TAIPEI (Taiwan News) — Huawei is expected to see slower growth in its 5G business this year as it expands into software, and the Chinese telecoms giant hopes U.S. sanctions on its smartphones will be lifted.
Huawei was placed on the U.S. Entity List in May 2019 due to national security concerns. The Chinese company has denied it is a risk.
After Huawei was placed on the trade blacklist, U.S. companies were effectively barred from selling it American technology. Then in August of 2020, the restrictions were expanded to include foreign companies doing business in the U.S., which led to Taiwan Semiconductor Manufacturing Co. (TSMC) ceasing to supply Huawei with chips.
The expansion of trade sanctions went into effect on Sept. 15 of last year, which left Huawei rushing to stockpile as many chips as possible before the deadline.
Huawei relies on TSMC to manufacture advanced chips for its smartphones, 5G network base stations, servers, cloud computing, and artificial intelligence products, according to Paul Triolo, head of global tech policy for Eurasia Group. Stockpiles only last so long, he added.
According to technology analyst Dan Wang, Huawei’s consumer business, which accounted for 54 percent of its revenue in 2019, will most likely be affected. Triolo said Huawei spun off its budget smartphone line "Honor" in order to regain access to vital semiconductors.
The Chinese company became the world’s biggest smartphone maker in the second quarter of 2020, but the Honor sale and chip shortage will probably see it fall out of the top six this year, according to market research firm Trendforce.
Huawei will also look to continue developing its Harmony operating system for its smartphones after being restricted from Alphabet Inc’s Android OS, said Nicole Peng, VP of Mobility at the consultancy Canalys. The company will also look to increase its footprint in cloud computing and internet-of-things products; however, those are not expected to offset the loss of smartphone and 5G infrastructure business, analysts told Reuters.
With countries like the U.K. and Japan banning Huawei from their 5G networks, the company will likely concentrate on China instead. According to Jeffries analyst Edison Lee, Huawei has enough chips saved up to install around 500,000 5G base stations, but instead of using up the supply, the Chinese government will most likely slow down its installation of 5G stations throughout the country.