Huawei Technologies Co’s (華為) leafy campus in southern China has been engulfed in a state of emergency since the US Department of Commerce last month banned the sale of any silicon made with US know-how — striking at the heart of its semiconductor apparatus and aspirations in fields from artificial intelligence (AI) to mobile services.
People familiar with the matter said that its stockpiles of certain self-designed chips essential to telecom equipment would run out by early next year.
Executives scurried between meetings in the days after the latest restrictions, one person who attended the discussions said.
However, the company has so far failed to brainstorm a solution to the curbs, they said, asking not to be identified as they were talking about private matters.
While Huawei can buy off-the-shelf or commodity mobile chips from a third party, such as Samsung Electronics Co or MediaTek Inc (聯發科), it cannot possibly get enough and might have to make costly compromises on performance in basic products, they added.
What Huawei’s brass fear is that Washington, after a year of Entity List sanctions that have failed to significantly curtail the company’s rapid growth, has finally figured out how to quash its ambitions.
The latest curbs are the culmination of a concerted assault against China’s largest tech company that began years ago, when the White House tried to cut off the flow of US software and circuitry, lobbied allies from the UK to Australia to banish its network gear and persuaded Canadian police to lock up the founder’s daughter.
However, the latest measures are a more surgical strike leveled at HiSilicon Technologies Co (海思半導體), the secretive division created 16 years ago to drive research into cutting-edge fields such as AI inference chips.
That unit surged in prominence precisely because it is viewed as a savior in an era of US containment, and its silicon now matches rivals like Qualcomm Inc’s and powers many of Huawei’s products: the Kirin for phones, Ascend for AI and Kunpeng for servers.
Now that ambition is in doubt. Every chipmaker on the planet, from Taiwan Semiconductor Manufacturing Co (台積電) to China’s own Semiconductor Manufacturing International Corp (中芯國際), needs gear from US outfits, such as Applied Materials Inc, to fabricate chipsets.
Should Washington get serious about throttling that spigot, Huawei would not be able to get any of the advanced silicon it designs into the real world — stymieing efforts to craft its own processors for mobile devices and radio frequency chips for 5G base stations, to name just two of the most vital in-house components.
Dubbed the Foreign-Produced Direct Product Rule (DPR), US President Donald Trump’s latest constraints have implications for China’s 5G rollout, for which Huawei is by far the dominant purveyor.
The ban “focuses on HiSilicon-designed chips, which present the biggest threat to the US,” Jefferies Group LLC analyst Edison Lee wrote last month. “The DPR could quash HiSilicon and then Huawei’s ability to make 5G network gears.”
The latest curbs could severely disrupt production of some of the more critical and visible products in Huawei’s portfolio, including the Kirin brains and communications chips of 5G phones, AI learning chips for its cloud services and servers, and the most basic kinds of chips for networking.
“HiSilicon won’t be able to continue its innovation any further until it’s able to find alternatives through self-development and collaboration with local ones, which will take years to mature,” said Charlie Dai (戴鲲), a principal analyst at Forrester Research.
“We estimate that Huawei’s inventory of high-end chips (including baseband chips and CPUs for Huawei’s high-end smartphones) may last 12 to 18 months maximum,” Dai said.
Internally, executives remain hopeful of finding a workaround and are repeating the same mantra as a year ago — doing without US technology is not impossible.
“The good news is we still have time,” said one person involved in Huawei’s supply chain management, who asked to remain anonymous.
Chip architecture and supply “redesign takes time, but [is] not something that can’t be done,” they said.
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