduction in the company’s market share and a decrease in competitiveness are the most optimistic. The latter will inevitably lead to a decrease in the cost of smartphones.
The actual reason for being kicking out?
Samsung Display and LG Display decided to stop the supply to Huawei from when the restrictions take effect on Sept. 15, as the ban includes chips needed to operate displays, and orders from Huawei do not take up a large portion.
Huawei is increasingly being backed to a corner due to the trade restrictions tightening from the US. The reason for Samsung Display and LG Display to back out seems to be because the chips used to power the display are impacted by the sanctions. However, the report also states the supply doesn’t make up for the bulk of Huawei’s sourcing from these manufacturers.