Huawei reportedly told its suppliers it intends to reduce its annual smartphone output by as much as 62.9 percent from 2020.
The conglomerate’s decision to curtail its manufacturing follows its loss of access to crucial American-derived semiconductor technology. Its presence within the mobile device market declined sharply in Q4 2020 when its shipments fell by 42.3 percent year-over-year.
Based on recent comments from Washington, the corporation is unlikely to regain its former market share in the near future.
Huawei Slashes Smartphone Output
According to Nikkei Asia, Huawei informed component providers it will assemble between 70 to 80 million smartphones in 2021. The publication talked to some suppliers that suggested its yearly output could fall to around 50 million devices. Due to its sourcing limitations, the telecom will only be making 4G mobile products going forward.
Last year, the corporation shipped an estimated 189 million units and ranked as the world’s top handset seller in Q2.
The conglomerate has faced significant disruption to its cellular business since the U.S. Department of Commerce placed it on its Entity List in May 2019. That designation means it cannot acquire certain American technologies, like semiconductors and software, without a government permit. Last September, Washington issued new export controls that would penalize foreign and domestic firms for selling advanced U.S.-related chip supplies and tools to the telecommunications company without permission.
Because of the regulation change, Taiwan Semiconductor Manufacturing Company (TSMC), Huawei’s mobile chipset fabricator, ended their business relationship.
Huawei stockpiled critical smartphone components ahead of the new rules coming into effect to support its most lucrative business segments. However, its new procurement limitations massively disrupted its procurement operations. Research group Gartner estimated its chip purchases fell by 23.5 percent annually in 2020.
In addition, the conglomerate sold off its Honor budget electronics subsidiary for $15.2 billion after the new sanctions became active. Reuters also stated it is considering selling off its Mate and P Series premium device brands, an assertion it refuted.
As of this writing, Huawei has not publicly commented on reports regarding its 2021 production plans.
No Changes to Blacklisted Status Forthcoming
Gina Raimondo, the Biden administration’s nominee for Commerce Secretary, recently made a statement suggesting Huawei’s blacklisting will remain in place.
As part of her confirmation process, a group of Senators questioned Raimondo about the conglomerate and other Chinese firms that have been sanctioned by the United States. In response, the Governor of Rhode Island wrote she had “no reason” to make changes to the Entity List. She declared the affected corporations had received their designations because they posed a risk to American national security or foreign interests.
Washington restricted Huawei’s access to certain U.S. originating technologies because of its “illicit activities” and ties to the Chinese government.
Since the conglomerate is unable to purchase state-of-the-art semiconductors, production equipment, or design software, its decision to focus on 4G handsets makes sense. It may be able to source parts from that generation because of its more mature architecture.
Last month, Huawei’s financing arm invested capital into 20 China-based electronic component manufacturers to enhance its domestic supply chain. However, analysts believe the region will not have the technological resources to make cutting-edge semiconductors for at least a decade.
Given its circumstances, the conglomerate will not retake its position as a global leading smartphone vendor any time soon.