One of the most complicated and controversial topics in the tech industry is the United States’ relationship with Huawei. Citing national security concerns, the U.S. government has effectively blacklisted the Chinese tech firm by adding it to the Department of Commerce’s Entity List.
Now, Qualcomm, one of the world’s best-known chipmakers, is urging Washington to lift the restrictions and allow it to sell chips to Huawei. Given the fact that Huawei produces a massive number of smartphones annually, Qualcomm stands to benefit greatly by selling its Snapdragon processors to the Chinese firm.
The chipmaker also raised concerns about how the restrictions will affect the market as a whole by funneling more business towards foreign manufacturers like MediaTek and Samsung.
Wanting a Pass
Qualcomm’s concerns were made public after The Wall Street Journal said it obtained a presentation from the chipmaker that lobbies the U.S. government to ease its Huawei restrictions.
It’s somewhat ironic that Qualcomm is so devoted to doing business with Huawei. After all, the two recently resolved a licensing dispute that requires the latter to pay up. The settlement includes a $1.8 billion catch-up payment in the fiscal fourth quarter.
Even so, it’s impossible to ignore the business implications of selling chips to Huawei. According to IDC, the Chinese firm accounted for 17.8 percent of the global smartphone market in the first quarter of 2020. That’s a greater market share than Apple, who accounted for 13.3 percent.
Of course, the smartphone industry is on the verge of a massive shift as consumers upgrade from 4G LTE to 5G devices. Qualcomm says that there could be “a rapid shift in 5G chipset market share” if it is restricted from selling components to Huawei while international companies aren’t.
In a recent earnings call, Qualcomm’s CEO Steve Mollenkopf specifically mentioned Huawei while discussing how it would try to sell chips to every phone maker. At the time, however, there was no indication of a lobbying campaign. It appears that is now changing.
Will it Happen?
Believe it or not, the exception that Qualcomm is seeking isn’t out of the realm of possibility. Several other companies have managed to get around the U.S. ban with licenses.
Intel, Micron, and Xilinx are a few of the high-profile firms to do so. If their success is any indication, Qualcomm could have a very real chance of selling its chips to Huawei.
That being said, smartphones account for a major part of Huawei’s business. Easing the ban to let Qualcomm sell its Snapdragon processors to the Chinese firm would weaken it significantly. It will be interesting to see what happens in the coming months and whether or not Qualcomm will find success.