What Huawei Dreads Most Is More US Sanctions

Commentary Huawei’s financial report for the first half of this year shows a sharp decline in its revenue. The company’s senior members have talked about their difficulties on different occasions, revealing that Washington’s sanctions and technology ban have significantly impacted the Chinese tech giant. On Aug. 6, Huawei disclosed its H1 financial report. According to its press release, the company generated a revenue of $49.5 billion in the first half of 2021, with the biggest decline in its consumer business revenue, which includes handsets—it fell from $39.5 billion in the first half of last year to $20.9 billion in the first half of this year. Huawei’s rotating chairman Eric Xu said that the company wanted “to survive and do so sustainably,” which implies that Huawei was hard hit by Washington’s sanctions. Huawei’s revenue growth trend was curbed by the sanctions imposed by the United States in May 2019. Huawei recorded 19 percent increase in revenue in 2019, and only 3.8 percent in 2020. “As the U.S. has imposed four rounds of sanctions over the past two years, our 5G smartphones are affected, and we have to go with 4G; and our 5G microchips are used like 4G,” said Richard Yu, Huawei’s consumer business CEO, at the launch event of the company’s latest flagship model P50 in July. Yu’s words reveal that Huawei’s core consumer business has been losing ground due to Washington’s sanctions and export bans on Huawei. It’s been pointed out that P50-series suffer from lack of adequate peripheral 5G parts such as radio frequency filters. “Huawei could no longer source bulk acoustic wave (BAW) filters from Broadcom and thus had to sell the P50 as 4G phones,” reported Asia Times. The report indicated that such filters convert electrical energy into acoustic or mechanical energy, and are widely used for many new 4G and 5G bands. According to a Chinese report, filters in China use either SAW (surface acoustic wave) technology or BAW technology, and their production is dominated by U.S. and Japanese manufacturers. Attendees walk past a display for 5G services from Chinese technology firm Huawei at the PT Expo in Beijing, China, on Oct. 31, 2019. (Mark Schiefelbein/AP Photo) Murata Manufacturing Co., Ltd., a Japanese manufacturer of electronic components, had a 50 percent global market share of SAW filters in 2020, according to its annual report. U.S. manufacturers of BAW filters, Broadcom Inc. and Qorvo, account for 87 percent and 8 percent of the global market of BAW filters, respectively. China-made RFICs (radio-frequency integrated circuit) are used in 2G, 3G, and 4G frequency bands. Few domestic manufacturers of SAW and BAW filters are able to mass produce the products. Most Chinese filters are used in medium- and low-end products only. Chinese producers are not able to provide high-performance 5G RFICs needed by Huawei. Washington’s restriction orders on chips have also impacted Huawei’s server vendor business, aside from its high-end handset business. Rumors on the internet say that Huawei plans to sell its server business and that the local branch of China’s watchdog for state-owned enterprises in eastern Suzhou city will take over. If the news is true, Huawei will have to sell another premium asset. Last year, it sold its smartphone brand Honor to a consortium of more than 30 companies. This time, Huawei is said to be selling its server business that uses Intel/AMD chips (based on X86 architecture). Huawei finds it difficult to have a stable supply of X86 chips due to the U.S. sanction. According to Chinese media reports, X86 architecture is the absolute mainstream system adopted by China’s server CPU market. This system is highly reliable on Intel and AMD in terms of core components, and the X86 CPUs are purchased from Intel and AMD. Once these companies are prohibited by the United States from selling their products to China, Chinese X86 server service providers could see their businesses shut down. Huawei may not be able to escape Washington’s bans even if it sells its businesses to other companies, which the United States may include in the Entity List as well. At a press conference on Sept. 13, the Ministry of Industry and Information Technology (MIIT) announced that China has set up over 1 million base stations, accounting for more than 70 percent of the global base stations. China has over 400 million 5G end users—the largest user group in the world. China’s shipment of 5G handsets reached 168 million, a year-on-year growth of 80 percent. However, Huawei’s P50 handsets show that, even with 5G chips, they do not necessarily have the function of 5G. Moreover, as long as the U.S. bans the export of filter technology used in 5G RFICs, smart electronic products of various loT (Internet of Things) types will not be able to have 5G functions. The survival of Huawei is not just an issue for the company and its supply chain alone. The Chinese Communist Party (CCP) really wants the Unit

What Huawei Dreads Most Is More US Sanctions

Commentary

Huawei’s financial report for the first half of this year shows a sharp decline in its revenue. The company’s senior members have talked about their difficulties on different occasions, revealing that Washington’s sanctions and technology ban have significantly impacted the Chinese tech giant.

