Huawei has inked new component supply deals with Semiconductor Manufacturing International Corporation (SMIC) and Shanghai Microelectronics, reports Asia Times Financial. Together, the two Chinese companies will provide the conglomerate with chips for its base stations and smartphones.
Because of a recent mandate by the U.S. government, Huawei will lose access to American-based technology this September.
Why Huawei Entered into New Supply Partnerships
The corporation forged business relationships with SMIC and Shanghai Microelectronics to stay afloat in the face of unprecedented headwinds.
Last May, the U.S. Department of Commerce placed Huawei on its Entity List, which meant it could no longer buy certain American products or equipment. Despite the setback, the company initially thrived, selling millions of handsets and securing over 600,000 5G deployment contracts. However, last month the Commerce Department introduced new export controls barring the firm from buying chips made utilizing U.S. innovations.
Consequently, Huawei’s chief semiconductor supplier, Taiwanese Semiconductor Manufacturing Company (TSMC), stopped taking its clients’ new orders. Though based in Taipei, the chipmaker utilizes American production methodologies to produce its wafers. But the communications gear company has not taken its near-time misfortune lying down.
Since losing TSMC, the telecom has worked to reaffirm its purchasing agreements with SK Hynix and Samsung. The corporation also moved to create new supply deals with MediaTek and Qualcomm to shore up its chip caches. While the status of those arrangements is unknown, it has seemingly found a way forward with its new vendors.
How SMIC and Shanghai Microelectronics Can Help Huawei
The reason Huawei depended on TSMC for its components is that it can mass-produce 7nm chips. As the Taiwanese firm pioneered the use of the process at high volume, it formed a crucial link in the smartphone maker’s supply chain. The conglomerate’s HiSilicon subsidiary used the microelectronics fabrication method to make its high-performance Kirin mobile CPUs.
By teaming with SMIC and Shanghai Microelectronics, Huawei should be able to overcome its sourcing problems.
With production capacity in China, Italy, Japan, Taiwan, and the U.S., SMIC can handle Huawei’s need for lower-end chips. As it is on the cusp of developing a 7nm process, Shanghai Microelectronics will be able to fulfill the conglomerate’s demand for high-performance chipsets. In addition, SMIC’s plan to raise $2.8 billion on the Shanghai Stock Exchange should give it the capital necessary to launch new cutting-edge foundries.
According to the South China Morning Post, Huawei has enough semiconductor supplies to sustain itself through the first half of 2021. Though the firm will likely encounter sourcing issues directly afterward, its new strategic corporate alliances should fuel its long-term success.