Chip reserve, layoff and chip production: Huawei’s response to three key issues

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Under the great pressure of the U.S. government, Huawei’s human, financial and business development is basically stable, and Huawei’s human resources policy will remain stable for some time to come.
Author: Zhou Yuan
From September 23 to 25, the 2020 Huawei full connection Conference (hereinafter referred to as “Huawei HC conference”) was held in Shanghai. HC conference is the most important and largest conference of Huawei every year. It is also an important window for the industry to observe the company’s new strategy and new products. However, this year, Huawei’s survival has attracted much attention.
On the morning of September 23, senior executives including Guo Ping, chairman of Huawei’s rotating chairman, Wang Tao, executive director and director of product investment review committee, Zhang Ping’an, President of cloud services for Huawei’s consumer business, were interviewed by Chinese and foreign media, responding to the most concerned topics in the industry.
About chip reserve
On May 16 and August 17, 2020, the US Department of Commerce revised the sanctions rules against Huawei twice. The newly upgraded rules “jam” Huawei from two aspects:
First, without permission, TSMC and SMIC will not be able to contract for Huawei after September 15, which means that Huawei Kirin chips and other self-designed chips will be completely cut off, because Huawei has only chip design capability and no chip manufacturing capability;
Second, not only American companies need to apply for licenses, but companies from other countries also need to apply for licenses from the US Department of Commerce for transactions with Huawei, as long as the software and hardware products provided by the company to Huawei adopt American software or technology. For example, Samsung Electronics in South Korea is a global manufacturer of memory chips, but Samsung has adopted American technology in many key aspects of its design and storage chips. Without permission, Samsung can not sell memory chips to China.
Under such extreme sanctions, how long can Huawei’s chip Reserve last?
Guo Ping did not disclose the specific chip reserve, explaining that the company’s emergency storage of various types of chips was not completed until September 15, and the specific data is still under evaluation. But at the same time, he said, “the surplus of landlords” is relatively sufficient for 2B services including carrier base stations, but for 2C services dominated by smart phones, it is still actively looking for alternatives.
Huawei 2B business includes three parts, namely telecom operator equipment, enterprise oriented IT equipment and cloud computing services. According to the company’s annual report in recent years, these three businesses contribute nearly 50% to Huawei’s revenue.
Among them, a variety of chips in the equipment of Huawei telecom operators belong to Huawei’s self-developed chips. After the chip foundry is cut off, the business will mainly rely on chip reserves for a period of time in the future; enterprise it and cloud computing businesses rely more on Intel computing chips, while Intel has obtained the supply license to China, which means that Huawei’s cloud business and enterprise IT business are sustainable Yes, better.
Huawei’s 2C business is too large to keep up with its reserves. According to the data publicly disclosed by Huawei, Huawei will ship 240 million mobile phones in 2019 and 105 million mobile phones in the first half of 2020. Since 2018, the consumer business has become Huawei’s largest source of revenue, accounting for more than 50% of Huawei’s revenue.
Some media have asked whether Huawei will purchase Qualcomm chips if it has applied for a license. Guo Ping responded that if he could apply, he would be happy to use the Qualcomm chip to make mobile phones.
Among the world’s major mobile phone manufacturers, Huawei and apple both use self-developed mobile phone chips, while Xiaomi and oppo use high-throughput chips. Industry insiders generally believe that self-developed chips can help reduce costs and obtain better software and hardware performance.
About layoffs
At the HC conference, Guo Ping admitted many times that the continuous crackdown in the United States has brought great pressure on Huawei’s operation, and survival is the main line of the company.
Facing the survival crisis, will Huawei lay off a large number of employees?
There are signs of Huawei’s overseas business: Jeremy Mitchell, Huawei’s chief corporate affairs officer in Australia, said Huawei’s R & D investment in Australia has been cut by more than a $100 million and plans to cut 1000 employees (from 1200 to 200) by 2021, the financial review reported on September 22. In 2018, Australia banned Huawei from providing equipment for 5g mobile networks in Australia on the grounds of “national security risk”.
Wang Tao, Huawei’s managing director and director of the product investment review committee, responded to the above layoffs. He said that Huawei’s market share in Australia has always been very small, not its focus on the market, while Huawei has always been inclined to high-quality customers with high-quality resources.
More people are concerned about whether Huawei will lay off large numbers of employees in China, and even some Huawei employees have expressed such concerns to Caijing.
In response, Guo Ping said: “at present, the company’s human, financial and business development is basically stable. Huawei’s human resources policy will be stable for some time to come. It will continue to absorb the best talents. As for the specific individual market, it will adjust according to the demand.”
About chip self built factory
After the U.S. announced new sanctions rules on May 16, the industry has repeatedly rumored that Huawei plans to build a 28 nanometer chip manufacturing line without U.S. technology to solve the neck problem of unmanned chip manufacturing.
In this media interview, Guo Ping’s response to the rumor is that he is willing to help reliable supply chains enhance their chip manufacturing, equipment and material capabilities, and help them and Huawei itself.
A number of industry insiders told Caijing that it is very difficult for Huawei to build its own chip manufacturing production line under the circumstances that equipment, technology and materials are completely banned.
The dilemma Huawei is facing today has fully exposed the depth of China’s chip industry. On August 4 this year, the State Council issued the notice on several policies to promote the high-quality development of integrated circuit industry and software industry in the new period. The new deal plans to formulate policies and measures from eight aspects, including finance and taxation, investment and financing, research and development, import and export, talents, intellectual property rights, market application and international cooperation, so as to accelerate the development of China’s integrated circuit and software industry.