The trade war could leave Huawei smartphones frozen in time without core technology from the US
- The crown jewel of Chinese tech will need more than its vaunted ‘wolf culture’ to stay innovative, given the US freeze on technologies that are key to reaching the top of the smartphone game
Then, last month, the US government banned Huawei and its affiliates from purchasing American components and software without a licence, the latest move in a continuing campaign by Washington to punish the company for alleged theft of trade secrets and violating US sanctions on Iran.
One by one, Huawei began losing access to the technologies it needed to stay in the race as a top smartphone brand, including Google’s Android operating system, ARM Holdings’ processor cores and, most recently, preloaded Facebook apps.
In particular, Huawei’s wholly owned chip design company HiSilicon was touted as key to the company’s tech independence from the US because it produces devices ranging from the Kirin processors that power Huawei’s smartphones to chipsets used in its 5G base stations.
It was a nice morale booster for the troops but belied the reality of Huawei’s dependence on US core technology. HiSilicon engineers design their chips with electronic design automation (EDA) software from US companies and depend on American manufacturing equipment to etch the circuits onto silicon wafers.
China’s wrong, the US can kill off Huawei. But here’s why it won’t
Four years ago, after HiSilicon successfully produced a state-of-the-art circuit design, a senior R&D executive at the company highlighted the importance of its technology partnerships with US EDA vendors Synopsys, Cadence Design Systems and Mentor Graphics, as well as Taiwan wafer foundry TSMC.
“We had close collaboration with TSMC and EDA, that’s the most important thing … They supported us to cross that chasm,” said Daniel Yanqiu Diao, who spoke during a panel session at the 2015 Design Automation Conference in Las Vegas, the annual confab for EDA boffins.
That chasm just got much wider. Without continuing technical support from its overseas EDA partners, HiSilicon’s smartphone chips will be frozen in time, unable to take advantage of technical advances.
There have been attempts by China to secure advanced chip design technology. In 2017, Chinese steel magnate Jingyuan Han bankrolled the purchase of EDA assets from the bankrupt California company ATop Tech, a rival of Synopsys, which flagged the deal as a potential national security risk.
CFIUS, the US agency that reviews foreign acquisitions, did not conduct a formal review and the deal went through. However, the new Chinese owners of ATop’s EDA tools won’t be able to help HiSilicon because the software is of US origin and still subject to the Trump ban.
TSMC, the subcontractor that makes chips for HiSilicon and US semiconductor companies like Qualcomm and Nvidia, operates production lines using gear from Applied Materials, Lam Research and KLA-Tencor, three Silicon Valley companies that together account for 40 per cent of the global wafer manufacturing equipment market.
Investors are bracing themselves for a protracted US-China tech war
Huawei’s 5G business, which Washington views as a national security threat, faces a similar challenge because its networking gear uses semiconductors and other speciality components from US companies.
If Huawei’s overseas consumers shun the brand because it cannot offer popular Western apps – and there are reports this is already happening in Europe – that will cut into profits the company would need to fund R&D for its 5G ambitions.
Huawei's best hope in the short term may be a truce brokered by Presidents Xi Jinping and Donald Trump at the G20 summit in Japan this month.
Huawei ban: why China shouldn’t retaliate against US firms
Huawei, though, is unlikely to roll over, given its wolf culture and military mindset imbued by founder Ren’s days as a soldier in the People’s Liberation Army. The company has a long track record of going “all in” to defeat opponents.
After Trump blocked Huawei from selling its gear to US government agencies, Ren should have strategically retreated so the company could live to fight another day.
Instead, Huawei upped the ante by suing the US government to try to overturn the ban. Huawei also provoked Trump – well known as anti-Obama on everything – by hiring former Obama administration cybersecurity expert Samir Jain to lobby on its behalf.
When a Fox News guest questioned whether Jain’s work for Huawei amounted to treason, Trump tweeted: “This is not good, or acceptable!”
In the early days of Huawei, one of Ren’s most popular motivational slogans was: “We shall drink to our heart’s content to celebrate our success, but if we should fail let’s fight to our utmost until we all die.”
Craig Addison is a senior production editor on the Post’ s technology desk. From 2002 to 2009, he worked for SEMI, the Silicon Valley-based trade group representing semiconductor equipment and materials companies. Follow on Twitter @craigaddison
