Huawei may re-enter 5G smartphone market, overcoming US ban

Technology giant Huawei is planning to return to the 5G smartphone market shortly by using chips being produced in China, Reuters news report said.
Huawei P30 smartphoneHuawei’s potential return to the 5G smartphone industry will excite smartphone buyers. U.S. ban on equipment sales to Huawei has severely impacted its consumer electronics business.

Research firms and industry sources suggest that Huawei plans to re-enter the 5G smartphone market by the end of this year, Reuters news report said.

Huawei’s ability to procure 5G chips domestically using its own semiconductor design tools and Semiconductor Manufacturing International (SMIC) is seen as a key factor in this comeback.

The company’s return to the 5G phone market would represent a significant victory after facing three years of challenges and operating in survival mode.

Huawei is expected to leverage its own advances in semiconductor design tools and collaborate with SMIC for chip production.

SMIC’s N+1 manufacturing process is anticipated to be used by Huawei, although the yield rate of usable chips is projected to be below 50 percent.

The limited yield rate could restrict 5G shipments to around 2 to 4 million units, according to one research firm. Another firm estimates shipments could reach 10 million units.
5G smartphone market forecast by IDC
The above chart from IDC indicated the growth of 5G smartphone vs 4G smartphones and the erosion in the price of the latest smartphones.

Huawei’s consumer business revenue peaked in 2020 but plummeted by almost 50 percent in the subsequent year due to U.S. restrictions on chipmaking tools.

The company’s access to chipmaking tools was severely affected by U.S. restrictions, which led to a decline in global rankings and limited sales to mostly last-generation 4G handsets.

Despite the challenges, Huawei managed to achieve a 10 percent market share in China in the first quarter of the year, according to consultancy Canalys.

The U.S. and European governments labeled Huawei a security risk, resulting in restrictions that impeded its access to chipmaking tools.

The lack of access to Google’s Android operating system and associated developer services limited the appeal of Huawei handsets outside of China.

However, Huawei’s breakthroughs in electronic design automation (EDA) tools for chips produced at and above 14 nm technology could enable the production of 7 nm chips for 5G phones in collaboration with SMIC.

The forecast yield rate of less than 50 percent for 5G chips could make them costly, potentially impacting their price competitiveness.

Huawei’s willingness to bear the cost could allow the production of 5G chips, but the pricing may not be as competitive as those of other market players.

In conclusion, Huawei’s potential return to the 5G smartphone market by the end of this year shows signs of recovery after facing significant challenges due to U.S. restrictions. The company’s ability to procure 5G chips domestically and collaborate with SMIC indicates a strategy to overcome the limitations imposed by the ban. However, the limited yield rate and potential cost challenges may impact Huawei’s competitiveness in the market. Additionally, the absence of Google’s Android operating system outside of China remains a hurdle for the company.