On Aug. 6, Huawei disclosed its H1 financial report. According to its press release, the company generated a revenue of $49.5 billion in the first half of 2021, with the biggest decline in its consumer business revenue, which includes handsets—it fell from $39.5 billion in the first half of last year to $20.9 billion in the first half of this year.

Huawei’s rotating chairman Eric Xu said that the company wanted “to survive and do so sustainably,” which implies that Huawei was hard hit by Washington’s sanctions.

Huawei’s revenue growth trend was curbed by the sanctions imposed by the United States in May 2019. Huawei recorded 19 percent increase in revenue in 2019, and only 3.8 percent in 2020.

“As the U.S. has imposed four rounds of sanctions over the past two years, our 5G smartphones are affected, and we have to go with 4G; and our 5G microchips are used like 4G,” said Richard Yu, Huawei’s consumer business CEO, at the launch event of the company’s latest flagship model P50 in July.

Yu’s words reveal that Huawei’s core consumer business has been losing ground due to Washington’s sanctions and export bans on Huawei.

It’s been pointed out that P50-series suffer from lack of adequate peripheral 5G parts such as radio frequency filters.

“Huawei could no longer source bulk acoustic wave (BAW) filters from Broadcom and thus had to sell the P50 as 4G phones,” reported Asia Times.

The report indicated that such filters convert electrical energy into acoustic or mechanical energy, and are widely used for many new 4G and 5G bands.

According to a Chinese report, filters in China use either SAW (surface acoustic wave) technology or BAW technology, and their production is dominated by U.S. and Japanese manufacturers.

Huawei logo
Attendees walk past a display for 5G services from Chinese technology firm Huawei at the PT Expo in Beijing, China, on Oct. 31, 2019. (Mark Schiefelbein/AP Photo)

Murata Manufacturing Co., Ltd., a Japanese manufacturer of electronic components, had a 50 percent global market share of SAW filters in 2020, according to its annual report.

U.S. manufacturers of BAW filters, Broadcom Inc. and Qorvo, account for 87 percent and 8 percent of the global market of BAW filters, respectively.

China-made RFICs (radio-frequency integrated circuit) are used in 2G, 3G, and 4G frequency bands. Few domestic manufacturers of SAW and BAW filters are able to mass produce the products. Most Chinese filters are used in medium- and low-end products only. Chinese producers are not able to provide high-performance 5G RFICs needed by Huawei.

Washington’s restriction orders on chips have also impacted Huawei’s server vendor business, aside from its high-end handset business.

Rumors on the internet say that Huawei plans to sell its server business and that the local branch of China’s watchdog for state-owned enterprises in eastern Suzhou city will take over. If the news is true, Huawei will have to sell another premium asset. Last year, it sold its smartphone brand Honor to a consortium of more than 30 companies.

This time, Huawei is said to be selling its server business that uses Intel/AMD chips (based on X86 architecture). Huawei finds it difficult to have a stable supply of X86 chips due to the U.S. sanction.

According to Chinese media reports, X86 architecture is the absolute mainstream system adopted by China’s server CPU market. This system is highly reliable on Intel and AMD in terms of core components, and the X86 CPUs are purchased from Intel and AMD.

Once these companies are prohibited by the United States from selling their products to China, Chinese X86 server service providers could see their businesses shut down.

Huawei may not be able to escape Washington’s bans even if it sells its businesses to other companies, which the United States may include in the Entity List as well.

At a press conference on Sept. 13, the Ministry of Industry and Information Technology (MIIT) announced that China has set up over 1 million base stations, accounting for more than 70 percent of the global base stations. China has over 400 million 5G end users—the largest user group in the world. China’s shipment of 5G handsets reached 168 million, a year-on-year growth of 80 percent.

However, Huawei’s P50 handsets show that, even with 5G chips, they do not necessarily have the function of 5G. Moreover, as long as the U.S. bans the export of filter technology used in 5G RFICs, smart electronic products of various loT (Internet of Things) types will not be able to have 5G functions.

The survival of Huawei is not just an issue for the company and its supply chain alone. The Chinese Communist Party (CCP) really wants the United States to relax the ban on Huawei because U.S. technology is crucial for China’s entire 5G industry. Huawei executive Meng Wanzhou’s warm homecoming shows that the CCP is hoping the United States will further lift the restrictions on the company.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


Chen Simin

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Chen Simin is a freelance writer who often analyzes China’s current affairs. She has contributed to The Epoch Times since 2011.