Apple Faces Challenges in China: Resurgent Huawei Poses Threat
Apple is encountering various obstacles in China, including increased geopolitical risks and a sluggish economy. However, analysts believe that the most significant challenge comes from Huawei, which recently made a major breakthrough in semiconductors despite U.S. sanctions. This poses concerns about how Huawei managed to achieve this feat without access to critical technologies. Furthermore, questions arise about the efficiency of the chip-making process used by Huawei’s semiconductor manufacturer, SMIC, and whether it can support a Huawei comeback on a large scale.
What’s Happened to Huawei So Far?
Huawei is one of the few companies, alongside Apple and Samsung, that designs its own smartphone processors. However, due to U.S. export restrictions, Huawei was unable to source chips from its previous manufacturer, TSMC, which is considered the most advanced semiconductor manufacturer worldwide. Despite being on the U.S. Entity List, SMIC, a Chinese chipmaker, managed to produce a chip for Huawei’s Mate 60 Pro, causing shockwaves within the political and tech communities.
What’s the Big Deal about Huawei’s New Chip?
The chip, named Kirin 9000S, combines the processor and components for potential 5G connectivity. While Huawei has not confirmed the phone’s 5G capability, reviews indicate that it can achieve download speeds associated with 5G. SMIC manufactured this 7-nanometer chip, indicating advanced semiconductor technology. Previously, SMIC struggled to produce such chips due to the unavailability of an EUV lithography machine from Dutch firm ASML. However, recent analysis suggests that SMIC managed to produce the chip despite the lack of cutting-edge equipment.
Is This Significant or Just Posturing?
The fact that SMIC manufactured 7-nanometer chips without EUV machines is significant from a technological standpoint. However, experts question the efficiency, profitability, and sustainability of this process on a larger scale. The yield of the 7nm process for Huawei chips is unknown but believed to be low. It remains to be seen whether SMIC can produce a sufficient number of chips for Huawei profitably.
What Will the U.S. Do Next?
The U.S. Department of Commerce has expressed interest in obtaining more information about Huawei’s chip. SMIC’s manufacturing process has exposed weaknesses in the U.S.’s export restriction strategy, potentially leading to further curbs. Washington may consider additional restrictions in other areas of chip design and manufacturing.
Apple’s China Headwinds Grow with Huawei Chip
Amidst geopolitical tensions between the U.S. and China, a resurgent Huawei poses a significant threat to Apple. Huawei, with its premium brand image and strong national pride in China, is expected to challenge Apple more than the geopolitical issues themselves. Huawei’s previous sales decline was largely due to its inability to utilize 5G technology and the latest chips. However, a potential resurgence in these areas, as seen with the Mate 60 Pro, could make Huawei’s new phones appealing to Chinese buyers once again.
“The biggest threat from Huawei is its continuous development in technology, not only in chips but also in new form factors like foldables,” says Will Wong, a senior research manager at IDC.
