Smaller Taiwanese semiconductor companies are likely to benefit from China’s tussle with the US over trade and technological prowess, with handset chip designer MediaTek having a good chance of getting more orders from Huawei Technologies Co after Taiwan Semiconductor Manufacturing Co (TSMC) said it would halt chip supplies to the Chinese tech giant within two months.
TSMC, the world’s biggest foundry, told investors on Thursday that as of May 15 it had stopped taking new orders from Huawei for the Kirin-brand chips designed by Huawei’s HiSilicon Technologies Co, after the US Department of Commerce banned exports that contain US technology to Huawei.
TSMC said it would not ship any chips to Huawei after the 120-day grace period granted by the US ends on Sept. 14.
Huawei has placed orders totaling US$2.1 billion with TSMC as it races to secure as many advanced Kirin chips as possible before the deadline.
Analysts said the move might help Huawei build sufficient chip inventory for its smartphone shipments until the end of this year, or early next year, but it would face a shortage of high-end chips next year if it fails to find alternative chip suppliers, or chip designers to replace HiSilicon.
Huawei is under intense pressure to find new suppliers for its mobile phone chips, especially 5G chips, to prevent disruption to its new premium model production lines.
Without new and high-end 5G phones to add to its portfolio, Huawei could risk losing market share and its No. 2 position in the world’s smartphone market.
Qualcomm is out of the picture, as it is based in San Diego, California. Samsung Electronics Co could be an option, but the South Korean firm has reportedly declined Huawei’s request for its 5G chips, codenamed Exynos, or to provide foundry services to make Kirin chips, given the intensifying battle for 5G dominance.
China’s biggest chip company, Semiconductor Manufacturing International Corp (SMIC), is a long shot, given its weaker technological capabilities.
The most advanced node that SMIC can offer is 14-nanometer technology, far less advanced than the 5-nanometer technology TSMC uses to make 5G chips for Huawei.
Besides, SMIC also uses a lot of semiconductor equipment from the US to produce its chips. Placing orders with SMIC could spell trouble if the US refuses to approve it shipping chips to Huawei.
US regulations require Washington’s approval to sell goods to Huawei produced with US-made equipment or using intellectual property owned by US firms.
However, MediaTek, the world’s second-biggest mobile phone chip supplier, now has a good chance to become a major supplier to Huawei, after being its secondary source for years.
Huawei usually uses MediaTek’s chips for its entry-level phones, but it could accelerate its purchases of 4G and 5G chips, making the Hsinchu-based firm the biggest beneficiary of the US-China trade spat.
MediaTek should be able to see shipments of 4G and 5G chips to Huawei soar after Sept. 14, as standard products are allowed to be shipped to Huawei under US regulations.
Realtek Semiconductor Corp and power management chipmaker Silergy Corp are also likely to see order gains, especially if China puts Qualcomm and Broadcom on its “unreliable entity” list, which means they could face investigation and be barred from selling to Chinese firms, in retaliation for Washington’s moves against Huawei.
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