In June, news emerged that Huawei will potentially come back into the 5G smartphone space by the end of 2023. This information apparently was provided to research firms anonymously from “industry sources including Huawei’s suppliers”. Huawei would not comment on the news, and neither would SMIC, the fab Huawei is using.
In the not-so-distant past, Huawei handsets were the second best-selling brand in the market. In 2019, Huawei handsets accounted for roughly 15.6% of global handset sales, beating Apple but falling just short of Samsung. This amounted to nearly 241 million Huawei phones being sold that year.
Most of these phones – not all, but definitely the high-end phones – used Huawei’s own Kirin application processor chips. They were 5G enabled, ran Android, were fabricated at TSMC on the latest process nodes, and very rarely got anything but positive reviews. At the time, Huawei and HiSilicon had access to the latest EDA tools from Synopsys and Cadence, the latest IP from Arm among many many others, and full access to the Google ecosystem for the export market.
Even in China, where Google services do not exist, Huawei’s phone sales plummeted in 2020 and 2021, with the brand dropping out of China’s top five. But now, in 2023, Huawei’s sales have increased by 76% year-on-year in Q2 bringing the brand into joint fifth place with Xiaomi at around 13% of the China market. In a market where all other brands (other than Apple) are losing sales, Huawei is somehow managing to increase its own at the expense of BBK, its previous subsidiary Honor, and Xiaomi.
Why anyone would buy a worse phone at the same or more expensive price can only be down to marketing and a sense of national pride, as although its phones are good, so are Oppo’s and Vivo’s – and they have 5G. Whatever it may be, Huawei has obviously done a great job at reviving its phone brand in the last year within China. Maybe aftermarket 5G enabling Huawei smartphone cases have helped.
This is clearly very strategic for China, and would be a big win, but it puts SMIC in a difficult position. Historically it has always kept its head down, but announcing such a feat could put it in the spotlight for further sanctions and equipment it needs to expand its mature node capacity.
Perhaps the chip isn’t the key factor to Huawei’s future global success. I feel it will certainly become a successful brand in China. China-designed chips, China-manufactured chips, and a China-made OS are all very potent selling points in the market. From a global perspective, it would still have a worse chip, even compared to other Chinese brands, but more importantly, no Google services, which is a killer for most of the rest of the world.
This will be a win for Huawei and for China, but Huawei won’t become the Huawei of 2019 any time soon. In my experience, HiSilicon has always had a great chip design team, but now apparently using its own EDA tools – and I suspect still some Western tools (supported or not) – along with a new process at SMIC rather than TSMC, means this chip won’t be world beating and potentially not commercially viable unless yields and scale are improved. For now, this will be a domestic play.