Huawei's 5G smartphone comeback: The phoenix rises from US ban ashes

Chinese technology giant Huawei is reportedly strategising a return to the 5G smartphone market later this year, signaling a resurgence after its consumer electronics business suffered due to a U.S. ban on equipment sales. According to undisclosed sources from three third-party technology research firms specializing in China's smartphone sector cited by Reuters, Huawei is expected to procure 5G chips domestically, leveraging its own advancements in semiconductor design tools along with the chipmaking capabilities of Semiconductor Manufacturing International Co (SMIC). Although Huawei declined to comment on the matter, the potential return to the 5G phone market could mark a significant victory for the company that faced severe setbacks in recent years.

Challenges and Recovery

Huawei's consumer business revenue peaked in 2020 at 483 billion yuan ($67 billion) but plummeted by nearly 50 per cent in the following year. The company, once a major contender alongside Apple and Samsung for the title of the world's largest handset maker, faced a series of U.S. restrictions starting in 2019, severely limiting its access to essential chipmaking tools for its advanced smartphone models. The U.S. and European governments had labeled Huawei a security risk, a claim the company vehemently denies. Consequently, Huawei has been selling limited batches of 5G models using stockpiled chips while primarily relying on last-generation 4G handsets for sales. As a result, its global rankings significantly dropped, but it managed to capture a 10 per cent market share in China in the first quarter of this year.

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5G Revival Projections

Research firms familiar with Huawei's operations anticipate adopting SMIC's N+1 manufacturing process for 5G chip production. However, due to an estimated yield rate of usable chips below 50 per cent, initial 5G shipments are expected to be limited to around 2 million to 4 million units. Another research firm projects shipments of up to 10 million units without providing further details. In comparison, Huawei shipped 240.6 million smartphones worldwide in its peak year of 2019. These projections suggest a gradual recovery in Huawei's smartphone business, especially considering the company's raised 2023 mobile shipment target to 40 million units.

Revamped 5G Smartphone Lineup

Should Huawei reenter the 5G smartphone market, it is anticipated that flagship models such as the P60 will receive 5G upgrades, with potential new launches expected in early 2024. However, the U.S. restrictions have disconnected Huawei from Google's Android operating system and the accompanying bundle of developer services, significantly limiting the appeal of Huawei handsets outside of China.

Advancements in Chip Design Tools

In March, Huawei announced significant breakthroughs in electronic design automation (EDA) tools for chips manufactured at and above 14 nanometers (nm) technology. This development enables Huawei to leverage its own EDA software with SMIC's N+1 manufacturing process, potentially producing chips at the equivalent of 7 nm, commonly used in 5G phones. While U.S. restrictions prevented SMIC from acquiring an advanced chipmaking tool critical for 7 nm chip production, there are indications that SMIC has managed to produce 7 nm chips by optimizing existing DUV machines obtained from Dutch firm ASML.

(With Inputs from Reuters)