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New US sanctions could slowly strangle Huawei's smartphone business

August 14, 2020. Summarized by summa-bot.

Huawei recently became the world's biggest smartphone maker, beating Samsung and Apple at their own game by offering consumers state of the art phones with amazing cameras at competitive prices.

The company will lose its supply of super fast, advanced Kirin chipsets starting from next month, because they are made by contract manufacturers that use US technology, Huawei's head of consumer business Richard Yu said at a conference last week.

Huawei's chipmaking subsidiary HiSilicon designs the Kirin chips, and then contracts Taiwan Semiconductor Manufacturing Company (TSMC) to make them.

In an earnings call last month, TSMC chairman Mark Liu said that the company is complying with the US regulations, and plans to stop shipping chips to Huawei after September 14.

Huawei should have enough Kirin chipsets to get through this year, said Nicole Peng, an analyst with market research firm Canalys.

Will Wong, an analyst with IDC, said Huawei would still be able to buy that company's "off-the-shelf" chipsets.

But using MediaTek's standard chipsets will erode Huawei's competitive advantages when it comes to hardware, the analysts said.

Losing Kirin chipsets "will definitely affect the unique selling point" of Huawei's smartphones, Peng said.

"Nevertheless, Huawei still has a strong national brand image in China, which is a great driver" for the company.

Huawei outsold every other brand in China last quarter, shipping roughly 40 million smartphones in China, up more than 8% compared to the same period last year, according to Canalys and IDC.

Those brisk sales in mainland China, along with rival Samsung's slump, also helped Huawei overtake the South Korean company to become the world's top smartphone seller.

Huawei's international smartphone business was already struggling after the United States imposed a separate restriction on the company last year that barred American firms such as Google (GOOGL) from supplying it with tech and software.

Before the US restrictions, Huawei's sales outside of China made up nearly half of its smartphone shipments.

And even at home, Huawei faces fierce competition from domestic rivals Vivo, Oppo and Xiaomi, who all have established relationships with chipset makers such as MediaTek and Qualcomm (QCOM), said Peng.

"These vendors will continue aggressively expanding, while Huawei is weakening next year in China," Peng said.

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